State the provisions relating to Bonus Shares.

Answer: Bonus shares are fully paid shares issued free of cost to existing equity shareholders by capitalising reserves. Under Section 63 of the Companies Act, 2013 and SEBI rules:

1. Sources: Bonus shares can be issued only out of free reserves, securities premium account or capital redemption reserve account, and not out of revaluation reserve.
2. Authorisation: The Articles of Association must authorise the issue, and the issue must be recommended by the Board and approved by members in general meeting.
3. No default: The company must not have defaulted in payment of interest or principal on fixed deposits or debt securities, or in payment of statutory dues of employees such as PF, gratuity and bonus.
4. Partly paid shares: Partly paid shares must be made fully paid before bonus shares are issued.
5. Not in lieu of dividend: Bonus shares cannot be issued in place of dividend.
6. Authorised capital: If the authorised capital is not sufficient, it must be increased first.
7. Time limit: Once announced by the Board, the bonus issue cannot be withdrawn and must be implemented within the time limit prescribed by SEBI (two months from the Board’s approval).