(1) A company2(20) Company means a company incorporated under this Act or under any previous company law may issue fully paid-up bonus shares2(84) Share means a share in the share capital of a company and includes stock to its members2(55) Member in relation to a company, means—
(i) the subscriber to the memorandum of the company who shall be deemed to have agreed to become member of the company, and on its registration, shall be entered as member in its register of members;
(ii) every other person who agrees in writing to become a member of the company and whose name is entered in the register of members of the company;
(iii) every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository, in any manner whatsoever, out of—
(i) its free reserves2(44) Free Reserves means such reserves which, as per the latest audited balance sheet of a company, are available for distribution as dividend:
Provided that—
(i) any amount representing unrealised gains, notional gains or revaluation of assets, whether shown as a reserve or otherwise, or
(ii) any change in carrying amount of an asset or of a liability recognized in equity, including surplus in profit and loss account on measurement of the asset or the liability at fair value, shall not be treated as free reserves;
(ii) the securities premium account; or
(iii) the capital redemption reserve account:
Provided that no issue of bonus shares shall be made by capitalising reserves created by the revaluation of assets.
(2) No company shall capitalise its profits or reserves for the purpose of issuing fully paid-up bonus shares under sub-section (1), unless—
(a) it is authorised by its articles2(5) Articles means the articles of association of a company as originally framed or as altered from time to time or applied in pursuance of any previous company law or of this Act;
(b) it has, on the recommendation of the Board, been authorised in the general meeting of the company;
(c) it has not defaulted in payment of interest or principal in respect of fixed deposits or debt securities2(81) Securities means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) issued by it;
(d) it has not defaulted in respect of the payment of statutory dues of the employees, such as, contribution to provident fund, gratuity and bonus;
(e) the partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up;
(f) it complies with such conditions as may be prescribed.Refer rule 14 of the Companies (Share Capital and Debentures) Rules, 2014. To view the rule,Click Here
(3) The bonus shares shall not be issued in lieu of dividend.
4.1.14-Companies (Share Capital and Debentures) Rules, 2014
14. Issue of Bonus Shares.-
The company which has once announced the decision of its Board recommending a bonus issue, shall not subsequently withdraw the same.