{"id":27001,"date":"2019-11-30T18:47:30","date_gmt":"2019-11-30T13:17:30","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=27001"},"modified":"2020-11-16T12:45:07","modified_gmt":"2020-11-16T07:15:07","slug":"what-is-the-procedure-for-shares-issue-through-bonus-issue","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/what-is-the-procedure-for-shares-issue-through-bonus-issue\/","title":{"rendered":"What is the Procedure for Shares Issue through Bonus Issue?"},"content":{"rendered":"<p class=\"has-drop-cap\">For capitalizing the Profit<strong>, A Company may if its article\nprovides issue fully Paid-Bonus shares. When the Company accumulates Profit, Bonus\nshares<\/strong>&nbsp;are issued to the&nbsp;<strong>pre-existing shareholders<\/strong>&nbsp;free\nof cost. Bonus shares are issued to replace the&nbsp;<strong>dividend<\/strong>, which has\nto be given to the shareholders, thereby giving them free shares.<\/p>\n\n\n\n<p><strong>When the Company accumulates large distributable profits and\nprosperous, it transfigures the accumulated profit into capital and divides the\ncapital among the existing shareholders in proportion to their privilege.<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Key Significance of\nissuing Bonus Shares-<\/h2>\n\n\n\n<ul><li>The flow of funds is not affected adversely.<\/li><li>With the increase in the number of shares in the company, the <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Market&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/market\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Market<\/a>\nvalue of the member&rsquo;s shareholding increases.<\/li><li>Bonus shares are not an income. Hence, it is not a taxable\nIncome.<\/li><li>With the issue of bonus shares, the paid-up share capital of the\ncompany increases.<\/li><li>The share capital is much more relevant to the employed asset.<\/li><li>The shareholding prior to the bonus issue remains the same.<\/li><\/ul>\n\n\n\n<p>The company&rsquo;s motive for issuing the bonus shares is to enhance retail involvement increase the equity base. However, when the share prices increase, the investors may find it hard to buy the shares.<\/p>\n\n\n\n<p><strong>Recently, the Companies Act, 2013 has added Section 63 for the provision\nof Bonus shares. As per the Companies act 2013, Section- 63(1), the Company can\nissue fully paid-up bonus shares to its members, shareholders in any manner\nwhatsoever:<\/strong><\/p>\n\n\n\n<p>A. Free reserves.<\/p>\n\n\n\n<p>B. Securities Premium Account.<\/p>\n\n\n\n<p>C. Capital Redemption Reserve Account.<\/p>\n\n\n\n<p><strong>Under what circumstance the Bonus share cannot be issued-<\/strong><\/p>\n\n\n\n<ul><li>Re-valuation of asset-based reserve capitalization.<\/li><li>When there is a condition that the company cannot replace\ndividend with a bonus share.<\/li><\/ul>\n\n\n\n<p>Criteria for Issue of Bonus Shares<strong>&ndash; <\/strong>The Company shall\ncapitalize its profits or reserve for the purpose of issuing the Bonus share by\ncomplying with the below-mentioned Condition-<\/p>\n\n\n\n<ul><li>Authorized by the Article of Association,<\/li><li>The Issue of Bonus share is within the limit Authorised Share\nCapital.<\/li><li>Recommendation of the Board, bypassing the resolution in the\ngeneral meeting.<\/li><li>No Default has been made in the payment of interest or principal\nin terms of fixed deposits.<\/li><li>No default has been made in respect of the statutory dues of the\nemployees.<\/li><li>In case of the outstanding amount, the partly paid-up shares are\nmade fully paid upon the date of <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Allotment&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;An allotment is the systematic distribution of business resources, often pertaining to the distribution of shares during initial public offerings (IPOs) to underwriting firms or to new and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/allotment\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>allotment<\/a>.<\/li><li>Bonus shares cannot be issued in place of dividends.<\/li><li>Quantum of Bonus issue.<\/li><\/ul>\n\n\n\n<p>Also, Read: <strong><a href=\"https:\/\/enterslice.com\/learning\/procedure-for-shares-issue-through-right-issue\/\">Procedure for Shares issue through Right Issue<\/a><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Steps for Issuing of Bonus\nShares: For issuing the Bonus Shares below-mentioned steps are required<\/strong><\/h3>\n\n\n\n<p><strong>Conduct a Board Meeting:<\/strong><\/p>\n\n\n\n<p>As per Section 173(3) of the<strong><a href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/CompaniesAct2013.pdf\"> Companies Act,2013<\/a><\/strong>, For conducting a Board meeting, a Company must issue a Notice at least 7 days before the date of conducting a Board meeting.<\/p>\n\n\n\n<p><strong>Criteria of Board Meeting:<\/strong><\/p>\n\n\n\n<ul><li>The quorum of the Board of Directors shall be present, i.e. 1\/3rd of the total strength of Board or 2 directors, any of them is higher can be taken.<\/li><li>Once the resolution is passed by the Board of directors, decide the number of bonus shares to be issued along with the date, time and venue of the general meeting for the announcement of issuance of shares.<\/li><li>To issue the notice for conducting the general meeting at least 21 days earlier from the date of conducting the general meeting to All the Directors, Shareholders and Auditors of Company.<\/li><li>Proper disclosure in the notice regarding the agenda of the meeting along with the date and venue of the meeting.<\/li><li>A Company is required to file e-form- MGT-14 within 30 days from the date of passing the Board Resolution along with the resolution passed in the general meeting as an attachment.<\/li><\/ul>\n\n\n\n<p><strong>Convene a General Meeting: <\/strong>Approve the issue of\nBonus shares by passing the Special resolution.<\/p>\n\n\n\n<p><strong>Filling PAS-3-<\/strong>Once the resolution is\npassed, file the Return of Allotment in Form PAS-3. <strong><\/strong><\/p>\n\n\n\n<p>Attachments required-<\/p>\n\n\n\n<ul><li>Board Resolution.<\/li><li>List of Allottee within 30 days from the date of allotment along with the Name, Address, occupation and a number of shares allotted to each of the allottees.<\/li><li>The list shall be certified by the authorized signatory.<\/li><\/ul>\n\n\n\n<p>Format of List of Allottee-<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>\n  <strong>Name\n  of the company<\/strong>\n  <\/td><td>\n  <strong>XYZ\n  company<\/strong>\n  <\/td><\/tr><tr><td>\n  Date\n  of allotment\n  <\/td><\/tr><tr><td>   Type of share allotted (Equity or Preference).   <\/td><td>\n  EQUITY\n  <\/td><\/tr><tr><td>\n  Nominal\n  Amount per share (in Rs.)\n  <\/td><\/tr><tr><td>\n  Total\n  number of Allottee\n  <\/td><\/tr><tr><td>   Detailed particulars in respect of terms and conditions, voting rights, etc.   <\/td><td>   Voting rights ranking pari-passu with existing share.   <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>Issue Share Certificates: <\/strong>The company is required\nto issue allotment letters and share certificates within 2 months from the date\nof share allotment.<\/p>\n\n\n\n<p>Conclusion-The above-mentioned\ncontent is all about what is Bonus shares? and what is the procedure involved\nwhile issuing the Bonus Share? Further, Following are the formats required\nwhile issuing the Bonus shares-<\/p>\n\n\n\n<h3>Format of the notice of Board meeting for issuance of Bonus shares-<\/h3><br>\n\n\n<a href=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/11\/NOTICE.pdf\" class=\"pdfemb-viewer\" style=\"width: 767px; \" data-width=\"767\" data-height=\"max\" data-toolbar=\"bottom\" data-toolbar-fixed=\"on\">NOTICE<br><\/a>\n<p class=\"wp-block-pdfemb-pdf-embedder-viewer\"><\/p>\n\n\n\n<h3>Format of Resolution for Board Meeting For Issue Of Bonus Shares-<\/h3><br>\n\n\n<a href=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/11\/CERTIFIED-COPY-OF-RESOLUTION-PASSED-IN-THE-BOARD-MEETING-OF-DIRECTORS-OF-ABC-PRIVATE-LIMITED-HELD-ON.pdf\" class=\"pdfemb-viewer\" style=\"width: 767px; \" data-width=\"767\" data-height=\"max\" data-toolbar=\"bottom\" data-toolbar-fixed=\"on\">CERTIFIED-COPY-OF-RESOLUTION-PASSED-IN-THE-BOARD-MEETING-OF-DIRECTORS-OF-ABC-PRIVATE-LIMITED-HELD-ON<br><\/a>\n<p class=\"wp-block-pdfemb-pdf-embedder-viewer\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>For capitalizing the Profit, A Company may if its article provides issue fully Paid-Bonus shares. When the Company accumulates Profit, Bonus shares&nbsp;are issued to the&nbsp;pre-existing shareholders&nbsp;free of cost. Bonus shares are issued to replace the&nbsp;dividend, which has to be given to the shareholders, thereby giving them free shares. When the Company accumulates large distributable profits [&hellip;]<\/p>\n","protected":false},"author":25,"featured_media":27007,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[2828],"tags":[],"acf":{"service_id":"227"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Procedure for Shares Issue through Bonus Issue - Enterslice<\/title>\n<meta name=\"description\" content=\"A company can provide shares through Bonus issue of shares to preexisting shareholders in the condition of retained earnings.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/what-is-the-procedure-for-shares-issue-through-bonus-issue\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Procedure for Shares Issue through Bonus Issue - Enterslice\" \/>\n<meta property=\"og:description\" content=\"A company can provide shares through Bonus issue of shares to preexisting shareholders in the condition of retained earnings.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/what-is-the-procedure-for-shares-issue-through-bonus-issue\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2019-11-30T13:17:30+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-11-16T07:15:07+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/11\/1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"600\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Priyanka Bajpayee","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/09\/81216.jpg","authorDescription":"Priyanka Bajpayee has done Masters in International Business Law and well versed in content writing covering the area of legal and finance. 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