Bonus issue

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 June 2010 1. are there any restrictions on bonus issue in companies act
2. is bonus issue should be based on audited balance sheet.

Ankur Garg

Ankur Garg (Expert)
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21 June 2010 The Companies Act, 1956 does not contain any provisions dealing with bonus shares. Section 205(3) of the Companies Act, 1956 there is no prohibition on a company to capitalise its profits or reserves for the purpose of issuing fully paid-up bonus shares or paying up any amount, for the time being unpaid, on any shares held by the members of the company.

You need to check whether your Articles of Association contains any restriction on capitalization of profits or reserves for issuing fully paid up bonus shares.

Regulations 96 & 97 of Table A to Schedule I of the Companies Act, 1956 contain provisions relating to capitalisation of profits and reserves of the company. As per these regulations the proposal to issue bonus shares has to be approved by the shareholders of the company in general meeting upon recommendation by the Board of Directors of the company However if these regulations have been excluded from the Articles of Association of the company then it shall be sufficient if the Board approves the bonus issue.

To conclude if your AOA required obtaining shareholders approval then you need to pass Ordinary Resolution and file form 23 along with form 2 for allotment otherwise it shall be sufficient to pass Board resolution for allotment of bonus shares.

Best Regards

Querist : Anonymous

Querist : Anonymous (Querist)

22 June 2010 dear Ankur
thanks for the reply.

kindly look at the second part of my query.

thanks
rama krishna

Ankur Garg

Ankur Garg (Expert)
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23 June 2010 YES SIR

As per my own understanding bonus issue should be based on audited balance sheet.

Thanks

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