BONUS ISSUE

Bonus Issue is provided for in the section 63 of the Companies Act, 2013. Bonus shares are issued by way of utilizing the profits and reserves of the company and issuing shares against those profits. The main purpose is to utilize the reserves of the company for the company as well as please the investors by providing them with additional shares at no cost.

Conditions for issue of bonus shares as per Section 63 of the Companies Act, 2013.

1. Source of issue of bonus shares

(1) A company may issue fully paid-up bonus shares to its members, in any manner whatsoever, out of—

(i) Its free reserves;

(ii) The securities premium account; or

(iii) The capital redemption reserve account:

The company can’t issue of bonus shares by capitalizing reserves created by the revaluation of assets.

2. Authorization by the AOA

– The Articles of the company must contain provisions authorizing the issue of bonus shares. The AOA should be amended first if it doesn’t contain these provisions.

3. Issue of bonus shares not allowed for partly-paid up shares

– Bonus shares can’t be issued to the shareholders who hold partly paid up shares. However, if the partly paid shares are made fully paid up before issuing bonus shares, they become eligible to accept bonus shares.

4. Prohibition on the issue of bonus shares

– The company can capitalize its profits or reserves for the purpose of issuing fully paid-up bonus shares, only if:

(i) It has not defaulted in the payment of interest or principal in respect of fixed deposits or debt securities issued by it;

(ii) It has not defaulted in respect of the payment of statutory dues of the employees, such as, contribution to provident fund, gratuity and bonus.

5. Bonus Shares shall not be issued in lieu of dividend.

6. A company which has once announced the decision of the board to issue bonus shares can’t subsequently withdraw the same.

7. Procedure for issue of bonus shares

1. Convene a Board Meeting and approve the following resolutions:

– Issue of bonus shares

– Quantum of bonus shares

– Decide the date, time and place to hold the EGM.

1. File form MGT-14 within 30 days of passing of board resolution.
2. Convene EGM and pass Ordinary Resolution.
3. File form MGT-14 within 30 days in case Special Resolution is passed due to the provision of the Articles of Association.
4. Convene Board Meeting for allotment of shares and issuing share certificates.
5. File the return of allotment in Form PAS-3 within 30 days from allotment.
6. Issue fresh share certificates with 60 days to all the allottees.
7. Update the register of members.

DISCLAIMER: The information provided in this article is intended for general informational purposes only and is based on the latest guidelines and regulations. While we strive to ensure the accuracy and completeness of the information, it may not reflect the most current legal or regulatory changes. Taxpayers are advised to consult with a qualified tax professional or you may contact to our tax advisor team through call +91-9871990777 or info@semantictaxgen.in the appropriate government authority to verify the accuracy of the information and to obtain advice on their specific tax situations.