Rule 14 states that the company which has once announced the decision of its Board recommending a bonus issue, shall not subsequently withdraw the same. When Shares are issued at a price lower than their face value, they are said to have been issued at a discount. … It is a loss to the company.
1) Except as provided in section 54, a company shall not issue shares at a discount. (2) Any share issued by a company at a discounted price discount shall be void.
It clearly prohibits the issue of shares at discount as it states in its clause (2) that any share (which means either equity share or preference share) issued by a company at a discounted price shall be void.
Convene the General Meeting: The Extraordinary General Meeting must be convened, and the issue of bonus shares must be authorized by passing Ordinary resolution by simple majority as per section 114(1) of the Act and authorize the Board to allow the bonus shares.
CONDITIONS FOR ISSUE OF BONUS SHARE:
Issue of Bonus Shares is authorized by its articles; … The partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up; 6. It complies with such conditions as may be prescribed.
With respect to shares held with NSDL or CDSL depositories, offline procedure for transfer of shares through off-market transfer is possible. One needs to fill out a DIS (Delivery Instruction Slip).
Discounted prices may be offered when company is not able to pay its debts and offering it share to its creditors. Company Act 2013 strictly prohibited the companies to issue shares at discounted price. It invites penalty and imprisonment for directors. … So never think of discounted price.
(1) Except as provided in section 54, a company shall not issue shares at a discount. (2) Any share issued by a company at a 1[discount] shall be void.
Correct answer is: (C) Issued as sweat equity.
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.
Fully paid up bonus shares may be issued only out of free reserves, securities premium account or capital redemption reserve account. (Section 63(1) The bonus shares shall not be issued in lieu of dividend.
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.
Bonus shares are issued according to each shareholder’s stake in the company. Bonus issues do not dilute shareholders’ equity, because they are issued to existing shareholders in a constant ratio that keeps the relative equity of each shareholder the same as before the issue.
Issue of bonus shares at a Premium
Internal resources like accumulated profits/ capital redemption reserves, premium account etc are capitalised by issuing bonus shares to existing shareholders of the company.
What is difference between bonus and split?
No. 1. Bonus issue is extra shares given to shareholders free of cost. Stock Split divides the existing outstanding shares of the company into multiple shares.