Bonus Shares can be issued only to equity shareholders.
The Act does not state any provision restricting or prohibiting bonus to preference shareholders. Further it does not expressly states that bonus shares can be issued “only” to equity shareholders. Hence, bonus shares can be issued to preference shareholders.
All shareholders who have shares in their Demat account on the record date will be eligible to receive bonus shares from the company. What is Ex-Date? The ex-date is one day before the record date. Here an investor has to buy the shares at least one day before the ex-date to become eligible for the bonus shares.
Bonus shares are issued according to each shareholder’s stake in the company. Bonus issues do not dilute shareholders’ equity, because they are issued to existing shareholders in a constant ratio that keeps the relative equity of each shareholder the same as before the issue.
Bonus Preference Shares means 6% Cumulative Redeemable Non-convertible Preference Shares of Re. 1 each to be issued by the Company by way of Bonus to its equity shareholders pursuant to the present Scheme, the principal terms and conditions for which have been set out in Annexure -1 to this Scheme.
A Bonus issue cannot be made selectively. … However, as a bonus issue will be governed by the Companies Act, 1956, a shareholder has the right to renounce any bonus shares offer to him in favour of any other person.
Who is eligible for bonus?
Eligibility for Bonus
The employee receiving salary or wages up to Rs. 21,000 per month. The employee engaged in any work whether skilled, unskilled, managerial, supervisory etc. The employee who have worked not less than 30 working days in the same year.
Preference shares, more commonly referred to as preferred stock, are shares of a company’s stock with dividends that are paid out to shareholders before common stock dividends are issued. … Preferred stock shareholders also typically do not hold any voting rights, but common shareholders usually do.
India follows a T+2 rolling system, which means the ex-date is 2 days before the record date. An investor, if he/she wants to be eligible for the bonus issue must buy shares before the ex-date. … So now if the share price of the company before the bonus issue was ₹200, it will decrease as the number of shares increase.
Bonus shares are issued by a company when it is not able to pay a dividend to its shareholders due to shortage of funds in spite of earning good profits for that quarter. In such a situation, the company issues bonus shares to its existing shareholders instead of paying dividend.
Bonus shares are shares issued to shareholders of a company free of any cost.
|Debit||Undistributed Profit Reserves / Share Premium Reserve / or Other reserves||Number of bonus shares × nominal value of 1 share|
|Credit||Share Capital Account||Number of bonus shares × nominal value of 1 share|
11.3 – Bonus Issue
A bonus issue is a stock dividend, allotted by the company to reward the shareholders. The bonus shares are issued out of the reserves of the company. … When the bonus shares are issued, the number of shares the shareholder holds will increase, but an investment’s overall value will remain the same.
A zero-dividend preferred stock is a preferred share issued by a company that is not required to pay a dividend to its holder. The owner of a zero-dividend preferred share will earn income from capital appreciation and may receive a one-time payment at the end of the investment term.
Section 56 (2) (vii) Income Tax Act does not apply to the issue of Bonus shares because there is a mere capitalization of profits by the issuing company and there is neither an increase or decrease in the wealth of the shareholder as his percentage holding remains constant.