Is it possible to withdraw a bonus issue through board resol

C S Alok Singh (Company Secretary) (522 Points)

29 October 2012  

I am facing a practical problem, regarding the withdrawl of bonus issue... as the bonus issue procedure was carried by the company, Thus, the E form 23 ( was filed with MCA for registering resolutions relevant to bonus issue i .e. : -

a) Increase in authorized capital  u/s 31 of the act

b) alteration of article 3 and insertion of article 217 in article of association u/s 3 of the act. 

Now due to insufficient profits , board shows its inablity to issue bonus shares. what is the remedy in such situation ?

"As per my reserch, regarding bonus issue, the only provision is Section 205(3) of the Companies Act, 1956 which states that “there is no prohibition on a company to capitalize its profits or reserves for the purpose of issuing fully paid-up bonus shares or paying up any amount, for the time being unpaid, on any shares held by the members of the company.”

Please note, that no where in section 205 it is written that special resolution or member’s approval is required for issuing bonus shares. Also, section 192 silent about bonus issue which specifically defines the items for the registration of special resolutions.

Hence procedurally bonus shares can be issued by approval of board of director only as according to AoA of the company. (read 15.1.7 of SEBI DIP guidelines of bonus issue)

But no resolution specifically of bonus issue got registered with MCA. As we have not registered any resolution of bonus issue with RoC / MCA, there is no non compliance with these authorities if we have not issued bonus shares issue later on.

In given situation the only compliance remain is to take approval of board again in the meeting next BM for withdrawal of bonus issue due to lack of profits or reserves.

Please guide me if i am wrong... your contrary views in this issue are cordially invited