Bonus Shares: Legal Requirements and Compliance Standards
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Provisions Related to Bonus Shares
Bonus shares are additional shares issued by a company to its existing shareholders free of cost, in proportion to their shareholding. These shares are issued from the company’s accumulated reserves or profits. The issue of bonus shares is governed by Section 63 of the Companies Act, 2013 and SEBI guidelines for listed companies.
Key Provisions for Issuing Bonus Shares
Authorization in Articles of Association (AOA)
The company must have a provision in its Articles of Association (AOA) permitting the issue of bonus shares. If such a provision is not present, the company must first amend its AOA by passing a special resolution.
Approval by Shareholders
The company must obtain approval from shareholders in a general
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