Issue of Bonus Shares (Section 63)

# Issue of Bonus Shares (Section 63)

## What are Bonus Shares?

Bonus shares are shares issued to existing shareholders as fully paid shares, free of cost, by capitalising the company's reserves/profits.

## 1. Permitted Sources for Bonus Issue

Bonus shares can be issued ONLY from:

• Free Reserves
• Securities Premium Account
• Capital Redemption Reserve Account

## 2. Prohibited Source

• Revaluation Reserves CANNOT be used for issuing bonus shares.

## 3. Procedural Conditions

### (a) Authority

• Must be authorized by AOA.

### (b) Board Recommendation

• Approval of Board of Directors is required.
• Once recommended by the Board, it cannot be withdrawn.

### (c) Shareholders' Approval

• Requires shareholder approval in General Meeting through Ordinary Resolution.

### (d) No Default Condition

The company must NOT have defaulted on:

• Interest or principal on fixed deposits or debentures/bonds.
• Statutory dues: PF, gratuity, or bonus.

### (e) Fully Paid-Up Shares

• Partly paid-up shares must be made fully paid-up before issuing bonus shares.

### (f) Not in Lieu of Dividends

• Bonus shares cannot be issued in lieu of dividends.

## 4. Capitalisation of Profits [Section 123(5)]

A company may capitalise its profits or reserves to:

• Issue fully paid-up bonus shares, OR
• Pay unpaid amounts on shares held by members.

## Quick Reference Box

## Resolution Type Reminder