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Bonus shares at discount & at premium

Pooja (employed) (25 Points)

13 July 2012

Hello,

Would like to know if Bonus share can be issued at a premium - ?

I believe it is no , because the very purpose of bonus issue is movement of reserves to Capital , however , issue of bonus share at premium will retain the premium in reserves account itself (thought there will be increase in the number of shares)

Also, Can Bonus shares be issued at Discount ? Would it make sense to have such an issue ??

Still,, is there any provision which states that Bonus cannot be made at a premium/Discount ?

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Tejas Jain (Chartered Accountant) (314 Points)
Replied 13 July 2012

When you selling the shares at "Nil" Value, where is the question of collecting value above the "par" value. If suppose, B/S are issued say for every 1 share held multiful shares issued, in which case, it is as good as shares are issued at discount and if for multiful shares held, one share issued, it is as good as shares are issued at Premium. In all these cases, we are adjusting the resultant capital either against "Free Reserves" or against "eligible redemption reserves".