How does the bonus issue work?

A company issues bonus shares to its existing shareholders, when they are short of money and shareholders expect a timely income. It does not involve any cash flow and it does increase the company’s assets but its share capital increases.

They are issued on the basis of stake which is kept by each shareholder on each company. For example, a 3:2 bonus issue names each shareholder 3 shares for every 2 shares they hold before the issue. A shareholder with 500 shares receives 750 bonus shares (500x 3/2=750).

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