What are Bonus Shares ?


Bonus shares are shares issued free to the members of the company whose names appear in the Register of Members as on the specified date. These are capitalized from out of the General Reserves of the company. In other words a company with a capital base of Rs 25 crores has Rs 500 crores in its General Reserve. Now if the company decides to capitalize some part of the General Reserve say Rs 25 crores it is issued in the form of Bonus Shares.

Bonus shares are shares issued free to the members of the company whose names appear in the Register of Members as on the specified date. These are capitalized from out of the General Reserves of the company. In other words a company with a capital base of Rs 25 crores has Rs 500 crores in its General Reserve. Now if the company decides to capitalize some part of the General Reserve say Rs 25 crores it is issued in the form of Bonus Shares. However while the subscribed capital of the company goes up to that extent, in the instant case, to Rs. 50 crores the General Reserves are brought down to that extent. As capital of the company has also been increased to the extent of issue of bonus shares say 1:1, these shares also qualify for dividends announced by the company after issue of shares.

What are cum bonus shares


When a company has announced on a particular date issue of bonus shares, the potential buyer is entitled to receive the bonus shares. In other words, as long as the price of a scrip is cum bonus, the potential buyer is entitled to receive the Bonus shares. Transfer of shares being a continuous process, to find out the investors who are eligible to receive the bonus shares announced by the company, a date is fixed by the company. The date is known as the Record Date. The company closes its books to ascertain the names of members entitled to receive the bonus shares.

In the coming days the common ex-date, Record date and Book Closure date will be discussed. Readers are requested to give their feedback to make it more user friendly.


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