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Can bonus shares be redeemed?

5. RESTRICTIONS ON WITHDRAWAL OF BONUS ISSUE: Rule 14 of the Companies (Share Capital and Debentures) Rules, 2014 provides that the company which has once announced the decision of its Board recommending a bonus issue shall not subsequently withdraw the same.

taxguru.in - Issue of Bonus Shares under Companies Act, 2013 with FAQs

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It is an offer of free additional shares to the existing shareholders in proportion to their existing holdings. The basic principal behind bonus issue is that the total number of shares increases with a constant ratio of number of shares held to the number of shares outstanding. For example if an existing shareholder of the company holds 200 shares and the company declares 4:1 bonus that is for every 1 (One) share, he gets 4 (Four) Shares for free. That is total 800 shares for free and his total holding will increase to 1000 Shares after allotment of Bonus Shares.

1. In Case of Unlisted Company:

1. Section 63 of Companies Act, 2013 and

2. Rule 14 of Companies (Share Capital and Debentures) Rules, 2014.

2. In Case of Listed Company: SEBI (ICDR) Regulations, 2009

Section 63 provides that a company may issue fully paid-up bonus shares to its members, out of-

1. Its free reserves;

2. The securities premium account; or

3. The capital redemption reserve account.

Exception:

No issue of bonus shares shall be made by capitalizing reserves created by the revaluation of assets.

The following conditions must be satisfied before issuing bonus shares:

3. The Company has not defaulted in payment of interest or principal in respect of fixed deposits or debt securities issued by it; 4. The company has not defaulted in respect of the payment of statutory dues of the employees, such as, contribution to provident fund, gratuity and bonus; 5. The partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up;

6. It complies with such conditions as may be prescribed.

5. RESTRICTIONS ON WITHDRAWAL OF BONUS ISSUE:

Ensure that whether AOA of the company, authorizes issue of bonus share. If not, then amend the AOA. Ensure that bonus issue has been made out of free reserves built out of the genuine profits or securities premium or capital redemption reserve account. Ensure that the company has not defaulted in payment of interest or principal in respect of fixed deposits and or debt securities issued by it or in respect of the payment of statutory dues of the employees such as contribution to provident fund, gratuity, bonus etc.

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Ensure that party paid up shares, if any, are made fully paid-up before the bonus issue is recommended by the Board of directors.

Ensure that the bonus issue is not made in lieu of dividend.

1. Issue Notice of Board Meeting at least before 7 days before the date of Board Meeting [Section 173(3)]. 2. In the case of listed entity, give prior intimation to the stock exchange at least two working days in advance of the date of Board Meeting. 3. Hold the Board Meeting and get the following proposal to be approved by the Board:

To recommend the Bonus Issue;

To Fix Ratio and quantum of Bonus Issue;

To approve the Notice of General Meeting;

To decide the date, Time and Venue of Extra-Ordinary General Meeting;

4. Issue Notice for calling Extra-Ordinary General Meeting at least 21 clear days before the date of Extra-Ordinary General Meeting. 5. Hold the Extra-Ordinary General Meeting and Pass Ordinary-Resolution for issue of bonus shares. 6. File Form MGT-14 with the Registrar within 30 days of passing of the Ordinary-Resolution. The following documents shall be attached with Form MGT-14:

Notice with Explanatory Statements;

Certified True Copy of All Resolution Passed at Extra-Ordinary General Meeting,

Certified Copy Altered MOA, if MOA altered

Certified Copy of Altered AOA, If AOA altered

7. Issue Notice of Board Meeting and hold Board Meeting for passing resolution for Allotment of Bonus Shares. 8. File Form PAS-3 (Return of Allotment) within 30 days of allotment. The following documents shall be attached with form PAS-3:

Certified True Copy of Board Resolution;

9. Issue Shares Certificates to all the allottee within two months from the date of allotment of bonus issue. 10. Intimate the details of allotment of shares to the Depository immediately on allotment of such shares.

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FREQUENTLY ASKED QUESTION :

Q.1 Can a company issue preference share also under bonus issue or it can issue only equity shares under bonus issue?

Ans. The Companies Act, 2013 not specified any specific type of shares under Bonus Issue, Therefore, a company can issue equity as well as preference share under bonus issue.

Q.2 What shall be issue price of bonus shares?

Ans. Bonus Shares are issued free of cost, so question of issue price does not arise.

Ans. No, Bonus Shares shall always be issued fully paid up.

Ans. No, Company cannot issue bonus shares in different ratio, It shall issue bonus shares to the existing shareholders in proportion to their existing holdings. Ans. Section 63 prohibits that no issue of bonus shares shall be made by capitalizing reserves created by the revaluation of assets.

Q.7 Can company once announced the decision of its Board recommending a bonus issue subsequently withdraw the same?

Ans. Bonus Issue cannot made in lieu of dividend.

Ans. Section 63 provides that a company may issue fully paid-up bonus shares to its members, out of-

1. Its free reserves;

2. The securities premium account; or

3. The capital redemption reserve account.

Ans. In such as case a company can alter its AOA by passing Special Resolution u/s 14 of the Companies Act, 2013.

Q.11 If the Partly paid up shares outstanding, then can company allot shares under Bonus Issue?

Ans. Company cannot allot shares in such a case. Party paid up shares, if any, are made fully paid-up before the bonus issue is recommended by the Board of directors.

taxguru.in - Issue of Bonus Shares under Companies Act, 2013 with FAQs

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