Bonus issue and stock split up
This query is : Resolved
05 March 2009
What are differences between bonus issue and stock split up? Is the bonus shares represent a compensation for inflation factor for the money initially invested? If so, is it advisable for the organisation to issue bonus shares?
CA Tirth Ajani
(Expert)
05 March 2009
bonus shares are issued to the existing shareholders by converting free reserves or share premium account to equity capital without taking any consideration from investors.
A type of corporate action where a company's existing shares are divided into multiple shares. Although the amount of shares outstanding increases by a specific multiple, the total value of the shares remains the same i.e. share capital compared to pre-split amounts, because no real value has been added as a result of the split.
there are many reasons behind issue of bonus shares and stock split up and inflation factor can be one of them.
A type of corporate action where a company's existing shares are divided into multiple shares. Although the amount of shares outstanding increases by a specific multiple, the total value of the shares remains the same i.e. share capital compared to pre-split amounts, because no real value has been added as a result of the split.
there are many reasons behind issue of bonus shares and stock split up and inflation factor can be one of them.
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