Issue of Bonus Shares

[Vinod Naik]

Dear Friends,

 

As I understand a Company cannot issue Bonus Shares by utilising Revaluation Reserves. However Company can issue Bonus shares out of Capital Reserves( reserves created out of sale of capital assets) . Can anyone please throw some lligth on this. Is my understanding correct

 

Thanks

Vinod.

[R V SECKAR]

Hello Mr.Vinod,

Only public companies are restricted from issuing bonus shares out of revaluation reserves .However , a private company can issue bonus shares .Please read the following judgment.

Bonus Shares can be issued out of revaluation of Reserves

 

  Supreme Court judgement in the matter of Bhagwati Developers v/s. Peerless Finance & Investment Co. & Ors. that the Supreme Court has upheld a judgment of a High Court wich had in the instant case held that the Respondent company being an unlisted private company was entitled to issue bonus shares out of revaluation reserves. Hence , a private company can issue bonus shares and it is wise to take member's approval for this.

Regards

R.V.Seckar

Please do visit my blog :http://rvsekar.blogspot.com/

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[Vivek Aggarwal]

Dear Vinod

As per me, Securities Premiun Account and Capital Redemption Reserve Account can be used for issuing Bonus Shares as specified by Section 78(2) and 80(5). Revaluation reserves cannot be used.

Other views invited.

Regards

CS Vivek Aggarwal

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From: Vinod Naik <vino...@gmail.com>
To: csmy...@googlegroups.com
Sent: Fri, 17 September, 2010 12:16:43 PM
Subject: [CSMysore] Issue of Bonus Shares

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[R V SECKAR]

Hello Mr.Vinod,

Revaluation is done mainly to keep the company's assets in tact with its market value instead of its book value.

By doing revaluation , it is observed that company will charge higher depreciation on its existing assets and tax will be reduced to some extent and hence revaluation can be said as a tax planning measure to divert a company's surplus to further expansion or to appease the appetite of shareholders by way of dividends. ( of-course , no dividend can be declared out of revaluation reserves)

I find no obstacle for a private company to maintain it as a revaluation reserve or by allotting shares to its existing shareholders (bonus) as both will remain in the Source of funds section in the balance sheet.

R.V.Seckar

[Durga Prasad]

 

Dear All,

 

I think Mr. Vinod is talking about capital Reserve arising after sale of asset and not revaluation reserve. Profits arising on sale of capital asset can be certainly utilised for issue of bonus shares.

Thanks & regards

 

Durga Prasad T
Company Secretary

Pearl Distillery Ltd

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T Durga Prasad