Which profits are available for issue of bonus shares?

What are sources available for issuing bonus shares?

Source of bonus shares

  • Profit and loss account.
  • general reserve.
  • revenue reserve.
  • free reserves.
  • dividend equalization fund.
  • capital reserve.
  • sinking fund.
  • debenture redemption reserve only after redemption.

Which is not available for issue of fully paid bonus shares?

Fully paid up bonus shares may be issued only out of free reserves, securities premium account or capital redemption reserve account. (Section 63(1) The bonus shares shall not be issued in lieu of dividend. (Section 63(3)

Why do companies issue bonus shares?

Companies issue bonus shares to encourage retail participation and increase their equity base. When price per share of a company is high, it becomes difficult for new investors to buy shares of that particular company. Increase in the number of shares reduces the price per share.

What is bonus share when is it issued?

A bonus issue is an offer given to the existing shareholders of the company to subscribe for additional shares. Instead of increasing the dividend payout, the companies offer to distribute additional shares to the shareholders. For example, the company may decide to give out one bonus share for every ten shares held.

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Can bonus shares be waived?

Krishan Kumar that as issuance and allotment of Bonus share is in the long term interest of the Company and its shareholders, they have agreed to waive their rights to receive bonus shares to which they would be entitled.

Which company will give bonus share in 2021?

Bonus

COMPANY Bonus Ratio DATE
KKV Agro Powers 1:4 21-08-2021
SRF 4:1 31-08-2021
Advitiya Trade 44:100 21-08-2021
Thejo Engg 2:1 30-08-2021

What are the disadvantages of bonus shares?

The disadvantages of issuing bonus shares are:

  • To the company – as issue of this may lead to increase in capital of the company.
  • Shareholder expect existing rate dividend per share to continue.
  • It also prevents the new investors from becoming the shareholders of the company.

What is the procedure for issue of bonus shares?

Ensure the meeting has the required quorum that is ⅓ rd of the total strength of the Board. Place the board resolution for approving the issue subject to the approval by shareholders in a general meeting by an ordinary resolution. Ensure that the resolution is passed. The ratio of the bonus shares must be fixed.

What is the minimum share application money?

The minimum share application money is 5% of the nominal value. The money received by the company when it issues shares to the public is known as application money. Allotment is made to the shareholders once the application money is received.

Is it good to buy bonus shares?

Increasing the number of outstanding shares through a bonus issue increases the participation of smaller investors in the company’s shares and hence enhances the liquidity of the stock. The Increase in the issued share capital increases the perception of company’s size.

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What is the benefit of bonus shares?

Bonus shares give positive sign to the market that the company is committed towards long term growth story. Bonus shares increase the outstanding shares which in turn enhances the liquidity of the stock. The perception of the company’s size increases with the increase in the issued share capital.

How are bonus shares calculated?

Bonus Shares- Calculation

Suppose a shareholder holds 2,000 shares of the company, now when the company issues bonus shares, he will receive 1,000 bonus shares (2,000*½= 1,000).