Bonus Issue under Companies Act, 2013
Sec 63 of the Companies Act, 2013 deals with Bonus Issue. It states the Conditions and the Sources for issue of Bonus shares.
What is Bonus issue?
Bonus Issue is an issue of shares to existing shareholders for free of cost. Since dividend involves cash outflow to company, bonus issue is a better option for the company. Bonus shares increases the total number of shares issued but company’s value remains same. % of Shareholding by shareholders remains same
Why Bonus Issue?
- To encourage participation in shareholding of the company
- To increase the Equity base of the company
What are the Conditions for Bonus Issue ?
- Only fully paid up bonus shares can be issued.
- Articles has to contain provision for issue of bonus shares
- Bonus issue has to be authorized by Board Resolution.
- No Default in payment of Interest or Principal of Deposits/ Debts is subsisting
- No Default in remittance of Statutory dues is subsisting
- Partly paid-up to be converted into fully paidup before allotment of Bonus shares
- Bonus shares not to be issued in lieu of dividend.
What are the sources for issue of bonus shares?
- General reserves
- Share Premium A/c
- Capital Redemption Reserve
- Revaluation reserve cannot be utilized for issue of Bonus shares
What are the steps involved in issue of Bonus shares – Secretarial procedure
- Ascertain the sources for Issue of Bonus shares.
- Ascertain the eligibility criteria
- AOA Clause,
- Non - default in payment of dues,
- No partly paid up shares etc.
- Whether Authorized capital is sufficient for issue of bonus shares –Refer MOA
- Ascertain the QUANTUM of issue of Bonus shares
- Hold Board Meeting and pass resolution for approving Bonus issue and resolve to hold a General meeting to obtain Member’s approval in the meeting
- Hold General meeting and pas Ordinary resolution to issue bonus shares
- Again hold another Board meeting for allotment of shares
- File Eform- 2 with ROC within 30 days
- Finally share certificates have to be issued, minute books and share registers has to be updated as part of secretarial procedure.
Suppose i established a company with authorised capital of 100,000. Increased the authorised capital to 200,000.
I want to issue 50,000 shares as bonus shares to existing shareholders and 50,000 to new investors.
I can issue shares to new investors without any conditions, but what are the legal reuiqrements to issue the bonus shares.
How much Reserves should company have? Company have not made any profits.