APR Limited, a company renowned for manufacturing various types of mats, has established a strong brand presence and garnered a commendable…

According to section 63 of the Companies Act, 2013, a company may issue fully paid-up bonus shares to its members, in any manner whatsoever, out of: (i) its free reserves; (ii) the securities premium account; or (iii) the capital redemption reserve account. Provided that no issue of bonus shares shall be made by capitalising reserves created by the revaluation of assets. Conditions for issue of Bonus Shares: No company shall capitalise its profits or reserves for the purpose of issuing fully paid-up bonus shares, unless- (i) it is authorised by its Articles; (ii) it has, on the recommendation of the Board, been authorised in the general meeting of the company; (iii) it has not defaulted in payment of interest or principal in respect of fixed deposits or debt securities issued by it; (iv) it has not defaulted in respect of payment of statutory dues of the employees, such as, contribution to provident fund, gratuity and bonus; (v) the partly paid-up shares, if any, outstanding on the date of allotment, are made fully paid-up; (vi) it complies with conditions as are prescribed by Rule 14 of the Companies (Share Capital and debentures) Rules, 2014 which states that the company which has once announced the decision of its Board recommending a bonus issue, shall not subsequently withdraw the same. Further, the company has to ensure that the bonus shares shall not be issued in lieu of dividend. For the issue of bonus shares APR Limited will require reserves of 50,00,000 (i.e. half of 1,00,00,000 being the paid-up share capital), which is readily available with the company. Hence, after following the above conditions relating to the issue of bonus shares, the company may proceed for a bonus issue of 1 share for every 2 shares held by the existing shareholders.