An issue of bonus shares is referred to as a bonus share issue or bonus issue.
A bonus issue is usually based upon the number of shares that shareholders already own. While the issue of bonus shares increases the total number of shares issued and owned, it does not change the value of the company.
1) The source out of which Bonus Shares shall be issued
The company shall issue fully paid Bonus Shares out of any one of the following source:
· Free reserves of the company
· The securities premium account
· The capital redemption reserve account
2. Source out of which the company shall not utilise for the purpose of issue of Bonus Shares
· The company shall not issue bonus shares by capitalizing reserve created out revaluation of Asset.
· The company shall not issue shares in lieu of Dividend.
3. Secretarial formalities to be complied with
In order to capitalize its profits or reserves
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