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Question
Answer in brief.
State the provisions related to Bonus Shares.
Solution
Bonus issues refer to the fully paid-up shares given to its existing equity shareholders without any cost, based upon the number of shares they have. Provisions related to Bonus Shares are as follows:
- A company can issue Bonus Shares only out of:
• Free reserves or
• Securities Premium Account or
• Capital Redemption Reserve Account - A company cannot issue Bonus Shares only out of reserves created by the Revaluation of Assets.
- The company also cannot issue bonus shares instead of paying a dividend.
- Once the announcement for Bonus Shares is made by the Board of Directors then it cannot be withdrawn.
- Bonus shares are fully paid up shares. Shareholders cannot give away their bonus shares to another person.
- There is no minimum subscription to be collected.
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