Rules for Issue of Bonus Shares

(ii) he has not failed to pay employees` assessed contributions, such as contributions to the provident fund, bonuses and bonuses. Rule 14 of the Companies (Share Capital and Debentures) Rules 2014 states that a company that has once announced the decision of its board of directors to recommend a bonus issue cannot subsequently withdraw it. Once the free shares have received a new ISIN (International Securities Identification Number), they will be credited to the shareholder`s Demat account within 10 to 15 days. Shareholders will receive an SMS or email regarding the credit of free shares to their Demat account, or shareholders will be able to log directly into their online Demat accounts to view their statement reflecting the delivery of free shares on a given day. For internal accounting, a bonus issue is simply a reclassification of reserves, with no net change in equity, although its composition is changed. A bonus issue is an increase in the Company`s share capital as well as a reduction in other reserves. Despite sufficient liquidity, companies can still issue free shares to avoid the high dividend tax imposed on them. This tax must be paid by the companies at the time of the dividend declaration. When a share is split, there is no increase or decrease in the company`s cash reserves. In contrast, when a company issues free shares, the shares are paid for from cash reserves and the reserves are depleted. Free shares are additional shares that a company issues to its existing shareholders based on their existing interest in the company. Companies typically issue free shares when they cannot pay dividends to shareholders due to a lack of money.

In such cases, companies issue free shares to their existing shareholders instead of paying a dividend. Investors do not have to pay taxes on the receipt of free shares. A corporation receives its equity from the investment of shareholders. As a result, shareholders expect a return on investment. The company can do the same by declaring cash dividends or free shares. Free shares are cumulative profits that a company distributes to current shareholders in the form of free shares. There are no additional costs and the shares receive the basis of the current shareholding. Cash dividends are real transactions, and there is a payment. However, in the case of free shares, there is no payment, and it is only an accounting entry in which the reserves are capitalized. The Company may not issue free shares by capitalizing the reserves created by the revaluation of assets. Free shares are additional shares issued by a company with share capital to its current shareholders without receiving payment from those shareholders.

Shares purchased on the Commencement Date are not eligible for the issuance of free shares because the investor cannot acquire ownership of the shares before the record date. There are certain conditions that companies must meet to issue free shares. The most important conditions are usually of a legal nature. In India, there are certain criteria that companies must follow before they can distribute free shares to their shareholders. * The draft resolution of the Board of Directors for the issuance of free shares corresponds to Annex 5.1 Therefore, even after the issuance of free shares, the total participation amounts to Rs 80,000,000. However, the number of shares increases to 1,20,000. The Companies Act 2013 (the „Act“) introduced section 63 to regulate the issuance of free shares. That section, together with Rule 14 of the Companies (Share Capital and Debenture Rules) 2014, states that: Free shares may be issued under section 63(1) of the Companies Act 2013 from the following sources: Answer: As the Companies Act 2013 does not specify the specific types of shares that may be issued in a free issue, A company can issue both shares and preferred shares. Article 63 of the Companies Act 2013 contains the provisions relating to the issue of free shares.

Answer: In this situation, the company was unable to issue shares. Before the bonus issue is recommended by the Board of Directors, all paid-up shares will be paid up in full. Answer: No, free shares are never issued unless they are fully paid up. Answer: No, the Corporation cannot issue free shares in different proportions; Instead, the free shares are issued to existing shareholders in proportion to their current holdings. However, issuing free shares takes more money from the cash reserve than issuing dividends. Since the issuance of free shares does not generate cash for the company, it could lead to lower dividends per share in the future, which shareholders may not welcome up.