SEBI Guidelines regarding Issue of bonus shares
Table of Contents
Guidelines issued by SEBI regarding Issue of bonus shares
SEBI has announced the following guidelines for the issue of bonus shares.
1. Provision in AOA for issue of Bonus Share
The Articles of the Association of the company should contain provisions for the issue of bonus shares. In the absence of such provisions in the Articles, the company should pass a resolution to that effect at the general body meeting.
2. Issue of Bonus Share
Bonus issue is capitalization of profit. Bonus shares should be issued from free reserves created out of genuine profits or share premiums collected.
3. Capitalization of reserve
Any reserve created through revaluation of fixed assets cannot be capitalized.
4. Issuing Bonus
Bonus shares cannot be issued in lieu of dividend.
5. No Partly paid-up shares
At the time of issuing bonus shares, there should not be partly paid up shares.
6. Payment of statutory dues
There should not be any default on the part of the company in payment of statutory dues to employees such as provident fund, gratuity, bonus, etc. Similarly, there should not be default in payment of interest on fixed deposits or interest or principal amount thereof.
7. Bonus vs Right issue
There should be a gap of at least 12 months between the public or right issue and bonus issue.
8. Proposal of bonus issue
The proposal of bonus issue must be implemented within six months from the date of such approval by the Board of Directors.
9. Resolution
If the issue of bonus shares results in excess of subscribed and issued capital over the authorized capital, a resolution will be passed at the general body meeting for increasing the authorized capital.
10. No bonus issue
No bonus issue will be made if it dilutes the rights of debenture holders whose debentures are convertible fully or partly.
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Sir,
One of my client has already made Right issue and all the formalities of right issue also gets completed. Now with in one month time he is in idea for making bonus issue. But in your article it is clearly noted in point no: 7 as follows:
7. Bonus vs Right issue: There should be a gap of at least 12 months between the public or right issue and bonus issue.
In this regard I verified to SEBI (LODR) regulations. But nowhere I found the above information. So please give the reference to my mail ID, which might be more useful for compliance purpose
with kind regards
V.Venkatesan
Company Secretary in practice