DETAILED NOTE ON BONUS ISSUE DEFINITION
An issue of bonus shares is referred to as a bonus share issue or bonus issue.
A bonus issue is usually based upon
the number of shares that shareholders already own. While
the issue of bonus shares increases the total number
of shares issued and owned, it does not change the value of the
company.
1) The source out of which Bonus Shares shall be issued
The company shall issue fully paid Bonus Shares out of any
one of the following source:
·
Free reserves of the
company
·
The securities premium
account
·
The capital redemption
reserve account
2. Source out of which the company shall not utilise for the
purpose of issue of Bonus Shares
·
The company shall not
issue bonus shares by capitalizing reserve created out revaluation of Asset.
·
The company shall not
issue shares in lieu of Dividend.
3. Secretarial formalities to be complied with
In order to
capitalize its profits or reserves for the purpose of issue of bonus shares the
Company has to
comply with the following:
·
The article of
association of the company should authorise such issue.
·
The board has to
recommend the issue of bonus shares
·
The company in a general
meeting should authorise the issue of bonus shares.
4. Company not eligible in issuing bonus shares
·
It has defaulted in
repayment of deposit.
·
It has defaulted deposit
interest.
·
It has defaulted in debt
securities.
·
It has defaulted in
respect of payment of statutory dues of the employee’s viz., contribution to Provident
Fund, Bonus and Gratuity.
·
Any outstanding partly
paid share remains unpaid.
·
Ensure that once the decision of board
regarding bonus issue is announced, then it cannot be withdrawn subsequently.
The provisions and procedures relating to issue of shares through
bonus issue are as follows:
|
S. No. |
Procedure for Bonus
Issue |
|
1. |
·
Every unlisted public company making
any offer for issue of any securities or buyback of securities or issue of
bonus shares or rights offer shall ensure that before
making such offer, entire holding of securities of its
promoters, directors, key managerial personnel
has been dematrialised in accordance with accordance with
provisions of the Depositories Act, 1996 and regulations made thereunder. ·
That any person who subscribe any securities has dematerialized
his all existing securities of the company before such subscription. ·
Whether authorized capital is sufficient for issue
of bonus shares and if authorized capital is not enough, then first alter the
capital of company by alteration of capital clause of the memorandum of
association. ·
Whether articles of association authorises for issue
of shares through bonus issue and if not then alter the articles of
association to include the provisions of issue of shares through bonus issue. |
|
2. |
Find out
availability of resources for issue of bonus shares as fully paid-up bonus
shares can be issued to members out of: Ø the free
reserves Ø the securities
premium account Ø the capital
redemption reserve account Provided that no
issue of bonus shares are made by capitalising reserves created by
revaluation of assets. |
|
3. |
The bonus shares shall
not be issued in lieu of dividend. No issue of bonus
shares shall be made capitalizing reserves created by the
revaluation of assets. Check availability of resources
for issue of Bonus shares. |
|
4. |
·
Prepare notice of board meeting along with draft
resolution(s) to be passed in the board meeting. ·
Send notice of board meeting to all the directors Ø at least 7 days
before the date of board meeting or Ø in such manner
as prescribed under section 173(3) of the Companies Act, 2013 and clause 1 of
the Secretarial Standard-1. |
|
5. |
Convene board
meeting to pass the following resolution: ·
Recommendation of Issuance of shares through bonus
issue. ·
Deciding the ratio of shares to be offered to
shareholders. ·
Authorisation to director/company secretary to sign
the documents. ·
Fix the day, date, time and venue for calling
general meeting. Approval of
notice for calling of general meeting for passing resolution for issuance of
bonus shares. |
|
6. |
File e-Form
MGT-14 with the Registrar of Companies regarding board resolution for
issuance of bonus shares in case of
public companies as private companies are exempted to file board
resolution for issuance of bonus shares. |
|
7. |
Prepare draft
minutes of the board meeting and circulate, within a period of fifteen days
from the date of conclusion of that meeting, to all directors, by hand/speed post/registered
post/courier/e-mail or by any recognised electronic means, for their
comment(s). |
|
8. |
Send notice of
general meeting to all directors, shareholders, auditors, secretarial
auditors and Debenture Trustee, if any, of the company at least 21 days
before the date of general meeting. However, notice may be given at a shorter
period of time if consent in writing is given thereto, by physical or electronic
means, by not less than ninety five percent of the members entitled to vote
at such meeting in case the matter is considered in Annual General Meeting,
however, if the matter is taken in Extra Ordinary General Meeting, then
shorter notice of general meeting may be given subject to consent of majority
members entitled to vote and who represent not less than ninety-five per cent
of such part of the paid-up share capital of the company as gives a right to
vote at the meeting. (However,
private companies can opt their own regulations with respect to notice of
General Meeting.) |
|
9. |
Convene general
meeting and pass special resolution for issue of bonus shares. The Act
requires about general meeting resolution, but while filing PAS-3 in case of
allotment of shares through bonus issue, it requires for SRN of MGT-14 for
special resolution, so better to pass special resolution. |
|
10. |
Maintain proper
record for: ·
Total number of members present at the meeting with
their shareholding pattern. ·
Members who voted in favour of the proposed
resolutions and number of shares held by them. ·
Members who voted against the proposed resolutions
and number of shares held by them. |
|
11. |
Prepare draft
minutes of shareholders’ meeting and for finalization, send the draft minutes
to the chairman of that meeting. |
|
12. |
File eform
MGT-14 with the Registrar of Companies within 30 days of passing of
special resolution along with explanatory statement. |
|
13. |
·
Prepare notice of board meeting along with draft
resolution(s) to be passed in the board meeting. ·
Send notice of board meeting to all the directors Ø at least 7 days
before the date of board meeting or Ø in
such manner as prescribed under section 173(3) of the Companies Act, 2013 and
clause 1 of the Secretarial Standard-1. |
|
14. |
Convene board
meeting to pass the following resolutions: ·
Allotment of shares. ·
Authorisation for issue of share certificate. ·
Authorisation for making entries in the register of
members. |
|
15. |
Prepare draft
minutes of the board meeting and circulate, within a period of fifteen days
from the date of conclusion of that meeting, to all directors, by hand/speed post/registered
post/courier/e-mail or by any recognised electronic means, for their
comment(s). |
|
16. |
Prepare list of allotees
for filing with the Registrar of Companies. |
|
17. |
File the e-Form
PAS-3 along with attachments within 30 days of allotment with the
Registrar of Companies. |
|
18. |
In case of
Private Limited Companies: ·
Prepare share certificate and get them stamped. ·
Issue share certificate to the respective allotees
within two months from the date of allotment of shares as per section 46 of
the Act and Rule 5 of the Companies (Share Capital and Debentures) Rules,
2014. ·
Please follow procedure for e-stamping of share
certificates |
|
19 |
In case of
Public Limited Companies: ·
Issue letter of allotment to the allotees and ask
them to furnish their Demat account details. ·
Prepare Corporate Excel Form in respect of allotment
of securities and submit the same to the Depository and to Registrar to the
issue of the company. ·
Receive confirmation from the Registrar to the issue
that it has credited securities in Demat account of all the allottee within
60 days of allotment. ·
Receive credit advice from the Depository and on the
basis of that credit advice, pay stamp duty on the allotted securities. ·
Please follow procedure for payment of stamp duty on
the allotted securities |
|
20. |
Make necessary
entries in register of members within seven days after passing of board
resolution for allotment of shares. |
|
21. |
Ensure— ·
that every individual who acquires significant
beneficial ownership shares after this allotment, has submitted a declaration
in Form BEN-1 to the company, within 30 days of acquiring such
significant beneficial ownership shares or any changes in such ownership. ·
that if Form BEN-1 is received by the
company, Form BEN-2 is filed with the Registrar of Companies within 30
days from the date of receipt of such declaration. ·
that the company has complied with the provisions of
the Companies (Significant Beneficial Ownership) Rules, 2018. |
(Author-
Vishal Wason is a a Fellow Member of the
Institute of Company Secretaries of India and Law Graduate. He is Practicing as
an Advocate with Hon’ble High Court of Delhi and other district courts
including Tribunals. He is having rich experience of more than 8 years (approx)
in Company law matters. His core area of practice includes Corporate Laws, ROC
matters, Intellectual Property Right (IPR) Laws and liaisoning with ROC, NCLT,
Trademark Registry, Regional Director, Official Liquidator, Reserve Bank of
India, Ministry of Corporate Affairs and Stock Exchange etc.
With
the vast experience in Corporate Sector, he has got in-depth knowledge and
experience of Secretarial Audit, Due Diligence, Corporate Drafting, Mergers,
Trademark & Copyrights, Joint Venture & Collaborations. He is also
handling various litigations including Section 138 case, civil related matters,
Property disputes, Criminal matters, Arbitration proceedings, etc.
Disclaimer:
The entire content of the note has been prepared in accordance with the
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refer the important existing provisions of applicable laws. The reader agrees
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