Issue of Bonus Shares by Pvt Company

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varun gupta (Querist)
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05 October 2009 A private Company wants to issue Bonus Shares.
a) Can it do so? Restrictions if any?
b) What are the required conditions to be fulfilled to do so?
c) Pls provide detailed compliance requirements to do so?

Thanks.
Varun

Ankur Garg

Ankur Garg (Expert)
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05 October 2009 Hi,

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)
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05 October 2009 Follow the below mentioned link and download the useful file for bonus issue:

https://www.caclubindia.com/forum/messages/2009/9/49751_bonus_issue.asp

Regards

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