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urgent pls help

rohit (CA Finalist) (480 Points)

26 July 2010

can a pvt company need to hold a egm to issue bonus shares or board meeting is sufficient

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 26 July 2010

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 in EGM 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

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rohit (CA Finalist) (480 Points)
Replied 26 July 2010

thnx a lot sir....in the articles as far as word "general meeting' is concerned..only 1 thing is written that with pursuant to sec 94 co. in general meeting shall alter its share cap by increasing or consolidating and dividing or subdividing all or pany of its share cap.

so does it need to call a egm

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 26 July 2010

Thanks Ankurji

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 26 July 2010

Keeping in view your reply and in the absense of specific provision in your AOA regarding EGM for Bonus shares, there is no need to call an EGM.

Once again go through my first reply along with your AOA and if you are satisfied then go ahead with board resolution.

One advice for safer side....if there is no problem for you to hold an EGM and pass SR along with form 23 then go for EGM and pass SR for bonus issue.

Regards