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Home / Company Law & Secretarial Services / Issue of Bonus Shares
Last updated: 2 October 2026
Bonus shares convert a company’s reserves into share capital, issued free to existing shareholders in proportion to their holding. Our team checks the conditions, prepares the approvals and completes the allotment and filings.
Under section 63 of the Companies Act, 2013, a company can issue fully paid bonus shares to its members only out of:
Bonus shares cannot be issued out of a revaluation reserve, and cannot be issued in lieu of dividend. The company must also meet these conditions:
Once announced, the decision cannot be withdrawn. The company files the return of allotment in Form PAS-3 and, where needed, increases its authorised capital first.
Based on the Companies Act, 2013 and the rules made under it. Last updated: 27 September 2026.
Provision for bonus shares
One of three permitted sources
Can be used for fully paid bonus shares
Revaluation reserve cannot be used
Bonus cannot be issued in lieu of dividend
Return of allotment filed with the ROC
The conditions are simple, but often skipped.
Revaluation reserve or unaudited profits used as the source.
Bonus approved without enough authorised capital.
Bonus issued while statutory dues or debt payments are pending.
Other capital actions.
Headroom for the bonus.
Raising money from members.
Distributing profits in cash.
Issuing certificates.
Reserves, articles and defaults checked.
Authorised capital increased, if needed.
Board recommends the bonus issue.
Shareholders approve in a general meeting.
Bonus shares allotted and certificates or demat credit issued.
PAS-3 filed and registers updated.
Close the issue with complete records.
Return of allotment filed.
Register of members updated.
Certificates issued or shares credited in demat.
Reporting for non-resident shareholders, where applicable.
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Free reserves, securities premium or capital redemption reserve — not revaluation reserve.
No. Section 63 does not allow bonus shares in lieu of dividend.
The board recommends it and shareholders approve it in a general meeting, if the articles permit.
No. Once announced by the board, the decision cannot be withdrawn.
Form PAS-3, the return of allotment.
ACS – Director, Expertvuw Management Pvt Ltd
This work is handled by Expertvuw’s team, with filings made on the MCA portal. Certifications and audits required by law are issued by independent practising professionals engaged for your case.