Definition: Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns. These are company’s accumulated earnings which are not given out in the form of dividends, but are converted into free shares.
It takes no more than 15 days for the bonus shares to be credited to the shareholders’ demat accounts when a fresh ISIN is assigned. Investors wanting a steady income seek out shares of companies that offer bonus shares on a regular basis.
Procedure For Issue Of Bonus Shares
- Ensure the meeting has the required quorum that is ⅓ rd of the total strength of the Board.
- Place the board resolution for approving the issue subject to the approval by shareholders in a general meeting by an ordinary resolution.
- Ensure that the resolution is passed.
Shareholders may sell the bonus shares and meet their liquidity needs. Bonus shares may also be issued to restructure company reserves. Issuing bonus shares does not involve cash flow.
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Steps to check bonus shares in ICICI Direct
- Login to ICICIDirect.com website.
- Expend ‘Portfolio & Services’ in the left navigation bar.
- Click on ‘Portfolio > Equity ‘
- Click on the required stock symbol hyperlink.
- Check the details of the bonus shares credited.
What is record date for bonus?
The record date is a cut-off date set by the company and the investors must be shareholders of the company before this date for them to be eligible to receive bonus share issue. Besides, the ex-date is a day preceding the record date set by the company.
The investor can sell shares before the bonus date and pay LTCG tax and buy the shares from the market once the bonus issue is over. But if s/he holds on to the stock, s/he will need to pay a higher tax. Don’t rush to sell the shares of a company in your portfolio if it announces a bonus.
A company issues bonus shares to increase liquidity of the stock and increase participation of investors. Secondly, the stock price drops to a reasonable range post a bonus issue, which makes it affordable for investors to purchase more shares.
Tata Power Company Ltd. has not announced any bonus since Jan 1, 2000.
Wipro Ltd. has given 5 bonuses since June 25, 2004. The last Bonus that Wipro Ltd. anoununced was in the ratio 1:3 with ex-date of March 6, 2019.
Corporate actions: Bonus history for Wipro Ltd.
|Ex-Date||Bonus Ratio||Record Date|
|March 6, 2019||1:3||March 7, 2019|
|June 13, 2017||1:1||June 14, 2017|
|June 15, 2010||2:3||June 16, 2010|
|Aug. 22, 2005||1:1||Aug. 23, 2005|
Fully paid bonus shares are those shares that are distributed at no extra cost in the proportion of the investors holding in the company.
Is dividend directly credited to bank account?
The dividend amount will be automatically credited to your bank account if your bank mandate is recorded with the registrar. The company announces the dividend on this date. The deadline by which you must be listed as a shareholder on the company’s books in order to earn a dividend.