Before diving deeper into that, when bonus shares will be credited; Let us understand the bonus shares and their eligibility criteria first.
Instead of giving dividends, the company offers bonus shares that are called additional shares provided by the company to their existing shareholders as “BONUS” but these bonus shares are offered as per the existing stake in the company.
For example- A shareholder holds 1000 shares of the company; When the company issues the bonus shares, the shareholder will receive 500 bonus shares, i.e. (1000/2 = 500).
When the company issues bonus shares to its shareholders, the terms are also mentioned like “record-date” and “ex-date”. Let’s read up on these terms given below:-
What is the Record Date?
It is the cut-off date chosen by the company to be eligible for bonus shares. If shareholders have their shares in the Demat account on the record date, then the Investor will be qualified to get bonus shares from the company.
What is Ex-date?
The ex-date is just one day before the record date where an investor has to buy the shares at least one day before the ex-date to become eligible for the bonus shares.
- Shareholders should own the company’s shares before the ex-date and record date.
- In India, the T+2 rolling system is set for the delivery of the shares, wherein the record date is 2 days behind the ex-date, therefore, shareholders must purchase shares before the ex-date because if they purchase on the ex-date, the company will not give the ownership of shares, hence shareholder will not be eligible for bonus shares.
- At the point when an organization proclaims a bonus share issue, it also announces an ex-date. The ex-date is the last day to purchase the organization’s stock to be qualified for a reward share issue. Any individual who joins the organization after the ex-date isn’t qualified for bonus shares. T+2 settlement cycle runs in India, and that imply the ex-date is one day before the record date.
- It takes 15 days from the record date to get credited to your Demat account if you are eligible for bonus shares, but it’s up to the RTA (Registrar & Share Transfer Agents) as well. You will also receive a text message notification on your mobile from CDSL when your bonus shares are credited to your Demat account.
- To claim your bonus shares, buy stocks one day before your ex-date.
- Let’s understand this by one example to gain more clarity:-
- Suppose your ex-date for the bonus is 17th February, then you need to buy stocks by 16th February and the same process is held with Dividends too.
- In case, your bonus shares are not credited to your Demat, then your holdings will be shown in Console as an artificial drop in P&L, and once the bonus share is credited, the investor’s P&L will be restored to its previous value.
- You can monitor and track all your current and forthcoming corporate activities on SMC Global Securities.
- If it has been over 15 days from the record date and still you haven’t gotten the bonus shares although you are qualified for it, raise your ticket and our customer care team will hit you up without further delay.
These are those shares that are distributed at no additional expense in the proportion of the investors holding in the company.
- Profit and Loss Account
- Capital Reserves
- Capital Redemption Reserves
- Security Premium Account
It is a share in a company that is partially paid as compared to the full issue price, which means an investor can buy partial shares without paying the total issue price and the rest can be paid in installments.
So whenever the bonus will be applied in the partly paid shares and converted into fully paid shares without calling out the uncalled amount through profit capitalization, will be called partly paid-up bonus shares.
But, unlike fully paid-up bonus shares, partly paid-up bonus shares can’t be issued through a capital redemption reserve account or security account.
From Investor’s Aspect:-
- Investors don’t need to pay taxes while receiving bonus shares from the company.
- Bonus shares are free of cost to shareholders which increase the outstanding shares of an investor in the company and enhances the liquidity of the stocks.
- Beneficial for the long-term as it multiplies the shareholder’s investment.
From Company’s Aspect:-
- The companies will have more free-floating shares.
- With the help of bonus shares, the company gets out of the dilemma of not paying dividends.
- Bonus shares upgrade the company’s worth and build positions, hype, and reputation in the market, acquiring the trust of existing investors and drawing the attention of more investors towards itself.
From Investor’s Aspect:-
- There is no demerit from an investor’s aspect. The only thing to take care of receiving bonus shares because the profit will remain the same; however, the number of shares will be increased as the earnings per share will fall.
From Company’s Aspect:-
- At the point when a company continues to give bonus shares as opposed to delivering dividends, the cost of the bonus issued continues to accumulate throughout the long term.
- The company does not receive any money while issuing bonus shares; therefore, the capacity to raise funds through bonus shares is limited.