Companies Act

Section 63. Issue Of Bonus Shares

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

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(i) its free reserves;

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(ii) the securities premium account; or

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(iii) the capital redemption reserve account:

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Provided that no issue of bonus shares shall be made by capitalising reserves created by the revaluation of assets.

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(2) No company shall capitalise its profits or reserves for the purpose of issuing fully paid-up bonus shares under sub-section (1), unless–

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(a) it is authorised by its articles;

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(b) it has, on the recommendation of the Board, been authorised in the general meeting of the company;

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

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(d) it has not defaulted in respect of the payment of statutory dues of the employees, such as, contribution to provident fund, gratuity and bonus;

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(e) the partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up;

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(f) it complies with such conditions as may be prescribed.

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(3) The bonus shares shall not be issued in lieu of dividend.