Bonus Issue

Category: Economy / Capital Market / Securities

UPSC Notes & Key Pointers

  • A bonus issue is the issue of additional shares to existing shareholders without charging them.

  • Bonus shares are generally issued by capitalising free reserves, securities premium or other eligible reserves.

  • It increases the number of shares held by shareholders but does not, by itself, bring fresh cash into the company.

  • The face value of the shareholder's total holding remains proportionately represented, while the number of shares increases.

  • Bonus issues can improve the liquidity of shares by increasing the number of shares available in the market.

  • Prelims Focus: Bonus shares vs rights issue vs fresh issue.