A BONUS issue of shares is required to be approved by the shareholders of a company by an ordinary resolution at a general meeting convened for the purpose. … Once a resolution for the bonus issue has been approved by the general body of shareholders, a shareholder cannot refuse to accept the bonus shares.
A company may decide to issue extra shares, free of charge, to existing shareholders in the same proportion as their existing holding. … A bonus issue can be in respect of all shareholders or restricted to those holding a certain class of shares.
Krishan Kumar that as issuance and allotment of Bonus share is in the long term interest of the Company and its shareholders, they have agreed to waive their rights to receive bonus shares to which they would be entitled.
The shareholders exercise their pre-emptive right to buy the new shares or the right of first refusal to the new shares. If there are any shares remaining after offering them to existing shareholders, the company offers these shares to a third party on the same terms.
Send Notice of General Meeting: The notice for the General Meeting for approving the issue of bonus shares must be sent out to all directors, shareholders, auditors and all members entitled to receive, giving no less than 21 clear days for the same.
Conditions for Issue of Bonus Shares
The issue of bonus shares must be authorized by the Articles of the company. The issue of bonus shares must be recommended by the resolution of the Board of Directors. Also this recommendation must be later approved by the shareholders of the company in the general meeting.
A BONUS issue cannot be made selectively. It has to be made to all shareholders of a public company. However, as a bonus issue will be governed by the Companies Act, 1956, a shareholder has the right to renounce any bonus shares offer to him in favour of any other person.
Gift shares to the company
The shareholders could gift their shares back to the company, for no payment or consideration. Since these shares are a gift, the company need not comply with the formalities required to purchase its own shares. All that is necessary is a stock transfer form to transfer legal title.
A Company may issue Bonus Shares out of- its free reserves; Securities Premium Account; Capital Redemption Reserve Account. Further, it has been provided that Issue of Bonus Shares shall not be made out of Capitalising Reserves created out of revaluation of Reserves.
Section 56 (2) (vii) Income Tax Act does not apply to the issue of Bonus shares because there is a mere capitalization of profits by the issuing company and there is neither an increase or decrease in the wealth of the shareholder as his percentage holding remains constant.
No, a subsidiary company cannot own shares in a parent company as per the Companies Act, 2013. … Further, holding companies are also barred by the Companies Act, 2013 from allotting or transferring its shares to a subsidiary company.
Generally, they are early investors in a company or other major stakeholders who are given the contractual right to buy additional shares of any new issue in order to maintain the size of their stake.
The need for shareholder approval of a merger is governed by state law. Typically, a merger must be approved by the holders of a majority of the outstanding shares of the target company.
Right to Buy New Shares
Common shareholders also have preemptive rights. If the company issues new shares to the public, current shareholders have the right to buy a specific number of shares before the stock is offered to new potential shareholders.