Bonus Shares

Bonus shares, bonus share is an accretion. A bonus share is issued when the company capitalises its profits by transferring an amount equal to the face value of the share from its reserve to the nominal capital. In other words the undistributed profit of the company is retained by the company under the head of capital against the issue of further shares to its shareholders. Bonus shares have, therefore, been described as a distribution of capitalised undivided profit, Standard Chartered Bank v. Custodian, (2000) 6 SCC 427: AIR 2000 SC 1488 (1499). [Companies Act, 1956 Sch I, Table A, Rr. 96 (97)]