SEBI GUIDELINES FOR BONUS ISSUE
SEBI is playing a vital role in regulating capital markets. Offer Documents / Prospectus for almost all types of issues are sent to SEBI for their comments. SEBI has framed guidelines for all types of issues including Bonus Issue. In case of Bonus Issue, there is no offer document as there is no involvement of any consideration. No funds are coming into the corpus of the company. Therefore, companies are required to just follow the guidelines issued by SEBI. Companies are not required to take any specific approval from SEBI. Things to remember before considering Bonus Issue
Bonus shares cannot be issued if the company has come out with any public / rights issue in the past 12 months. Bonus shares cannot be issued in lieu of Dividend.
Bonus shares can be issued only out of free reserves (i.e. reserves not set apart for any specific purpose) built out of the genuine profits or share premium collected in cash only. Bonus shares cannot be issued out of the reserves created by revaluation of fixed assets. If the existing shares are partly paid up, the company cannot issue Bonus Shares. It will be appropriate to first make the shares fully paid up before issuing Bonus Shares. It should be ensured that the company has not defaulted in payment of interest or principal in respect of fixed deposits and interest on existing debentures or principal on redemption thereof and It should be ensured that the company has sufficient reason to believe that it has not defaulted in respect of the payment of statutory dues of the employees such as contribution to provident fund, gratuity, bonus etc. If the company has already issued either fully convertible debentures or partly convertible debentures than in that case the company is required to extend similar benefits to such holders of securities through reservation of shares in proportion to their holding or in proportion to such convertible part. The Bonus Shares so reserved may be allotted...