Question

State the provisions relating to Bonus Shares.

Answer 1

Provisions for Issuance of Bonus Shares:

1. A company can issue Bonus Shares only out of: 
   1. Free reserves or
   2. Securities Premium Account or
   3. Capital Redemption Reserve Account
2. A company cannot issue Bonus shares out of reserves created by Revaluation of Assets.
3. It also cannot issue Bonus Shares instead of paying dividend.
4. Once the announcement for Bonus Shares is made by the Board of Directors, it cannot be then withdrawn.
5. Bonus shares are fully paid up shares.
6. Shareholders cannot renounce i.e. give away their Bonus shares to another person.
7. There is no minimum subscription to be collected.