Bonus shares

Bonus shares can be issued by the company if it proposes to capitalize the retined profits by way of Bonus shares.  The Ratio of issue of binus shares should be decided by consulting the Statutory Auditors. 

You will also have to follow the SEBI guidelines for issue of bonus shares by a listed company which is as follows:

CHAPTER IX

BONUS ISSUE

Conditions for bonus issue.

92. Subject to the provisions of the Companies Act, 1956 or any other applicable law for the time

being in force, a listed issuer may issue bonus shares to its members if:

(a) it is authorised by its articles of association for issue of bonus shares, capitalisation of

reserves, etc.:

Provided that if there is no such provision in the articles of association, the issuer shall pass a

resolution at its general body meeting making provisions in the articles of associations for

capitalisation of reserve;

(b) it has not defaulted in payment of interest or principal in respect of fixed deposits or debt

securities issued by it;

(c) it has sufficient reason to believe that it has not defaulted in respect of the payment of

statutory dues of the employees such as contribution to provident fund, gratuity and bonus;

(d) the partly paid shares, if any outstanding on the date of allotment, are made fully paid up

Restriction on bonus issue.

93. (1) No issuer shall make a bonus issue of equity shares if it has outstanding fully or partly

convertible debt instruments at the time of making the bonus issue, unless it has made reservation of

equity shares of the same class in favour of the holders of such outstanding convertible debt

instruments in proportion to the convertible part thereof.

(2) The equity shares reserved for the holders of fully or partly convertible debt instruments shall

be issued at the time of conversion of such convertible debt instruments on the same terms or same

proportion on which the bonus shares were issued.

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.

Completion of bonus issue.

95. (1) An issuer, announcing a bonus issue after the approval of its board of directors and not

requiring shareholders’ approval for capitalisation of profits or reserves for making the bonus issue,

shall implement the bonus issue within fifteen days from the date of approval of the issue by its

board of directors:

Provided that where the issuer is required to seek shareholders’ approval for capitalisation of

profits or reserves for making the bonus issue, the bonus issue shall be implemented within two

months from the date of the meeting of its board of directors wherein the decision to announce the

bonus issue was taken subject to shareholders’ approval.

(2) Once the decision to make a bonus issue is announced, the issue can not be withdrawn.

Bonus shares is a shares which is issued to the shareholdrs which are existing in the proportion of shares held by them. Bonus issue is made when the company accumulates large profit

STEPS ARE - 

FCD/PCD

Out of Free Reserves

bonus issue sholud not be in lieu of dividend

no statutory dues of emplyee

Bonus issue is to be made within 6 months of approval from the board

Bonus shares is a shares which is issued to the shareholdrs which are existing in the proportion of shares held by them. Bonus issue is made when the company accumulates large profit

STEPS ARE - 

FCD/PCD

Out of Free Reserves

bonus issue sholud not be in lieu of dividend

no statutory dues of emplyee

Bonus issue is to be made within 6 months of approval from the board

I had asked you the procedure for  issuing bonus shares adopted by companies??????