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Bonus issue

Priya Sharma (Company Secretary & Student.MBA) (998 Points)

14 September 2010

Whata are the other sources for issue ofBonus shares apart from Securities premium account??

Regards

Priya

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5 Replies

Santhosh Poojary (SIEMPRE AHÍ PARA TI) (15607 Points)
Replied 14 September 2010

As Per My Knowledge Following Source Can be Used For Issue Of Bonus Shares Other than Securities Premium..

1) General Reserve

2) Profit & Loss A/c

3) Capitad Redemption Reserve

4) Cash Profit From Sale of Fixed Asset ( Capital Reserve)

Requesting Seniors to Correct me, If i am wrong...

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Ajay Mishra (Company Secretary) (74337 Points)
Replied 14 September 2010

Dear Friend

The Bonus issue is made out of free reserves built out of genuine profits or share premium collected in cash only.

Money in Share Premium Account can not be treated as free reserve as they are in the nature of Capital Reserves. Circular No. 3/77 dated 15-04-1977)

Reserve created by revaluation of fixed assets are not capitalized.

Regards

CS Ajay Mishra

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 14 September 2010

Hello,

Regulations 96 & 97 of Table A to Schedule I of the Companies Acty, 1956 contain provisions relating to capitalisation of profits and reserves of the company. According to these regulations only the share premium account and the capital redemption reserve account shall be applied in the paying up of unissued shares to be issued to members of the company as fully paid bonus shares.

Sources on bonus issue

As per 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. However the following points have to be borne in mind while determining the profits or reserves which may be capitalized, namely,

1. The securities premium account may be applied by the company in paying up unissued securities of the company to be issued to members of the company as fully paid bonus securities [Section 78(2) of the Companies Act, 1956]

2. The capital redemption reserve account may, be applied by the company, in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares. [Section 80(5) of the Companies Act, 1956]

Also Note:

If the company has adopted regulation 96 of Table A in Schedule I to the Companies Act, 1956 only the share premium account and capital redemption reserve account shall be applied in the paying up of unissued shares to be issued to members of the company as fully paid bonus shares. It is advisable to consult the auditors of the company in drawing up the terms and conditions of the bonus issue.

Best Regards

1 Like

Santosh (Student ( Final Year - New )) (348 Points)
Replied 15 September 2010

Originally posted by : SAN...
	As Per My Knowledge Following Source Can be Used For Issue Of Bonus Shares Other than Securities Premium.. 1) General Reserve 2) Profit & Loss A/c 3) Capitad Redemption Reserve 4) Cash Profit From Sale of Fixed Asset ( Capital Reserve) Requesting Seniors to Correct me, If i am wrong...

As above

Manmohan ACA, CS (Chartered Accountant ) (14243 Points)
Replied 15 September 2010

Originally posted by : Santosh
	As Per My Knowledge Following Source Can be Used For Issue Of Bonus Shares Other than Securities Premium.. 1) General Reserve 2) Profit & Loss A/c 3) Capitad Redemption Reserve 4) Cash Profit From Sale of Fixed Asset ( Capital Reserve) Requesting Seniors to Correct me, If i am wrong...