Detailed procedure to issue bonus shares with sample format

A bonus share is a free share of stock given to current shareholders in a company, based upon the number of shares that the shareholder already owns.Once the Company announces the Bonus Issue, on authorization by the Board, it cannot be withdrawn.

Bonus shares may be issued out of

(i) its free reserves;
(ii) the securities premium account; or
(iii) the capital redemption reserve account:

(No issue of bonus shares shall be made by capitalising reserves created by the revaluation of assets)

Procedure

1. Check the Articles of Association of the Company
2. Check whether the Authorised Capital is sufficient enough to issue bonus shares
3. Check whether it has

• not defaulted in payment of interest or principal in respect of fixed deposits or debt securities issued by it;

• it has not defaulted in respect of the payment of statutory dues of the employees, such as, contribution to provident fund, gratuity and bonus;

• the partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up;

1. Call Board Meeting for the following

• Recommend issue of bonus shares
• Fix Record Date
• Authorising Board of Directors to take necessary steps
• Date, Place & Time for General Meeting

2. EGM Meeting Holding

Convene EOGM and Pass Ordinary resolution

3. Call Board Meeting for the following

• Allotting bonus shares to the allottees as per list of allottees
• Authorising Board of Directors to take necessary steps

4. Filling of e-Forms:

File PAS-3 within 30 days of the passing of Board Resolution for allotment of shares including some attachments such as Resolution for Bonus issue of shares, Board Resolution for allotment of shares, List of Allottees. (as per Annexure B of PAS-3)- having Name, Address, occupation if any and number of securities allotted to each of the allottees and further the list shall be certified by the signatory of the form pas-3

5. After Allotment

Issue allotment letter and share certificates within 2 months of allotment.

Bonus Issue of Shares

'RESOLVED THAT in pursuant to Section 63and all other applicable provisions of the Companies Act, 2013, and the rules made thereunder, and as per the Articles of Association of the Company and subject to such approvals, consents, permissions and sanctions as may be necessary from appropriate authorities, consent of the Board, be and is hereby accorded for capitalization of such sum standing to the credit of securities premium / free reserves of the Company, as may be considered necessary by the Board, for the purpose of issuance of bonus shares in the proportion of 3 (Three) Bonus Equity Share of Rs. 10 for every 2 (Two) fully paid-up Equity Shares of Rs. 10/- each held by them, credited as fully paid-up to the holders of the Equity shares of the Company whose names shall appear on the Register of Members on the ‘Record Date' determined by the Board, and the Bonus Shares so distributed shall, for all purposes, be treated as an increase in the Paid-up capital of the Company.

RESOLVED FURTHER THAT the Bonus shares so allotted shall rank paripassu in all respects with fully paid-up Equity Shares of the Company as existing on the Record Date.

RESOLVED FURTHER THAT for the purpose of giving effect to this Resolution, the Board be and is hereby authorized to do all such acts, deeds, matters and things and to give such directions as may be necessary or expedient, and to settle any question, difficulty or doubt that may arise in this regard as the Board in its absolute discretion may deem necessary or desirable and its decision shall be final and binding.

FURTHER RESOLVED THAT to give effect to above resolution an Extra-Ordinary General Meeting of the members is hereby called on ................at................. at the registered office of the company at a shorter notice. The consent of all the shareholders has been received. The Notice of the Extra-Ordinary General Meeting is hereby approved.”

CERTIFIED TO BE TRUE

NOTICE

NOTICE is hereby given that the Extra-ordinary General Meeting of the Members of ...............will be held at the Registered Office of the Company at .................................on May ........, 2019at 11.00 A.M. to transact, the following:

SPECIAL BUSINESS

1) Issuance of Bonus issue of shares

To consider and if thought fit, to pass, with or without modification, the following Resolution as Ordinary Resolution:

'RESOLVED THAT in pursuant to Section 63(2)(b) and all other applicable provisions of the Companies Act, 2013, and the rules made thereunder, and as per the Articles of Association of the Company and subject to such approvals, consents, permissions and sanctions as may be necessary from appropriate authorities, consent be and is hereby accorded to the Board of Directors of the Company for capitalization of such sum standing to the credit of securities premium / free reserves of the Company, as may be considered necessary by the Board, for the purpose of issuance of bonus shares of Rs. 10 each, credited as fully paid-up to the holders of the Equity shares of the Company whose names shall appear on the Register of Members on the ‘Record Date' determined by the Board, in the proportion of 3 (Three) Bonus Equity Share of Rs. 10 for every 2 (Two) fully paid-up Equity Shares of Rs. 10/- each held by them and the Bonus Shares so distributed shall, for all purposes, be treated as an increase in the Paid-up capital of the Company.

RESOLVED FURTHER THAT the Bonus shares so allotted shall rank paripassu in all respects with fully paid-up Equity Shares of the Company as existing on the Record Date.

RESOLVED FURTHER THAT for the purpose of giving effect to this Resolution, the Board be and is hereby authorized to do all such acts, deeds, matters and things and to give such directions as may be necessary or expedient, and to settle any question, difficulty or doubt that may arise in this regard as the Board in its absolute discretion may deem necessary or desirable and its decision shall be final and binding.”

By Order of the Board

Registered Office: For...................

Dated: ..............,

Notes:

1. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER. PROXIES IN ORDER TO BE EFFECTIVE MUST BE RECEIVED BY THE COMPANY NOT LATER THAN FORTY EIGHT (48) HOURS BEFORE THE MEETING.

PROXIES SUBMITTED ON BEHALF OF LIMITED COMPANIES, SOCIETIES, ETC., MUST BE SUPPORTED BY APPROPRIATE RESOLUTIONS/AUTHORITY, AS APPLICABLE.

2. A person can act as proxy on behalf of Members not exceeding fifty (50) and holding in the aggregate not more than 10% of the total share capital of the Company. In case a proxy is proposed to be appointed by a Member holding more than 10% of the total share capital of the Company carrying voting rights, then such proxy shall not act as a proxy for any other person or shareholder.

3. The Notice of the EGM along with the explanatory statement is sent to all members via email/ hard copy at the registered email id/addresses registered with the Company/RTA.

4. The meeting is called on shorter notice, therefore, a consent form is annexed with the notice.

5. In case of joint holders attending the Meeting, only such joint holder who is higher in the order of names will be entitled to vote at the Meeting.

6. Relevant documents referred to in the accompanying Notice and in the Explanatory Statements, if any, are open for inspection by the Members at the Company's Registered Office on all working days of the Company, during business hours up to the date of the Meeting.

6. All Members are requested to

• Send all correspondence relating to transfer and transmission of shares to Registrar of shares to Registrar and Transfer Agent and not to the Company. Quote their Folio No. / Client ID No. in their correspondence with the Registrar and Share Transfer Agent.

• Members holding shares in dematerialized form are requested to intimate all changes pertaining to their registered email id, bank detail, mandates, nominations, power of attorney etc to their Depository Participants. Changes intimated to the Depository Participants will then be automatically reflected in Company's records which will help the Company and its Registrars and Transfer Agents.

7. The record date for determining the eligibility of the members to receive the said bonus shares will be ......................

8. Members may note that this Notice along with necessary annexure will also be available on the Company's website

By Order of the Board

Registered Office: For...................

Dated: ..............,

EXPLANATORY STATEMENT

(Pursuant to Section 102 of the Companies Act, 2013)

Item No. 1

The Chairman informed the Board that as the members are aware that the operations and performance of the Company has grown significantly over the past few years. Now, the company has also embarked upon some expansion plans therefore, in order to expand the capital base and to facilitate any further fund raising of equity shares of the company the Board in its meeting dated ...................... subject to consent of the members of the Company considered and recommended to issue of bonus equity shares. The company has free distributable reserves, therefore, the amount as required for capitalization for the Bonus Issue, be applied from the mentioned accounts for issuance of fully paid up bonus shares in the proportion of 3 (three) Bonus Equity Share of Rs. 10 for every 2 (Two) fully paid-up Equity Shares of Rs. 10/- each held as on a ‘record date' determined by the Board, subject to approval of the shareholders and such other authorities as may be necessary.

The provisions of the Companies Act, 2013 require the Company to seek the approval of the Members for issue of bonus equity share.

The Board of Directors of the Company recommends the Resolutions as set out in the accompanied Notice for approval of the members.

None of the Directors of your Company is, in any way, concerned or interested in this resolution.

By Order of the Board

Registered Office: For...................

Dated: ..............,

''RESOLVED THAT pursuant to the resolution of the shareholders passed at the Annual/Extra-Ordinary General Meeting of the Company held on____, Bonus Equity shares of Rs.______ /- each, having distinctive numbers from________ to________ be and are hereby issued to those shareholders whose names appear in the Register of Members of the Company as on the Record Date i.e., ______ as per the list enclosed.:”

'RESOLVED FURTHER THATthe bonus shares to be allotted subject to the Memorandum and Articles of Association of the Company and shall rank in all respects paripassu with the existing equity shares of the Company.”

'RESOLVED FURTHER THAT for the purpose of giving effect to this Resolution, the Board or the Company Secretary be and are hereby authorised to do all such acts, deeds, matters and things and to give such directions as may be necessary or expedient, and to settle any question, difficulty or doubt that may arise in this regard as the Board in its absolute discretion may deed necessary or desirable and its decision shall be final and binding.”

'RESOLVED FURTHER THAT the requisite e-forms be filed with the MCA in this regards.”

'RESOLVED FURTHER THAT certified true copies of the aforesaid resolutions signed by anyone of the Board of Directors or the Company Secretary, be and is hereby forwarded to the concerned authorities for their reference and records.”

CERTIFIED TO BE TRUE

List of Allottees

Table B

FOR .....................