Guidance Note - Bonus Shares
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. This Guidance Note is a practical guide to bonus shares and takes the reader through what bonus shares are, why they are issued and the procedure for issuing them in a private company.
Bonus shares are paid for out of a company’s accumulated profits and can be issued as an alternative to dividends. The effect of a bonus issue in a company’s balance sheet is to transfer a sum equivalent to the nominal value of the bonus shares from ‘profits for distribution’ to ‘share capital’. The company therefore keeps capital within the business, rather than having to pay it out as a dividend.
This guidance note has been written in conjunction with our bonus share allotment board minutes and shareholder resolution.
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