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New Guidelines on Bonus Issue
A company, instead of paying cash dividend, may capitalize its profits by issuing bonus shares to its existing shareholders out of its undistributed profits. It is called bonus dividend and such shares are called Bonus shares.


Postini Alternative

A company may apply such bonus in making the partly paid up shares fully paid up without asking for cash from the shareholders. Generally, a company issues bonus shares when it has sufficient Reserves and surplus but no cash to pay off dividend.

The company Law restricts the issue of bonus shares bu imposing the following conditions to be compiled with by the company:-

(i) The Article of Association permit the issue of Bonus Shares.

(ii) Such shares can be issued only out of; Accumulated Profits' or 'Share Premium Account' or 'capital Redemption Reserve Account'.

(iii) Permission of the Controller of Capital Issues has been obtained irrespective of the amount Involved.

(iv) The proposal of the Board of Directors had been duly approved by the shareholders in the general meeting.

The company shall file a return stating the number and nominal amount of bonus shares issued together with the name and addresses of the allottees and a copy of resolution authorizing such issue within 30 days from the date of allotment. (Sec. 75)

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