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corporatelawreporter.com /2014/03/26/issue-bonus-shares-companies-act-2013/
There was no specific section under the Companies Act, 1956 dealing with Bonus Shares. Companies
were following the norms prescribed by the Controller of Capital issues. Once SEBI came into
existence and controller of Capital issues were abolished, unlisted Private Limited Companies and
Public Limited Companies were free to issue Bonus Shares if there were sufficient reserves to match
the issue of Bonus Shares. To bring in sanctity to the Issue of Bonus Shares, The Companies Act, 2013
has introduced Section 63 to deal exclusively with Bonus Shares . Unlike Issue of Sweat equity Shares,
MCA has not specified any rules to comply with. Section 63 deals with five aspects.
i.
ii.
iii.
iv.
v.
Under Section 63(2)(f) empowers the Central Government to stipulate fresh conditions to comply with
as and when required for the issue of Bonus Shares.
One such condition presently notified is that the Bonus Issue once recommended by the Board and
announced by the Company, it cannot be withdrawn subsequently.
COMPLIANCE CHECK LIST AND GENERATION OF VARIOUS DOCUMENTS AND REGISTERS
DURING PRE AND POST ISSUE
Once the professional understands the requirements of Section 63 as stated above, he should then
have the following Compliance Check List which will enable him to prepare the required Documents/
registers during Pre and Post Issue of Bonus Shares
Compliance Check List
1. Source out of which the bonus issue is to be made
a. Current Profit ..Value :
b. Current ReservesValue:
c. Current Securities Premium Account.Value:
2. Quantum of Issue:
a. No of Shares
b. Nominal Value per share:
c. Total:
3. Intended Date of Board Meeting:
a. For alteration of Articles subject to the approval of the shareholders (if required)
b. For recommending the Issue
c. Convening of EGM
4. Intended Date of EGM for considering the alteration of Article if required and/or approval of the
Bonus Issue:
5. Intended Date of Board meeting for the allotment of Bonus Shares:
Conclusion
TWO ISSUES THAT NEED CLARIFICATION
The Following are the two contentious issues in Section 63 which needs attention of the Central
Government
i. A Company cannot issue Bonus Shares if it has defaulted in repayment of deposits, interest on
deposits, debt securities, and statutory dues like, PF, gratuity and Bonus. There is no definition for the
word default in the Companies Act, 2013. For instance, if a Company fails to pay PF in a particular
month and subsequently pays in the next month, a default is committed. Whether such a Company can
or cannot issue Bonus Shares? The words such as defaulting or Continuing Default are not used in
the Section. What does the MCA want to convey? I do not think that there is a possibility of any 100%
Non defaulting Companies to be in existence since Incorporation till its dissolution. Even a single day
delay in payment of the above dues is a default. What mechanism we have to monitor such an event of
default?
ii. Once the Board recommends, the Bonus issue cannot be withdrawn even if the members decide so.
That means no revocation of the recommendations made by the Board of Directors is possible. In other
words you are forcing the shareholders to accept the recommendation of the Board. So it is only a
formality to seek approval of the Shareholders. Let us assume that the Bonus Issue is recommended
by the Board and is rejected or not passed by the members in the EGM, the company still has to go
ahead with the Issue of Bonus Shares by virtue of Section 63(2)(f).
I leave the above two questions to be pondered over by the readers.