Section 63 of the Companies Act, 2013
Section 63 of the Companies Act, 2013 deals with the issue of fully paid-up bonus shares by a company.
✅ Section 63 – Issue of Bonus Shares
1. Bonus Shares:
A company may issue fully paid-up bonus shares to its members (shareholders) out of the following:
Free reserves
Securities premium account
Capital redemption reserve account
🔹 Note: Bonus shares are issued free of cost to shareholders, usually in proportion to the number of shares already held.
2. Conditions for Bonus Issue:
A company can issue bonus shares only if:
It is authorized by its Articles of Association.
The issue is recommended by the Board of Directors and approved by the shareholders in a general meeting.
It has not defaulted in:
Repayment of deposits or interest thereon,
Payment of statutory dues of employees (like provident fund, gratuity, bonus).
3. No Bonus in Lieu of Dividend:
A company cannot issue bonus shares in place of dividends.
That means bonus shares must be a separate benefit and cannot be a replacement for dividend payments.
4. Fully Paid-up Shares Only:
Bonus shares must be fully paid-up shares. No partly paid shares are allowed in a bonus issue.
🎯 Purpose of Section 63:
To regulate how companies can reward their shareholders by converting their reserves into share capital, without affecting the company’s cash position.
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