issue of bonus shares
This query is : Resolved
30 June 2010
1)I want know the compliances of companies act 1956 with regard to Issue of bonus shares by a private limited company?
2)what are ROC compliance with regard to it?
3)whether bonus shares can be issued to a single shareholder only?
2)what are ROC compliance with regard to it?
3)whether bonus shares can be issued to a single shareholder only?
30 June 2010
Hi,
The Companies Act, 1956 does not contain any provisions dealing with bonus shares. Section 205(3) of the Companies Act, 1956 there is no prohibition on a company to capitalise its profits or reserves for the purpose of issuing fully paid-up bonus shares or paying up any amount, for the time being unpaid, on any shares held by the members of the company.
You need to check whether your Articles of Association contains any restriction on capitalization of profits or reserves for issuing fully paid up bonus shares.
Regulations 96 & 97 of Table A to Schedule I of the Companies Act, 1956 contain provisions relating to capitalisation of profits and reserves of the company. As per these regulations the proposal to issue bonus shares has to be approved by the shareholders of the company in general meeting upon recommendation by the Board of Directors of the company However if these regulations have been excluded from the Articles of Association of the company then it shall be sufficient if the Board approves the bonus issue.
To conclude if your AOA required obtaining shareholders approval then you need to pass Ordinary Resolution and file form 23 along with form 2 for allotment otherwise it shall be sufficient to pass Board resolution for allotment of bonus shares.
Best Regards
The Companies Act, 1956 does not contain any provisions dealing with bonus shares. Section 205(3) of the Companies Act, 1956 there is no prohibition on a company to capitalise its profits or reserves for the purpose of issuing fully paid-up bonus shares or paying up any amount, for the time being unpaid, on any shares held by the members of the company.
You need to check whether your Articles of Association contains any restriction on capitalization of profits or reserves for issuing fully paid up bonus shares.
Regulations 96 & 97 of Table A to Schedule I of the Companies Act, 1956 contain provisions relating to capitalisation of profits and reserves of the company. As per these regulations the proposal to issue bonus shares has to be approved by the shareholders of the company in general meeting upon recommendation by the Board of Directors of the company However if these regulations have been excluded from the Articles of Association of the company then it shall be sufficient if the Board approves the bonus issue.
To conclude if your AOA required obtaining shareholders approval then you need to pass Ordinary Resolution and file form 23 along with form 2 for allotment otherwise it shall be sufficient to pass Board resolution for allotment of bonus shares.
Best Regards
30 June 2010
In my view most articles provide for having members' approval for bonus issue. Hence, be careful in that regard.
The normal procedure is:
1) Board Meeting to consider the bonus proposal and the quantum/ratio of bonus. Also decide on the date, time place for AGM/EGM and Notice of the same
2) Members Meeting wherein the resolution is passed as Ordinary or Special (as required by the ARticles)
3) Fixing Record Date
4) Filing Form 23
5) Board Meeting / Allotment committee meeting for allotment of shares
The normal procedure is:
1) Board Meeting to consider the bonus proposal and the quantum/ratio of bonus. Also decide on the date, time place for AGM/EGM and Notice of the same
2) Members Meeting wherein the resolution is passed as Ordinary or Special (as required by the ARticles)
3) Fixing Record Date
4) Filing Form 23
5) Board Meeting / Allotment committee meeting for allotment of shares
30 June 2010
Bonus cannot be issued to a single shareholder. It has to be issued to others as well. Such differential treatment is not valid.
30 June 2010
bonus shares should be issued in same proportion to shareholders
30 June 2010
As I have stated earliet. There is only exception that I have seen in my practical experience. Reliance Power, wherein the promoters did not take any bonus shares.
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