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Bonus shares

Issuing bonus shares - an allotment of "free" shares to existing shareholders out of company profits

What are bonus shares?
Bonus shares are shares allotted to the existing members of the company pro rata with the shares they already hold where the shares are paid for by the company out of its accumulated profits. In other words, instead of paying out the profit as dividends, the money is used to pay for additional shares given to each shareholder.

Why are bonus shares issued?
The reasons for doing are various but can include:

  • making the balance sheet look stronger by increasing the share capital
  • making individual share values more realistic
  • increasing the number of shares so that some may be given away or sold
  • increasing the number of shares held by the existing shareholders so that the company may issue other shares to outside investors.

Procedures for issuing bonus shares
Issuing bonus shares will involve a share allotment and must be recommended by the directors and approved by the shareholders.
If the company has an authorised share capital, the articles may need to be updated to remove the limitation on the number of shares that may be allotted. There can be complications where the company has different classes of shares, in which case there must be careful review of the terms attached to the different classes.

Our service
The Company Law Solutions service for allotting bonus shares provides all required:

If we required, we can supply share certificates and/or statutory registers as an additional service.
If the company is a single person company, with just one director/shareholder, appropriate alternative documentation is provided.

Most bonus issues will fall within the benchmark price. Increased charges may apply if the articles need to be updated to remove the authorised share capital or there are complications with multiple share classes.