{"id":4558,"date":"2020-03-05T18:57:51","date_gmt":"2020-03-05T13:27:51","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=4558"},"modified":"2020-12-11T15:45:21","modified_gmt":"2020-12-11T10:15:21","slug":"issue-of-bonus-shares-under-companies-act-2013","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/issue-of-bonus-shares-under-companies-act-2013\/","title":{"rendered":"Issue of Bonus Shares under Companies Act, 2013"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Bonus\nShares are given to shareholders as some additional shares, based upon the\nnumber of shares the shareholders hold in the Company. <strong><em>The accumulated earnings of a\ncompany sometimes are not distributed as Dividend but are issued as Bonus\nShares<\/em><\/strong>. These shares are issued to the current shareholders without\nreceipt of any consideration from them. Bonus Shares increases the\nmarketability of the Company. The main intention behind Bonus Issue is to bring\nthe nominal capital of the Company in line with the assets. In this article, we\ndiscuss the procedure followed for the Issue of Bonus Shares.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/issue-of-bonus-shares-under-companies-act-2013\/#What_are_Bonus_Shares\" >What\nare Bonus Shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/issue-of-bonus-shares-under-companies-act-2013\/#What_are_the_SEBI_guidelines_on_Issue_of_Bonus_Shares\" >What\nare the SEBI guidelines on Issue of Bonus Shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/issue-of-bonus-shares-under-companies-act-2013\/#What_are_the_Conditions_and_Checks_for_Issue_of_Bonus_Shares\" >What\nare the Conditions and Checks for Issue of Bonus Shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/issue-of-bonus-shares-under-companies-act-2013\/#What_is_the_procedure_followed_for_Issue_of_Bonus_Shares_in_a_Company\" >What\nis the procedure followed for Issue of Bonus Shares in a Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/issue-of-bonus-shares-under-companies-act-2013\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_Bonus_Shares\"><\/span>What\nare Bonus Shares?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Sometimes\nCompanies are not able to pay Dividend in cash, due to shortage of funds,\ndespite profit in the Companies. In such a situation, the Companies Issue Bonus\nShare to existing shareholders instead of paying the Dividend in cash to the\nshareholders. Bonus Shares are issued without paying any cost in the proportion\nof the shares. &nbsp;<\/p>\n\n\n\n<p>Earlier\nunder <strong><em>the 1956 Companies Act<\/em><\/strong>, <strong><em>no specific provisions were regulating the\nBonus Shares<\/em><\/strong>. The Controller of the Capital Issues issued certain\nnorms, but after the emergence of SEBI as a regulator, it was also removed. Now\nin the new <strong><em>Companies Act, 2013, Section 63, when reading with Rule 14 (Companies\nShare Capital and Debenture) Rules, 2014<\/em><\/strong> states for the Issue of Bonus\nShares to the shareholders. &nbsp;<\/p>\n\n\n\n<p><strong><em>Under\nSection 63 of Companies Act, 2013, the Issue of Bonus Shares can be done of\nfully paid-up equity shares:<\/em><\/strong><\/p>\n\n\n\n<ul><li>Through Company\u2019s\nFree Reserves <\/li><li>Through The\nSecurities Premium Account<\/li><li>The Capital Redemption\nReserve Account <\/li><\/ul>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"583\" height=\"343\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-14.png\" alt=\"Issue of Bonus Shares \" class=\"wp-image-4560\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-14.png 583w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-14-300x177.png 300w\" sizes=\"(max-width: 583px) 100vw, 583px\" \/><\/figure><\/div>\n\n\n\n<p><strong><em>Furthermore,\nthe Company cannot Issue Bonus Shares in the following situations: <\/em><\/strong><\/p>\n\n\n\n<ul><li>When through revaluation\nof assets, Capitalizing Reserve is created in the Company.<\/li><li>The Issue of\nShares cannot be done in lieu of Dividend.&nbsp;\n<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_SEBI_guidelines_on_Issue_of_Bonus_Shares\"><\/span>What\nare the SEBI guidelines on Issue of Bonus Shares?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The\nmain guidelines of the Securities and Exchange Board of India (SEBI) for Issue\nof Bonus Shares are as follows:<\/em><\/strong><\/p>\n\n\n\n<ul><li>No Dilution of other issues by the Bonus Shares.<\/li><li>The Bonus Shares shall only be issued out of the Free Reserves.<\/li><li>The Reserve formed by the revaluation of an asset cannot be capitalized for Bonus Shares.<\/li><li>In lieu of Dividend, the Bonus Shares cannot be issued.<\/li><li>The availing <a href=\"https:\/\/corpbiz.io\/company-registration\"><strong>Company registration<\/strong><\/a>, the entity should implement the <strong><em>proposal of Bonus Shares within 6 months <\/em><\/strong>of the date of approval of the proposal in the Board Meeting. <\/li><li>The Bonus Shares proposal cannot be withdrawn by the Company if once made.<\/li><li>There should not be default in payment of interests of the Company issuing Bonus Shares.<\/li><li>The Issue of Bonus should not be done <strong><em>within 12 months of the Public Issue<\/em><\/strong>.<\/li><li>There should be a suitable provision for the Capitalization of Reserves in the <strong><em>Articles of Association (AoA)<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Articles_of_association\">[1]<\/a><\/sup><strong><em>.<\/em><\/strong> If no provision is there, then alter the AoA accordingly.<\/li><li>If necessary, the Company can increase its authorized capital to permit the Bonus Share proposal. &nbsp;&nbsp;<\/li><\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/conversion-of-dormant-company-into-active-company\/\"> \nConversion of Dormant Company into Active Company<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Conditions_and_Checks_for_Issue_of_Bonus_Shares\"><\/span>What\nare the Conditions and Checks for Issue of Bonus Shares?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Conditions for Issue of Bonus Shares<\/h3>\n\n\n\n<ul><li>The Articles\nmust contain the provisions for the Issue of Bonus Share according to <strong><em>Section\n63 of the Companies Act, 2013<\/em><\/strong>.<\/li><li>On the\nrecommendation of the Board, the members should authorize the Issue of Bonus\nShares.<\/li><li>No default of\npayment should be by the Company regarding the fixed deposits or debt\nsecurities.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Checks for Issue of Bonus Shares<\/h3>\n\n\n\n<ul><li>Check the authorized\ncapital is sufficient for the issuance of Bonus Shares. If the capital is\nadequate, then the Company can move ahead with the Issue of shares. If the\ncapital is not sufficient, then the capital clause should be altered in the <strong><em>Memorandum\nof Association (MoA).<\/em><\/strong><\/li><li>Check the <strong><em>Articles\nof Association (AoA)<\/em><\/strong> whether they authorize for the Issue of Bonus\nShares or not. If AoA authorizes then, the Company can go ahead with the Issue\nbut on the other hand, if AoA does not allow, then alteration of AoA should be\ndone.<\/li><li><strong><em>Resource\nAvailability<\/em><\/strong> will be\nchecked.<\/li><li><strong><em>Quantum of Bonus\nshares<\/em><\/strong> will be checked.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_procedure_followed_for_Issue_of_Bonus_Shares_in_a_Company\"><\/span>What\nis the procedure followed for Issue of Bonus Shares in a Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The procedure followed for the Issue of Bonus Shares is as follows:<\/em><\/strong><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"580\" height=\"331\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-15.png\" alt=\"Issue of Bonus Shares in a Company\" class=\"wp-image-4561\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-15.png 580w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/image-15-300x171.png 300w\" sizes=\"(max-width: 580px) 100vw, 580px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Call\nfor Board Meeting<\/h3>\n\n\n\n<p>Issue\na notice of not less <strong><em>than 7 days for having<\/em><\/strong> a Board\nMeeting of members.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Hold\nBoard Meeting<\/h3>\n\n\n\n<p><strong><em>The\nBoard Meeting should consider the following points:<\/em><\/strong><\/p>\n\n\n\n<ul><li><strong><em>Section 174(1)<\/em><\/strong> states that Quorum of the Board Meeting should be\n1\/3<sup>rd<\/sup> of the total strength of the Board.<\/li><li>The ratio of the\nBonus Shares to be issued should be decided.<\/li><li>Pass the\nResolution of the Board Meeting.<\/li><li>Decide the time,\nplace and date for the Extraordinary General Meeting (EGM).<\/li><li>Issue notice for\nthe EGM. The notice of EGM will include complete details of the EGM as well as\nDirector authorize for the Issue of right Issue.<\/li><li>The Issue of\nnotice of EGM should be passed at least 21 days before the date on which the\nEGM will be held according to <strong><em>Section 101 of Companies Act, 2013<\/em><\/strong>.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">File\nForm MGT-14<\/h3>\n\n\n\n<p><strong><em>After\npassing of the Board Resolution for the Issue of Bonus Shares, e-form MGT-14\nshould be filed within 30 days<\/em><\/strong>.\nThe Resolution passed for the Issue of shares should be attached with the\nMGT-14 Form.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Hold\nEGM <\/h3>\n\n\n\n<p><strong><em>The\nEGM should check for the following:<\/em><\/strong><\/p>\n\n\n\n<ul><li>Check for Quorum\nof the Meeting.<\/li><li>Check whether\nthe Auditor is present or not. If not present, then check for Leave of Absence\nis granted or not as <strong><em>prescribed in Section 146 of Companies Act,\n2013<\/em><\/strong>.<\/li><li>Pass Resolution\nfor Bonus Shares Issue.<\/li><li>Pass Resolution\nfor Allotment of Bonus Shares.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Filing\ne-Forms<\/h3>\n\n\n\n<p><strong><em>After\nEGM, passed the Resolution for Bonus Shares Issues, file Form PAS-3. The Form\nPAS-3 should be attached with the following requisites:<\/em><\/strong><\/p>\n\n\n\n<ul><li>Resolution for\nAllotment of Bonus Shares<\/li><li>Resolution for\nIssue of Bonus Shares <\/li><li>List of the\nAllottees with the name, address, occupation, and the number of securities\nallotted to each.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Issue\nShare Certificate<\/h3>\n\n\n\n<p>After\nthe share allotment is done, the Company is mandated to allot share certificate\nto all shareholders <strong><em>within 2 months. <\/em><\/strong>&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Companies Act, 2013, prescribes for the Issue of Bonus Shares to the shareholders. For the Issue, the AoA should authorize for the same. The Issue of Bonus Shares once recommended, the Company cannot withdraw it. The Issue process of Bonus Shares is time-consuming and long-lasting. We at <a href=\"https:\/\/corpbiz.io\"><strong>Corpbiz<\/strong><\/a> have experienced and qualified experts to assist you with the process. Our experts will assure the successful completion of your work in the prescribed time limit.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/shares-issue-through-employee-stock-option-plan\/\"> Process for Shares Issue through Employee Stock Option Plan<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bonus Shares are given to shareholders as some additional shares, based upon the number of shares the shareholders hold in the Company. The accumulated earnings of a company sometimes are not distributed as Dividend but are issued as Bonus Shares. These shares are issued to the current shareholders without receipt of any consideration from them. [&hellip;]<\/p>\n","protected":false},"author":16,"featured_media":4575,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[120],"tags":[381],"acf":{"service_id":"321"},"authorName":"Sakshi Sharda","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/02\/sakshi-sharda.jpg","authorDescription":"Sakshi Sharda has done BBALLB(HONS) and holds a strong knowledge on the matters pertaining to finance and law. From the past one year she is working as a legal advisor and in her leisure time she works on improvising her knowledge. Sakshi is spreading her knowledge by writing for Corpbiz.","postViews":36655,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4558"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=4558"}],"version-history":[{"count":12,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4558\/revisions"}],"predecessor-version":[{"id":21668,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/4558\/revisions\/21668"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/4575"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=4558"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=4558"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=4558"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}