- Meaning: The company issue additional shares to existing shareholder in proportion to shares held with them, without any monetary consideration, out of its accumulated profit is termed as Bonus share.
- The bonus share can be issued only if is mentioned in the Articles of Association of the Company.
- Usually every company makes provisions in its Articles of Association for bonus share.
- Procedure to Issue Bonus Shares :
1. Articles of Association: The Company must be authorized by its Articles of Association to issue Bonus shares.
2. Resolution: A resolution to that declaration should have been passed in general meeting.
3. Closing of List of Members: The directors must close the list of members before calling the shareholders’ meeting.
4. Members list: After the closing of members list secretary prepares the list of members.
5. Agreement Regarding the Declaration of Ownership: These shares are given instead of cash amount, to shareholders for whom an agreement regarding the declaring of ownership is made.
6. Sanction Letter: After the contract is made sanctioned letter is prepared and sent to shareholders.
7. Registration with Registrar of Companies: A statement regarding the issue of bonus shares to shareholders has to be submitted to the registrar within one month of the declaration.
8. SEBI: To issue Bonus share and to decide the amount of bonus shares, the procedure should be followed in accordance with the guideline of SEBI.