Bonus Shares (capitalisation or scrip issue) documents

August 2014
A bonus issue of shares (also known as a capitalisation or scrip issue) is an issue of new shares to existing shareholders in the same proportion as their existing shareholding. Instead of paying out a company’s profits as dividends, the money is used to distribute further shares to shareholders.

With this in mind, our existing board minutes have been updated and added to a brand new sub-folder containing Guidance Notes, an additional Board Minutes and a Shareholders’ Ordinary Resolution to assist company directors and secretaries to administer the process of declaring and issuing bonus shares.

With a scrip or bonus issue, a company turns part of its accumulated reserves into new shares. Bonus shares are issued for a variety of reasons and it will often depend upon the type of company involved. For most private companies, a bonus issue helps to increase the number of shares the company has without requiring shareholders to invest any more money. Issuing bonus shares in a private company involves a share allotment and therefore it must be recommended by the directors and will usually require shareholder approval.

Our new and updated documents include:

• an easy to follow, user friendly Guidance Notes: Bonus Shares to guide you through what bonus shares are, why they are issued and the procedure for declaring and issuing bonus shares;
• the board minutes required to recommend and declare bonus shares. We have included two board minutes – one for a company where the directors can resolve to issue bonus shares without shareholder approval Board Minutes - Bonus or Capitalisation Issue and the other where subsequent shareholder approval is required Board Minutes – Bonus Issue with Shareholder Approval; and
• a Shareholders’ Ordinary Resolution for Bonus or Capitalisation Issue required in order to approve a bonus issue following its recommendation by the directors.

These new & updated documents have been written with company secretaries or company directors in mind as well as other professionals such as accountants advising the boards of SME businesses.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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