SWEAT EQUITY SHARESANDBONUS ISSUE OF SHARES

1. SWEAT EQUITY SHARES
AND
BONUS ISSUE OF
SHARES
Presented by :- Shashank Singh (1228)
Pooja sharma (1248)
Sangeeta (1246)
Anjali Pandey (1404)

2. SWEAT EQUITY SHARES MEAN EQUITY SHARES
ISSUED BY THE COMPANY TO ITS EMPLOYEES OR
DIRECTORS AT DISCOUNT
OR FOR CONSIDERATION OTHER THAN CASH.

3. ACCORDING TO SECTION 79A OF THE COMPANY
ACT, A COMPANY MAY ISSUE SWEAT EQUITY SHARES
OF A CLASS OF SHARES ISSUED ,IF THE FOLLOWING
CONDITIONS ARE FULFILLED:-
 The issue of sweat equity shares is authorised by a
special resolution passed by the company in
general meeting.
 The resolution specifies the number shares ,
current market price, the consideration, if any, or
the classes of directors or employees to whom such
equity shares are proposed to be issued.
 Not less than one year has elapsed since the date
on which the company was entitled to commence
business.

4.  The sweat equity shares of a company whose
equity shares are listed on recognised stock
exchange, are issued in accordance with the
regulations made by the SEBI in his behalf .
 Such shares cannot be resold by their holder with in
a period of 3 years, called lock-in period.

5. BONUS
SHARE

6. Sometimes a company may have accumulated large
reserves then the company may issue additional
equity shares to the existing shareholders in
proportion of their existing shares in the company
and without charging any further payment .

7.  Because of the bonus issue ,profit become part of
the share capital of the company and hence it is
also known as capitalisation of profits of the
company
Two ways of giving
bonus shares
By making existing
partly paid shares
as fully paid
without getting
cash
By the issue of
free full paid
shares

8. GUIDELINES FOR ISSUE OF BONUS SHARES:-
 The bonus issue is made out of free reserves built
out of genuine profit or security premium collected
in cash only.
 Reserves created by revaluation of fixed assets are
not capitalised .
 The declaration of bonus issue , in lieu of dividend
is not made .
 The bonus issue is not made unless the partly paid
shares , if any existing are made fully paid– up.

9.  A company which announces its bonus issue after
the approval of the Board of Director must
implement the proposal within a period of six month
from the date of such approval and shall not have
the option of changing decision .
 For the issue of bonus shares if the subscribed and
paid up capital exceed the authorised share capital,
a resolution shall be passed by the company at its
General Body Meeting for increasing the authorised
capital.

10.  These can be discussed from two angle
Advantages of
issue of Bonus
shares
From the view point
of company
From the view point
of shareholder

11. FROM THE VIEW POINT OF COMPANY
 As the bonus issue does not involve any
cash payment , liquidity or working capital of
the company is not effected .
 It results into improved credit worthiness of
the company as the profit is permanently
ploughed back into the company.
 Profit and accumulated reserves the assets
of the company goes on increasing whereas
share capital remains the same .

12. FROM THE VIEW POINT OF SHAREHOLDER
 Shareholder can dispose off the bonus share for
fulfilling their cash needs.
 Because of increased shareholding , the
shareholder will receive increased dividends in
future.
 Because of the high prices of the shares of
successfull companies , it is very difficult to buy the
shares of such companies from the market . Bonus
issue enables the shareholder to increase his
holding in such companies.

13. DISADVANTAGES
 The issue of bonus share may result into drastic fall
in the market price of the shares because of the
increased supply of the shares in the market. The
advantages gained by the shareholder in the form
of additional shares may be sometimes more than
neutralised because of fall in the market price .
 Issue of bonus shares may result into reduction in
the rate of dividend .
 Company may lead to speculative dealings in its
shares in the market

14. SOURCES FOR ISSUING BONUS SHARES
 Capital reserves
 General reserves
 Profit and Loss Account
 Capital redemption
reserves
 Security premium
Account
 Any other reserves.

15. JOURNAL ENTRIES ON ISSUE OF BONUS
SHARES
 Step 1:- Reserves and profits used to declare bonus
shares are debited and ‘Bonus to shareholder’s a/c’ is
credited :-
P&L Appropriation a/c Dr
General reserves a/c Dr
Security premium a/c Dr
Capital redemption Reserves a/c Dr
Capital reserves a/c Dr
To bonus Shareholder’s a/c
(Bonus sanctioned out of profits and reserves)

16.  Step 2:- If the bonus is given in the form of fully paid
shares :-
Bonus to shareholder’s a/c Dr
To share capital a/c
( Issue of bonus shares )
 Step:- 3 If the bonus is utilised by making existing partly
paid shares as fully paid shares :-
I. Share final call a/c Dr
To share capital a/c
( Final call due )
II . Bonus to shareholder’s a/c Dr
To share final call a/c
( Bonus utilised for meeting the call )

17. Thank you