Capitalisation of profits

Hi

Yes the Article regarding Capitalisation of Profit should be mentioned in AOA of the company, if not you must insert the clause in accordence with Table A of Schedule I of the Companies Act, 1956. Only adoption of set of Table A is not sufficient, clause should also be in AOA.

If the Company has adopted regulation 96 of Table A of Schedule I of the Companies Act, 1956 only the share premium account and capital redemption reserve account shall be applied in the paying up of unissued shares to be issued to members of the company as fully paid bonus shares.

Regards

CS Ajay Mishra

SIr, Thanks for your quick response. But Section 28(2) says if the articles are registered, in so far as the articles do not exclude or modify the regulations contained in Table A aforesaid, those regulations shall so far as applicable, be the regulations of the company in the same manner and to the same extent as if they were contained in duly registered artices.

Inspite of provisions of section 28(2) do a company should have specific provision in the articles for capitalisation of profits? Request you to clarify.

Hi

In addition of Regulation 96 and 97 of  Table A of Schedule I of the Companies Act, 1956, there are some other section which apply to issue of bonus shares:

• RELEVANT PROVISIONS
• Companies Act, 1956:
  1. Section 53: All share certificates shall be delivered to the shareholders within 3 months from the date of allotment of Bonus share in a manner specified in this section.
  2. Section 75: File return of allotment in Form-2 of Companies (Central Governments) General Rules and Forms, 1956 with Registrar of Companies together with prescribed fee within 30 days from the date of allotment.
  3. Section 78(2): The Securities Premium Account may be applied by the company in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares.
  4. Section 80 (5): The Capital Redemption Reserve Account may be applied by the company, in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares.
  5. Section 205 (3): There is no prohibition on a company to capitalize its profits or reserves for the purpose of issuing fully paid bonus shares or paying up an amount, for the time being unpaid, on any shares held by the members of the company.
• Table A of Schedule I is modal of Article of Association which a company can adopt in total or they can add some other clause in thaier Article which do not have any override effect of Companies Act, 1956.

As per Section 9 of the Companies Act, any provision contained in MOA. AOA, resolution or agreement shall to the extent to which it is repugnant to the provision of Companies Act, 1956 become void.

Regards

CS Ajay Mishra

In view of clear provisions of Section 28(2) read with Regulations 96 and 97 of Table A, company can issue bonus shares unless the Articles specifically exclude these Regulations.

However, it should be kept in mind that if Regulation 96 is adopted, only the share premium account and capital redemption reserve account shall be applied in the paying up of unissued shares to be issued to members of the company as fully paid bonus shares. [as provided in Regulation 96(3)].