Company Law: Issue Of Shares

Meaning Of Bonus Shares:

• Bonus Shares are fully paid shares given by the Company as a gift, out of accumulated profits or reserves.
• Bonus shares are given free of cost to equity shareholders in proportion to their existing shareholding.
• Eg: If ratio is decided at 2:1, it means that shareholder holding shares will be allotted one bonus share.

Meaning Of Right Issue Of Shares:

• Under Right issue, equity shares of the Company are first offered to the existing equity shareholders of the Company.
• The present shareholders are given a right to apply for new shares in certain proportion to the existing shares held by them
• Eg: If ratio is decided at 1:1, it means that shareholder holding 100 shares can apply for 100 shares.
• The Company shall give option to the shareholder, either to buy the share & increase his shareholding or to give up the right.