Bonus share

This query is : Resolved

CS Richa Sharma (Querist)
Follow

03 July 2010 please provide me latest guidelines/laws/rules/regulations for bonus share issue.
what percentage to be maintained in reserve before / after bonus share issue?
is there any restriction on capitalization of profits in case of bonus share issue?

Please reply ASAP.

Ankur Garg

Ankur Garg (Expert)
Follow

03 July 2010 Hi Richa,

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

Ankur Garg

Ankur Garg (Expert)
Follow

03 July 2010 Also let me know your mail ID through PM. I'll send Some useful file/article to read and understand.

Regards

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now