A listed company proposing to issue bonus shares shall comply with the following requirements:
1. – The articles of association of the company must contain a provision for capitalisation of reserves, etc; – If there is no such provision in the articles the company must pass a resolution at its general meeting making provision in the articles of association for capitalization;
2. 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;
3. The company has not defaulted in payment of statutory dues of the employees such as contribution to provident fund, gratuity etc.
4 The partly-paid shares, if any, outstanding on the date of allotment are required to be made fully paid-up.
5. (a) No company shall, pending conversion of FCDs/PCDs, issue any by way of bonus unless similar benefit is extended to the holders of such FCDs/though reservation of shares in proportion to such convertible part of FCDs or PCDs. (b) The shares so reserved may be issued at the time of conversion(s) of such debentures on the same terms on which the bonus issues were made.
6. The bonus issue shall be made out of free reserves built out of the genuine profits or securities premium collected in cash.
7. Reserves created by revaluation of fixed assets shall not be capitalised.
8. The declaration of bonus issue, in lieu of dividend, shall not be made.
9. A company which announces its bonus issue after the approval of the Board of directors must implement the proposal within a period of 15 days from the date of such approval (if Shareholders’ approval is not required) or 2 months (if Shareholders’ approval is required).
10. Once the decision to make a bonus issue is announced, the same cannot be withdrawn.
