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can a company issue bonus shares at premium?

asked Aug 25, 2016 in Company Accounts-Accounting for Share Capital by raju (9 points) 1,018 views

1 Answer

0 votes
Why companies issue shares at premium?  Obviously companies issue shares at premium when they feel that the company is doing well and its share can fetch more money than its face value.  Bonus shares are issued by companies to capitalise their revenue as well as capital reserves.  In simple words a company issues bonus shares to its shareholders for free by utilising the reserves lying with the company.  Security Premium account can also be used to issue bonus shares.  What purpose will be served if a company issues bonus shares at premium?  No. purpose.  The use of Security Premium is restricted.  So why shall a company want to put its free reserves or profits in an account which has restive use?  So in my opinion a company cannot issue bonus shares at premium.
answered Aug 25, 2016 by jbsclasses (3,971 points)
but in one famous book it happned ,author name is Jain and Narang
commented Aug 25, 2016 by raju (9 points)
Don't you think it is a useless thing to do?  Why shall one want to do it?  There may not be a legal provision restricting it, but in case a company does it, I am sure auditors will ask questions and report it if company does not change the entry. since it is not at all serving any purpose.
commented Aug 25, 2016 by jbsclasses (3,971 points)
author name not Jain and Narang i think Gupta- Radhaswami-* advanced accountancy
commented Aug 25, 2016 by raju (9 points)
It does not matter whosoever is the author.  To be honest, the question of issuing bonus shares at premium is a hypothetical and to some extent a weired question. The price at which a share is to be issued arises if shares are issued for cash or for consideration other than cash.  Question of issue price of share does not arise if it is to be issued for free.  Issuing bonus shares is a way of capitalising free reserves, that is all.  The question of price really does not arise.
commented Aug 25, 2016 by jbsclasses (3,971 points)
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