GENERAL KNOWLEDGE

Detailed explanation-1: -SEBI Guidelines for Issue of Bonus Shares The issue must be made from free reserves created out of undistributed profits or share premium, whose collection is made in cash only. Issue of bonus shares cannot be made by the capitalization of reserves which are created by revaluation of fixed assets.

Detailed explanation-2: -When the Company has accumulated large surplus of profits and it decides to convert this surplus into share capital, then the Company can issue bonus shares to its shareholders in proportion to their respective holding. Bonus Shares are issued by way of capitalisation of profits or reserves of the Company.

Detailed explanation-3: -Bonus shares do not dilute shareholders’ equity because they are issued in a constant ratio that keeps the relative equity of each shareholder the same as before the issue. For example, a three-for-one bonus issue entitles each shareholder three shares for every one that they hold before the issue.

Detailed explanation-4: -No bonus shares shall dilute other issues: Bonus issue from free reserves: Revaluation reserve not eligible: Issue in lieu of dividend: Partly paid shares not eligible: Time within which bonus issue shall be made: Bonus proposal cannot be withdrawn: More items