Procedure for bonus issue under section 63 of Companies Act

Bonus issue under section 63 of Companies Act, 2013 read with rule 14 of companies (Share capital and Debentures) Rules, 2014

Bonus shares are the fully paid shares issued freely to share holders. Companies which are making continuous profits and setting apart some of the profits for future projects or companies which issued shares in premium and have accumulated balances in share premium account and want to capitalise it, issue bonus shares.Companies act 2013, provides for the procedure for issue of shares as bonus by the company.

In this article you will find the procedure to issue bonus shares.

A company may issue fully paid bonus shares to its members out of:

l Free Reserves ;

l Security Premium Account or

l Capital Redemption Reserves:

However, no issue of bonus shares by capitalizing reserves created by the revaluation of assets.

Prior Conditions Before Issuing Bonus Shares

• Authorised by Articles of Association of the company;

• Pass board resolution for the issue of bonus shares.

• As per the board resolution, call general meeting and pass special resolution approving the issue of bonus shares

• No default in payment of interest, principle of fixed deposit, or debt securities issued.

• No default in payment of statutory dues of employees.

• All existing shares should by fully paid up before the issue of bonus shares.

• Once recommended by the board cannot be withdrawn (RULE:14) NOTE: No bonus in lieu of dividend is allowed.

PROCEDURE FOR BONUS ISSUE

• lConvene a Meeting of the Board of Directors. 7 days notice to be sent to all directors as per Section 173 of Companies Act, 2013. Consider the proposal of Bonus issue, authorise the Compnay secretary or a director to full all procedure sto call general meeting to pass special resolution.

• Convene Extra Ordinary General Meeting. 21 days notice required for calling a general meeting, which should be clear days notice.

• File Form MGT 14 with Registrar of Companies within 30 days of passing the Special Resolution along with prescribed fee. Following are the attachments to MGT 14.

  • certified true copy of Special Resolution

  • Certified true copy of Board Resolution.

• After allotment file Form PAS 3 with ROC within 30 days of passing board resolution to allot bonus shares. Following are the attachments to PAS 3

  • copy of Resolution passed in General Meeting authorising the issue of bonus shares.

  • copy of board resoltuion passed for the allotment of bonus shares

  • list of allottees

  • any other mandatory attachments.

• Shares certificate should be issued within 60 days.

• Details should be entered in register of members and index of members kept under Section 88, by the company secretary of the company, if there is one, other wise the director authorised by the company in this regard by a board resolution.