Question

 

Describe the circumstances of issue of Bonus Shares.

16 Feb 2026
Answer :
Word Count : 531
Bonus shares are additional shares issued by a company to its existing shareholders without any extra payment, by capitalizing its accumulated reserves and surplus. The issue of bonus shares does not bring fresh funds into the company but converts undistributed profits into share capital. Companies issue bonus shares under specific circumstances based on financial strength, regulatory compliance, and strategic considerations. One of the main circumstances for issuing bonus shares is the presence of sufficient accumulated profits or reserves. When a company has large retained earnings or free reserves that are not immediately required for business expansion or operational needs, it may capitalize these reserves by issuing bonus shares. This helps in converting a part of reserves into permanent share capital while rewarding shareholders. Another circumstance is when a company wants to maintain _________ _________ _________ _____ ____.
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