Why bonus issue

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How it helps? Zero maintenance charges Zero fees for demat account opening Volume based brokerage. Let us now learn why the companies issue bonus shares. Why Companies Issue Bonus Shares? Let us now learn about how the bonus shares calculation is done. Bonus Shares Calculation The bonus shares are given to the existing shareholders according to their existing stake in the company. What is Record Date?

Let us now learn about the advantages of bonus shares. Advantages Of Bonus Shares There is no need for investors to pay any tax on receiving bonus shares. It is beneficial for the long-term shareholders of the company who want to increase their investment.

Bonus shares enhance the faith of the investors in the operations of the company because the cash is used by the company for business growth. When the company declares a dividend in the future, the investor will receive higher dividend because now he holds larger number of shares in the company due to bonus shares.

Bonus shares give positive sign to the market that the company is committed towards long term growth story.

Bonus shares increase the outstanding shares which in turn enhances the liquidity of the stock. The perception of the company's size increases with the increase in the issued share capital. Conditions for Issue of Bonus Shares The issue of bonus shares must be authorized by the Articles of the company.

The issue of bonus shares must be recommended by the resolution of the Board of Directors. Also this recommendation must be later approved by the shareholders of the company in the general meeting. The Controller of Capital Issues must give permission to the issue. Connect with us. New To share Market? Open Your Account Today! New Customer? Sign up for Free Intraday Trading now. P-Anakapalli A. P-Guntur A. P-Hyderabad A. P-Kakinada A. P-Karimnagar A.

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Need Help? About us. Download link sent. This transfer does not create any value for the shareholders because they get something that was already theirs.

Reliance Power used the bonus tactic to arrest the slide in its share price after its IPO in February The company announced that it would give three shares for every five held by non-promoter shareholders to bring down the cost from Rs to Rs Sign In.

The announcement of bonus shares shows that a company is confident of the future and, therefore, the stock price moves up. Latest Must Read Markets.