SPLIT OF SHARES AND BONUS THEREON
This query is : Resolved
10 June 2021
A company has in its board meeting approved split 1 share of Rs. 5/- in 2.5 share of Rs.2/-.
Further in the same board meeting 1:1 Bonus has been approved. First shares et split and then the bonus shares would be allotted of course all subject to approval of shareholders.
So efectively if one holds one share theoretically he would have 5 shares once the process is completed.
However the question arises is how whether Company can allott bonus shares in fraction?
Would appreciate response!
Further in the same board meeting 1:1 Bonus has been approved. First shares et split and then the bonus shares would be allotted of course all subject to approval of shareholders.
So efectively if one holds one share theoretically he would have 5 shares once the process is completed.
However the question arises is how whether Company can allott bonus shares in fraction?
Would appreciate response!
13 June 2021
Request response to the above query!
20 July 2021
one share can't be split into 2.5 shares. It can't be split in fractions.
21 July 2021
Yes please but in this case company would be splitting first and then issue the shares in the same meeting. After bonus it becomes whole number! However is it technically correct? Thanks for your response!
21 July 2021
No it is not correct because splitting cant be in fractions.
22 July 2021
Yes Please! However the company in this clearly states that Bonus shares shall be issued after sub-division! May please see the filing by Tide Water! Thanks for your response!
25 July 2025
Here’s a clear breakdown of the issue:
### Situation:
* Company wants to split shares of ₹5 each into **2.5 shares of ₹2 each** (i.e., splitting 1 share into fractional shares).
* Then issue **bonus shares** on the post-split shares.
* Theoretical holding per original share would become 5 shares after the bonus issue.
---
### Key points:
1. **Fractional shares are generally not allowed**
Under Indian company law and SEBI guidelines, a share split (sub-division) cannot result in fractional shares. The split must be into whole numbers.
2. **Splitting into 2.5 shares is not valid**
You cannot split 1 share into 2.5 shares. The split ratio must be such that resulting shares are whole numbers, e.g., 1 share → 2 shares or 1 share → 5 shares.
3. **Bonus shares cannot be issued in fractions**
Similarly, bonus shares must be allotted in whole numbers.
4. **Sequence matters**
If the company intends to issue bonus shares that would result in whole numbers only after the split, the split itself must be valid and cannot create fractional shares initially.
---
### Practical way companies handle such situations:
* Instead of 1 share → 2.5 shares, the company could do a split like **2 shares of ₹5 each → 5 shares of ₹2 each** (which results in whole shares).
* Then issue bonus shares on the increased number of shares to avoid fractions.
---
### Conclusion:
* The split ratio of **1 share into 2.5 shares** is **not legally valid**.
* Company must propose a split that results in whole shares only.
* Bonus shares allotment should be based on valid shareholding without fractions.
---
If you want, I can help draft a formal note or suggest alternatives for structuring the split and bonus to avoid fractions. Would you like that?
### Situation:
* Company wants to split shares of ₹5 each into **2.5 shares of ₹2 each** (i.e., splitting 1 share into fractional shares).
* Then issue **bonus shares** on the post-split shares.
* Theoretical holding per original share would become 5 shares after the bonus issue.
---
### Key points:
1. **Fractional shares are generally not allowed**
Under Indian company law and SEBI guidelines, a share split (sub-division) cannot result in fractional shares. The split must be into whole numbers.
2. **Splitting into 2.5 shares is not valid**
You cannot split 1 share into 2.5 shares. The split ratio must be such that resulting shares are whole numbers, e.g., 1 share → 2 shares or 1 share → 5 shares.
3. **Bonus shares cannot be issued in fractions**
Similarly, bonus shares must be allotted in whole numbers.
4. **Sequence matters**
If the company intends to issue bonus shares that would result in whole numbers only after the split, the split itself must be valid and cannot create fractional shares initially.
---
### Practical way companies handle such situations:
* Instead of 1 share → 2.5 shares, the company could do a split like **2 shares of ₹5 each → 5 shares of ₹2 each** (which results in whole shares).
* Then issue bonus shares on the increased number of shares to avoid fractions.
---
### Conclusion:
* The split ratio of **1 share into 2.5 shares** is **not legally valid**.
* Company must propose a split that results in whole shares only.
* Bonus shares allotment should be based on valid shareholding without fractions.
---
If you want, I can help draft a formal note or suggest alternatives for structuring the split and bonus to avoid fractions. Would you like that?
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