Bonus Share Issue — MCA Filing

Governed by Section 63, Companies Act 2013, read with Rule 14, Companies (Share Capital and Debentures) Rules 2014. Permitted sources of a bonus issue are free reserves, the securities premium account, or the capital redemption reserve account — Section 63(1)'s proviso expressly bars capitalising reserves created by revaluation of assets. Rule 14 conditions: the issue must be authorised by the Articles; the company must not be in default on payment of interest or principal on any fixed deposit or debt security it has issued; it must not be in default on statutory dues to employees (provident fund, gratuity, bonus); and any partly-paid shares must be made fully paid up before the bonus issue. Once the Board publicly recommends a bonus issue, Rule 14 prohibits withdrawing that recommendation. The issue requires member approval (by resolution as the Articles prescribe) following the Board's recommendation, and the company must file Form PAS-3 (return of allotment) with the Registrar within 30 days of allotment, along with the related Forms MGT-14 (for the resolution) and SH-1 as applicable. No further bonus issue can be made in lieu of a dividend.

A bonus share issue is a company capitalising its accumulated profits into paid-up capital under Section 63 of the Companies Act 2013 — shareholders receive additional shares without paying for them, funded by the free reserves or the securities premium account. The conditions for the issue are prescribed in Rule 14 of the Companies (Share Capital and Debentures) Rules 2014: the company's articles must authorise it, the free reserves must actually exist, there must be no default in the payment of dividends on preference shares, and the issue must be recommended by the board and approved by the shareholders in general meeting.

The execution is about formalities done in the right order. The board recommends the issue, the shareholders approve it in general meeting, the resolution is filed with the Registrar in Form MGT-14 under Section 117 of the Act, and the allotted shares are recorded in the register of members and filed in Form PAS-3. The money side must reconcile too — the amount capitalised must move from the free reserves to the share capital in the balance sheet, and the reserves available for capitalisation must be computed correctly.

Getting the mechanics wrong turns a celebration into a compliance problem. A bonus issue made without shareholder approval, or capitalising reserves that do not exist, is voidable and can draw penalty proceedings under the Companies Act. The late filing of the resolutions and allotment forms brings additional fees under Section 403, and a defective allotment complicates the next funding round or share transfer.

This service is for private and public companies issuing bonus shares. We verify the reserve position under Section 63 and Rule 14, prepare the board and shareholder resolutions, file Form MGT-14, complete the allotment in Form PAS-3, update the register of members and the balance sheet, and hand you a clean post-issue record.