Issue of bonus shares out of sec prem reserve(amalgamation)
This query is : Resolved
16 July 2013
Can the learned members please guide me with the following query of mine:-
Can Security Premium and amalgamation redemption reserve be used to issue
Bonus Shares in a Public Limited-Unlisted Company? Please note that such
Securities premium has arisen on *issue of shares on amalgamation*.
As per SEBI (DIP) Guidelines for Issue of Bonus Shares, Reserves (i.e., not
Free Reserves) not available for Issue of Bonus Shares are:
1. Capital reserve arising due to revaluation of assets.
2. *Securities premium arising on issue of shares on amalgamation or lake
over*.
3. Investment allowance reserve/Development rebate reserve before expiry of
4 years of creation.
4. Balance in debenture redemption reserve account before redemption takes
place.
5. Surplus arising from a change in the method of charging depreciation.
But I require the applicability of such reserves strictly for *unlisted
public companies.*
Can Security Premium and amalgamation redemption reserve be used to issue
Bonus Shares in a Public Limited-Unlisted Company? Please note that such
Securities premium has arisen on *issue of shares on amalgamation*.
As per SEBI (DIP) Guidelines for Issue of Bonus Shares, Reserves (i.e., not
Free Reserves) not available for Issue of Bonus Shares are:
1. Capital reserve arising due to revaluation of assets.
2. *Securities premium arising on issue of shares on amalgamation or lake
over*.
3. Investment allowance reserve/Development rebate reserve before expiry of
4 years of creation.
4. Balance in debenture redemption reserve account before redemption takes
place.
5. Surplus arising from a change in the method of charging depreciation.
But I require the applicability of such reserves strictly for *unlisted
public companies.*
16 July 2013
Hi
I will suggest you to read Chapter IX of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 , it may help you.
I will suggest you to read Chapter IX of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 , it may help you.
16 July 2013
As per Regulation 94 of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009
Bonus shares only against reserves, etc. if capitalised in cash:
94 (1) The bonus issue shall be made out of free reserves built out of the genuine profits or securities premium collected in cash only and reserves created by revaluation of fixed assets shall not be capitalised for the purpose of issuing bonus shares.
(2) Without prejudice to the provisions of sub-regulation (1), the bonus share shall not be issued in lieu of dividend.
Bonus shares only against reserves, etc. if capitalised in cash:
94 (1) The bonus issue shall be made out of free reserves built out of the genuine profits or securities premium collected in cash only and reserves created by revaluation of fixed assets shall not be capitalised for the purpose of issuing bonus shares.
(2) Without prejudice to the provisions of sub-regulation (1), the bonus share shall not be issued in lieu of dividend.
16 July 2013
Dear Mr. Mishra,
Please note that I require provisions applicable only to UNLISTED PUBLIC COMPANY.
Please note that I require provisions applicable only to UNLISTED PUBLIC COMPANY.
16 July 2013
Dear Mr. Mishra,
Please note that I require provisions applicable only to UNLISTED PUBLIC COMPANY.
Please note that I require provisions applicable only to UNLISTED PUBLIC COMPANY.
16 July 2013
Ohhhhhhh, Sorry
Go to the following file, it will help you:
https://www.caclubindia.com/share_files/issue-of-bonus-shares-37558.asp
Go to the following file, it will help you:
https://www.caclubindia.com/share_files/issue-of-bonus-shares-37558.asp
16 July 2013
Thanks Ajay.
But the securities premium present in the balance sheet of the Company has arisen out of amalgamation and is of the amalgamated companies and I am unable to find out any provisions that restricts or allows issue of bonus shares out of such securities premium reserve.
But the securities premium present in the balance sheet of the Company has arisen out of amalgamation and is of the amalgamated companies and I am unable to find out any provisions that restricts or allows issue of bonus shares out of such securities premium reserve.
02 August 2024
For an unlisted public company in India, the rules governing the issuance of bonus shares, particularly concerning reserves such as securities premium arising out of amalgamation, are guided by various regulations and accounting standards. Here's a detailed breakdown based on your query:
### Applicability of Reserves for Issuing Bonus Shares
**1. **Securities Premium Reserve:**
- **General Rule:** Under the SEBI (DIP) Guidelines, securities premium arising from the issue of shares on amalgamation is not generally available for the issuance of bonus shares. This is because it is considered a reserve that is not freely available for distribution. The guideline specifically restricts the use of such reserves for bonus issues.
- **Unlisted Public Companies:** The rules applicable to unlisted public companies follow similar principles. The **Securities and Exchange Board of India (SEBI) guidelines** and **Company Law** provisions outline that the securities premium arising from an amalgamation cannot be used for issuing bonus shares.
**2. **Amalgamation Reserve:**
- **Reserve Created Due to Amalgamation:** The reserves created due to amalgamation, such as the amalgamation reserve, are generally not considered free reserves available for issuing bonus shares. These reserves often have specific conditions attached and may be used only for purposes prescribed by law or specific agreements related to the amalgamation.
**3. **Other Reserves:**
- **Capital Reserve:** Not allowed.
- **Investment Allowance Reserve/Development Rebate Reserve:** Not allowed before expiry of the prescribed period.
- **Debenture Redemption Reserve:** Not available before redemption.
- **Surplus Arising from Depreciation Change:** Not allowed.
### Relevant Provisions for Unlisted Public Companies
**1. **Companies Act, 2013:**
- **Section 63:** The Companies Act, 2013, stipulates that bonus shares must be issued out of free reserves, securities premium account, or capital redemption reserve account, but not from reserves that are not freely available for distribution.
- **Free Reserves:** The term “free reserves” refers to reserves that are available for distribution as dividends and includes profits made in the ordinary course of business.
**2. **SEBI Guidelines:**
- **SEBI (DIP) Guidelines:** These guidelines are more stringent and specifically outline which reserves can be used for bonus issues. They do not typically apply to unlisted public companies in the same manner but provide guidance on how reserves should be handled.
### Conclusion:
For an unlisted public company, **securities premium arising from the issue of shares on amalgamation** is **not available for issuing bonus shares**. The bonus shares must be issued out of free reserves that are available for distribution. The legal and regulatory provisions and guidelines consistently restrict the use of such reserves for bonus issues.
**Actionable Steps:**
1. **Review Free Reserves:** Ensure that bonus shares are issued from reserves that are classified as free reserves, as per the Companies Act, 2013.
2. **Consult Legal Experts:** For specific and complex situations, consulting with legal or accounting professionals for guidance tailored to the unique circumstances of the company is advisable.
### References:
- **Companies Act, 2013** – Section 63
- **SEBI (DIP) Guidelines** (although more applicable to listed companies, they provide insight into regulatory expectations)
### Applicability of Reserves for Issuing Bonus Shares
**1. **Securities Premium Reserve:**
- **General Rule:** Under the SEBI (DIP) Guidelines, securities premium arising from the issue of shares on amalgamation is not generally available for the issuance of bonus shares. This is because it is considered a reserve that is not freely available for distribution. The guideline specifically restricts the use of such reserves for bonus issues.
- **Unlisted Public Companies:** The rules applicable to unlisted public companies follow similar principles. The **Securities and Exchange Board of India (SEBI) guidelines** and **Company Law** provisions outline that the securities premium arising from an amalgamation cannot be used for issuing bonus shares.
**2. **Amalgamation Reserve:**
- **Reserve Created Due to Amalgamation:** The reserves created due to amalgamation, such as the amalgamation reserve, are generally not considered free reserves available for issuing bonus shares. These reserves often have specific conditions attached and may be used only for purposes prescribed by law or specific agreements related to the amalgamation.
**3. **Other Reserves:**
- **Capital Reserve:** Not allowed.
- **Investment Allowance Reserve/Development Rebate Reserve:** Not allowed before expiry of the prescribed period.
- **Debenture Redemption Reserve:** Not available before redemption.
- **Surplus Arising from Depreciation Change:** Not allowed.
### Relevant Provisions for Unlisted Public Companies
**1. **Companies Act, 2013:**
- **Section 63:** The Companies Act, 2013, stipulates that bonus shares must be issued out of free reserves, securities premium account, or capital redemption reserve account, but not from reserves that are not freely available for distribution.
- **Free Reserves:** The term “free reserves” refers to reserves that are available for distribution as dividends and includes profits made in the ordinary course of business.
**2. **SEBI Guidelines:**
- **SEBI (DIP) Guidelines:** These guidelines are more stringent and specifically outline which reserves can be used for bonus issues. They do not typically apply to unlisted public companies in the same manner but provide guidance on how reserves should be handled.
### Conclusion:
For an unlisted public company, **securities premium arising from the issue of shares on amalgamation** is **not available for issuing bonus shares**. The bonus shares must be issued out of free reserves that are available for distribution. The legal and regulatory provisions and guidelines consistently restrict the use of such reserves for bonus issues.
**Actionable Steps:**
1. **Review Free Reserves:** Ensure that bonus shares are issued from reserves that are classified as free reserves, as per the Companies Act, 2013.
2. **Consult Legal Experts:** For specific and complex situations, consulting with legal or accounting professionals for guidance tailored to the unique circumstances of the company is advisable.
### References:
- **Companies Act, 2013** – Section 63
- **SEBI (DIP) Guidelines** (although more applicable to listed companies, they provide insight into regulatory expectations)
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