Rights Shares and Bonus Shares
Q.4 (ii) Rights Shares and Bonus Shares
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Answer:
| Points | Rights Shares | Bonus Shares |
|---|---|---|
| Meaning | Further shares offered first to existing equity shareholders in proportion to their holding (Section 62). | Fully paid shares issued free of cost to existing shareholders by capitalising profits or reserves (Section 63). |
| Consideration | Shareholders have to pay for them, usually at a price lower than market price. | Issued free; shareholders pay nothing. |
| Purpose | To raise fresh capital for the company. | To capitalise accumulated profits and reward shareholders. |
| Effect on funds | Cash resources of the company increase. | No fresh funds come in; reserves are converted into share capital. |
| Renunciation | Shareholder may accept, reject or renounce the offer in favour of another person. | Cannot be renounced; allotted automatically. |
| Offer period | Offer remains open for at least 15 days and not more than 30 days. | No offer period; allotment follows the Board/general meeting approval. |
| Partly paid shares | May be issued partly paid. | Always issued as fully paid. |
Doubtly AI
· 28 Oct 2026
AI-verified · Oct 2026
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