To know about bonus shares in detail in financial management

1. SRI KRISHNA ADITHYA COLLEGE OF
ARTS AND SCIENCE
DONE BY
VISHNUVARDHAN M
20BMPA239
SRI KRISHNA ADITHYA COLLEGE OF ARTS AND SCIENCE

2. SRI KRISHNA ADITHYA COLLEGE OF ARTS AND SCIENCE
BONUS SHARES MEANING
• Bonus shares are additional shares given to the
current shareholders without any additional
cost, based upon the number of shares that a
shareholder owns. These are company's
accumulated earnings which are not given out in
the form of dividends, but are converted into
free shares.

3. WHY COMPANIES ISSUE BONUS SHARES?
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. These shares are given
to the current shareholders on the basis of their
existing holding in the company. Issuing bonus
shares to the existing shareholders is also called
capitalization of profits because it is given out of the
profits or reserves of the company.
SRI KRISHNA ADITHYA COLLEGE OF ARTS AND SCIENCE

4. TYPES OF BONUS SHARES
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5. CONDITONS FOR ISSUE OF BONUS SHARES
• On the recommendation of the board the bonus share must be approved by the members in General Meeting
• No default in respect of deposit or debentures or statutory dues of employees
• Any outstanding partly paid up shares shall be made fully paid up
• In accordance with SEBI (ICDR) Regulations An issuer shall make a bonus issue only if has made reservation
of equity shares in favour of the holders of fully or partly convertible debentures if any in proportion to the
convertible part and the shares so reserved shall be issued at the time of conversion
• It should be authorized by the Articles of Association of the company
• The company which has once announced the decision of the Board recommending a bonus issue shall not
subsequently withdraw the same [Rule of 14 of Company (shares and debentures) Rules,2014]
SRI KRISHNA ADITHYA COLLEGE OF ARTS AND SCIENCE

6. BENEFITS OF BONUS SHARES
SRI KRISHNA ADITHYA COLLEGE OF ARTS AND SCIENCE

7. SOURCES OF BONUS ISSUE
• Free sources
• Securities premium account or
• Capital redemption reserve account
SRI KRISHNA ADITHYA COLLEGE OF ARTS AND SCIENCE

8. BONUS SHARES CALCULATION
• These shares are issued in a certain proportion to the existing holding.
FOR EXAMPLE:
• If you hold 100 shares of a company and a 2:1 bonus share is declared you get
200 shares free. That means your total holding of sharing in that company will now
be 300 of100 at no cost to you
SRI KRISHNA ADITHYA COLLEGE OF ARTS AND SCIENCE

9. SRI KRISHNA ADITHYA COLLEGE OF ARTS AND SCIENCE