SWEAT EQUITY SHARES

ANDBONUS ISSUE OF

SHARES

Presented by :- Shashank Singh (1228) Pooja sharma (1248) Sangeeta (1246) Anjali Pandey (1404)

SWEAT

EQUITY SHARES MEAN EQUITY SHARES ISSUED BY THE COMPANY TO ITS EMPLOYEES OR

DIRECTORS AT DISCOUNT OR FOR CONSIDERATION OTHER THAN CASH.

ACCORDING TO SECTION 79A OF THE COMPANY ACT, A COMPANY MAY ISSUE SWEAT EQUITY SHARES OF A CLASS OF SHARES ISSUED ,IF THE FOLLOWING CONDITIONS ARE FULFILLED:-

The issue of sweat equity shares is authorised by a special resolution passed by the company in general meeting.

The resolution specifies the number shares , current market price, the consideration, if any, or the classes of directors or employees to whom such equity shares are proposed to be issued.

Not less than one year has elapsed since the date on which the company was entitled to commence business.

The sweat equity shares of a company whose equity shares are listed on recognised stock exchange, are issued in accordance with the regulations made by the SEBI in his behalf .

Such shares cannot be resold by their holder with in a period of 3 years, called lock-in period.

BONUSSHARE

Sometimes a company may have accumulated large reserves then the company

may issue additional equity shares to the existing shareholders in proportion of their existing shares in the company and without

charging any further payment .

Because of the bonus issue ,profit become part of the share capital of the company and hence it is also known as capitalisation of profits of the company

Two ways of giving bonus

shares

By making existing partly paid shares as

fully paid without getting

cash

By the issue of free full paid

shares

GUIDELINES FOR ISSUE OF BONUS SHARES:-

The bonus issue is made out of free reserves built out of genuine profit or security premium collected in cash only.

Reserves created by revaluation of fixed assets are not capitalised .

The declaration of bonus issue , in lieu of dividend is not made .

The bonus issue is not made unless the partly paid shares , if any existing are made fully paid– up.

A company which announces its bonus issue after the approval of the Board of Director must implement the proposal within a period of six month from the date of such approval and shall not have the option of changing decision .

For the issue of bonus shares if the subscribed and paid up capital exceed the authorised share capital, a resolution shall be passed by the company at its General Body Meeting for increasing the authorised capital.

These can be discussed from two angle

Advantages of issue of Bonus

shares

From the view point of company

From the view

point of shareholder

FROM THE VIEW POINT OF COMPANY As the bonus issue does not involve

any cash payment , liquidity or working capital of the company is not effected .

It results into improved credit worthiness of the company as the profit is permanently ploughed back into the company.

Profit and accumulated reserves the assets of the company goes on increasing whereas share capital remains the same .

FROM THE VIEW POINT OF SHAREHOLDER Shareholder can dispose off the bonus share

for fulfilling their cash needs. Because of increased shareholding , the

shareholder will receive increased dividends in future.

Because of the high prices of the shares of successfull companies , it is very difficult to buy the shares of such companies from the market . Bonus issue enables the shareholder to increase his holding in such companies.

DISADVANTAGES The issue of bonus share may result into

drastic fall in the market price of the shares because of the increased supply of the shares in the market. The advantages gained by the shareholder in the form of additional shares may be sometimes more than neutralised because of fall in the market price .

Issue of bonus shares may result into reduction in the rate of dividend .

Company may lead to speculative dealings in its shares in the market

SOURCES FOR ISSUING BONUS SHARES Capital reserves General reserves Profit and Loss Account Capital redemption reserves Security premium Account Any other reserves.

JOURNAL ENTRIES ON ISSUE OF BONUS SHARES Step 1:- Reserves and profits used to declare

bonus shares are debited and ‘Bonus to shareholder’s a/c’ is credited :-

P&L Appropriation a/c DrGeneral reserves a/c DrSecurity premium a/c DrCapital redemption Reserves a/c DrCapital reserves a/c Dr To bonus Shareholder’s a/c (Bonus sanctioned out of profits and reserves)

Step 2:- If the bonus is given in the form of fully paid shares :-

Bonus to shareholder’s a/c Dr To share capital a/c( Issue of bonus shares ) Step:- 3 If the bonus is utilised by making

existing partly paid shares as fully paid shares :-

I. Share final call a/c Dr To share capital a/c ( Final call due )

II . Bonus to shareholder’s a/c Dr To share final call a/c ( Bonus utilised for meeting the call )

Thank you