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Bonus issue

sreedevi (Trainee) (118 Points)

25 September 2009

Dear Experts,

i have an query. pls clear my doubt on this issue.

1) In a pvt com, how many times they will issue bonus shares? (For a year) any limitations there?

2) After considering the profit, i.e Agm date is 31.7.09, is it possible to issue bonus share on 1.8.09

Kindly give ur valuable comments.

C. Sreedevi

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7 Replies

(Guest)

There is no fixed Number of times for issue of bonus shares.

Company can anytime issue the Bonus shares, if the company has free reserves. Company can Issue bonus shares for N no.of times.

(2) Yes. It is possible to issue the Bonus shares as on 1-8-2009.

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 26 September 2009

Agree. No limitation in Companies Act on number of Bonus Issue.

You can not use profits of the company for bonus issue otherwise it would be equal to Bonus in lieu of dividend, which is not allowed.

Bonus shares can be issued only out of Reserves of the company.

Regards

sreedevi (Trainee) (118 Points)
Replied 29 September 2009

Sir,

sreedevi (Trainee) (118 Points)
Replied 29 September 2009

Sir,

Thank you for your reply. i also have a doubt.

Whether the pvt. com can issue bonus shares out of revaluation reserve?

Regards

C. Sreedevi

(Guest)

No, any type of company can not issue bonus shares from the revaluation reserve.

As revaluation reserve is not a free reserve.

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 29 September 2009

As per the explanation of Companies (Declaration of Dividend out of reserve) Rules, 1975 revaluation reserve is specifically excluded for the purpose of dividend.

Find below the extracts of above mentioned rules:

Explanation.—For the purposes of this rule, "profits earned by a company in previous years and transferred by it to the reserves" shall mean the total amount of net profits after tax, transferred to reserves as at the beginning of the year for which the dividend is to be declared; and in computing the said amount, the appropriations out of the amount transferred from the Development Rebate Reserve at the expiry of the period specified under the Income-tax Act, 1961 (43 of 1961) shall be included and all items of capital reserves including reserves created by revaluation of assets shall be excluded.

Regards

KIRIT (CHARTERED ACCOUNTANTS) (86 Points)
Replied 02 March 2011

What is meant by bonus in lieu of dividend? If a company wants to issue bonus shares out of accumulated profits without declaring dividend (never declared in past)what is the legal way? Will it be enough if entire profit is transferred to general reserves just b4 issue of bonus shares by passing resolution?