{"id":4144,"date":"2024-05-04T16:00:00","date_gmt":"2024-05-04T10:30:00","guid":{"rendered":"https:\/\/uat1.gettogetherfinance.com\/blog\/?p=4144"},"modified":"2025-10-10T17:16:20","modified_gmt":"2025-10-10T11:46:20","slug":"bonus-issue","status":"publish","type":"post","link":"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/","title":{"rendered":"Bonus Issue Uncovered: Insights, Analysis, and Perspectives"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-content\/uploads\/2024\/05\/Bonus-Issue-1024x597.webp\" alt=\"Bonus Issue\" class=\"wp-image-4145\"\/><\/figure>\n\n\n\n<p>Bonus issue is a corporate action taken by a company to offer extra shares to the existing shareholders which is an alternative of dividend payout. When additional shares are issued to the shareholders, there is an increase in the number of shares but the value of investment doesn\u2019t change. A company that announces this kind of corporate activity represents that it is expanding equity and liquidity. Issuing the bonus-shares increases the share capital of a company but does not increase its net assets. It can help the shareholders to meet liquidity requirements by selling their extra shares.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_73 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#What_is_the_bonus_issue\" title=\"What is the bonus issue?\">What is the bonus issue?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#What_are_bonus_shares\" title=\"What are bonus shares?\">What are bonus shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Types_of_Bonus_Shares\" title=\"Types of Bonus Shares\">Types of Bonus Shares<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Fully_Paid_Issue\" title=\"Fully Paid Issue\">Fully Paid Issue<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Partly_Paid_Issue\" title=\"Partly Paid Issue\">Partly Paid Issue<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Cash_Bonus_Issue\" title=\"Cash Bonus Issue\">Cash Bonus Issue<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Stock_Bonus_Issue\" title=\"Stock Bonus Issue\">Stock Bonus Issue<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Eligibility_Criteria\" title=\"Eligibility Criteria\">Eligibility Criteria<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Why_does_a_company_issue_bonus_shares\" title=\"Why does a company issue bonus shares?\">Why does a company issue bonus shares?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#To_encourage_participation_of_retail_investors\" title=\"To encourage participation of retail investors\">To encourage participation of retail investors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Display_sound_financial_health\" title=\"Display sound financial health\">Display sound financial health<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Positive_Psychological_Impact\" title=\"Positive Psychological Impact\">Positive Psychological Impact<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#What_are_the_benefits_of_bonus_issues_to_the_shareholders\" title=\"What are the benefits of bonus issues to the shareholders?\">What are the benefits of bonus issues to the shareholders?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Tax_Benefits\" title=\"Tax Benefits\">Tax Benefits<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Ownership_Stake\" title=\"Ownership Stake\">Ownership Stake<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Lower_Average_Cost\" title=\"Lower Average Cost\">Lower Average Cost<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Affordability_and_Accessibility\" title=\"Affordability and Accessibility\">Affordability and Accessibility<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Disadvantages_of_Bonus_Shares\" title=\"Disadvantages of Bonus Shares\">Disadvantages of Bonus Shares<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#For_Investors\" title=\"For Investors\">For Investors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#For_Company\" title=\"For Company\">For Company<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#FAQs\" title=\"FAQs\">FAQs<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#u003cstrongu003eQ1_What_is_the_bonus_issueu003cstrongu003e\" title=\"u003cstrongu003eQ1. What is the bonus issue?u003c\/strongu003e\">u003cstrongu003eQ1. What is the bonus issue?u003c\/strongu003e<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#u003cstrongu003eQ2_Why_does_a_company_issue_bonus_sharesu003cstrongu003e\" title=\"u003cstrongu003eQ2. Why does a company issue bonus shares?u003c\/strongu003e\">u003cstrongu003eQ2. Why does a company issue bonus shares?u003c\/strongu003e<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#u003cstrongu003eQ3_How_does_a_bonus_issue_benefit_an_investoru003cstrongu003e\" title=\"u003cstrongu003eQ3. How does a bonus issue benefit an investor?u003c\/strongu003e\">u003cstrongu003eQ3. How does a bonus issue benefit an investor?u003c\/strongu003e<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#u003cstrongu003eQ4_What_are_the_types_of_bonus_issuesu003cstrongu003e\" title=\"u003cstrongu003eQ4. What are the types of bonus issues?u003c\/strongu003e\">u003cstrongu003eQ4. What are the types of bonus issues?u003c\/strongu003e<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/bonus-issue\/#u003cstrongu003eQ5_Can_I_sell_the_bonus_shares_immediatelyu003cstrongu003e\" title=\"u003cstrongu003eQ5. Can I sell the bonus shares immediately?u003c\/strongu003e\">u003cstrongu003eQ5. Can I sell the bonus shares immediately?u003c\/strongu003e<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_bonus_issue\"><\/span>What is the bonus issue?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Bonus Issue is a corporate activity undertaken by a company wherein the company announces to offer extra shares to its existing shareholders. The strategy is adopted by a company to reward shareholders and maintain their trust towards the company&#8217;s operations. Under this activity, bonus-shares are allotted that affect the number of shares in an investor\u2019s portfolio without making an impact on market capitalization as the price per share is adjusted to maintain the liquidity. Thus, it builds the reputation of the company in the eyes of investors.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_bonus_shares\"><\/span>What are bonus shares?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-content\/uploads\/2024\/05\/What-are-bonus-shares-1024x275.webp\" alt=\"What are bonus shares?\" class=\"wp-image-4147\"\/><\/figure>\n\n\n\n<p>When the company issues an additional number of shares to its existing shareholders as a means of distributing gains from business and are referred as a \u2018bonus\u2019. A company can issue bonus shares instead of paying dividends to the shareholders. The bonus shares are also known as bonus-issue, scrip issues, or capitalization issues.<\/p>\n\n\n\n<p><strong>For example:<\/strong> If you are holding 100 shares of a company XYZ and it has announced to issue a 4:1 bonus which means that you will receive four extra shares for each share held in your portfolio. You will get 400 shares for those 100 shares but your investment will remain the same. The total number of shares would be 500.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Bonus_Shares\"><\/span>Types of Bonus Shares<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-content\/uploads\/2024\/05\/Types-of-Bonus-Shares-1024x275.webp\" alt=\"Types of Bonus Shares\" class=\"wp-image-4148\"\/><\/figure>\n\n\n\n<p>Companies issue extra shares for several reasons and form strategies as per the requirements of the company. As per the strategy adopted by a company, it may issue two types of shares which are fully paid and partly-paid.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Fully_Paid_Issue\"><\/span>Fully Paid Issue<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Fully Paid Shares are the shares distributed to the existing shareholders and are free of charge. A company can issue fully paid bonus shares by capitalizing its reserves, capital redemption reserves, profit and loss account and security premium account.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Partly_Paid_Issue\"><\/span>Partly Paid Issue<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Partly-paid shares have to be purchased by the investors without paying the total issue price upfront. Shareholders are required to make certain payments in order to fully own the extra shares distributed by the company. Investors can make the payment in installments when the company issues a call.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cash_Bonus_Issue\"><\/span>Cash Bonus Issue<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When the bonus shares are paid from the company&#8217;s earnings to the shareholders as a reward, this process is known as cash bonus issue. Cash bonus issues can be done in the form of special dividends, or by directly distributing cash to the shareholders.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Stock_Bonus_Issue\"><\/span>Stock Bonus Issue<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Stock bonus issue is directly related to the increase in ownership of the stakeholders. Stock bonus issue refers to the process when a company distributes additional shares to the shareholders, hence diluting the ownership of the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Eligibility_Criteria\"><\/span>Eligibility Criteria<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Shareholders who already hold the stocks of the company before the record date and the ex-date as per company\u2019s policies are eligible to get the shares. Record date is a date set by the company which specifies the date that a shareholder must have held the shares from a particular date to be eligible to get the shares. The ex-date is two days after the record date. So, the investors must buy the shares of the company before the expiry date because once the <a href=\"https:\/\/en.wikipedia.org\/wiki\/International_Securities_Identification_Number\" target=\"_blank\" data-type=\"URL\" data-id=\"https:\/\/en.wikipedia.org\/wiki\/International_Securities_Identification_Number\" rel=\"noreferrer noopener\">ISIN number<\/a> is allotted to the shareholders, the shares get credited in their account within the next 15 working days.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_does_a_company_issue_bonus_shares\"><\/span>Why does a company issue bonus shares?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-content\/uploads\/2024\/05\/Why-does-a-company-issue-bonus-shares-1024x275.webp\" alt=\"Why does a company issue bonus shares?\" class=\"wp-image-4149\"\/><\/figure>\n\n\n\n<p>A company may issue bonus shares to encourage participation of retail investors in the stock and adding liquidity to the shares by reducing the prices of shares after the issue process. The motive behind this activity can be to gain the trust of existing shareholders and enhance the company&#8217;s image among investors. Moreover, this can be done to manage market liquidity as to increase the availability of a number of shares. Also, the company focuses on increasing its accessibility to a wide range of investors without making an impact over market capitalization. There are key several other reasons:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"To_encourage_participation_of_retail_investors\"><\/span>To encourage participation of retail investors<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After the issue of additional shares by a company, the price of shares gets reduced encouraging retail investors to increase their participation in the asset as it becomes affordable. Many retail investors do not take part in the stock if it is quite expensive, extra shares in the market increase the liquidity because of reduced share prices. Retail investors are hence encouraged to buy or sell the shares in the market quickly.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Display_sound_financial_health\"><\/span>Display sound financial health<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Bonus shares are issued by a company out of profits or reserves which represents a company\u2019s strong financial health. Investors positively interpret this corporate activity and expect future profitability and growth of the company. Hence, it displays that a company has sufficient reserves to reward shareholders.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Positive_Psychological_Impact\"><\/span>Positive Psychological Impact<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A positive impact is created in the market as it determines the company has extra reserves. It creates a positive perception of the stock in the eyes of existing as well as new investors.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_benefits_of_bonus_issues_to_the_shareholders\"><\/span>What are the benefits of bonus issues to the shareholders?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-content\/uploads\/2024\/05\/What-are-the-benefits-of-bonus-shares-to-the-shareholders-1024x275.webp\" alt=\"What are the benefits of bonus issues to the shareholders?\" class=\"wp-image-4150\"\/><\/figure>\n\n\n\n<p>Shareholders can enjoy multiple benefits by issue of bonus-shares and have improved investment strategies and financial goals. Investors can gain financial benefits as well as psychological benefits through bonus issues. Shareholders can receive a large amount of dividend if in future the company decides to declare a dividend on the shares allotted. Moreover, the confidence of shareholders has increased in the company&#8217;s future prospects.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tax_Benefits\"><\/span>Tax Benefits<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Investors or shareholders can enjoy tax benefits as they are not required to pay any tax when they receive extra shares from a company. Investors are not eligible to pay tax on bonus-shares while they are obligated to do so when they receive dividends. Investors have to pay 30% tax on the dividend received by them while in case of bonus-issue they have to pay tax on capital gains as per Indian tax regimes which can be 10% to 15%.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Ownership_Stake\"><\/span>Ownership Stake<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Shareholders have an increased ownership stake in the company as they have more number of shares after issuing of shares by the company. The shares of investors are increased without investing more capital. The ownership stake of shareholders is proportionally increased to the number of additional shares received by them from the company.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Lower_Average_Cost\"><\/span>Lower Average Cost<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The average cost of capital invested is reduced because the shares are rewarded at no cost to the shareholders. Investors can enjoy potential gains if the price of the shares appreciates in future as the average price of investment is reduced.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Affordability_and_Accessibility\"><\/span>Affordability and Accessibility<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>New investors are attracted towards the company as the price of its shares gets reduced. Issuing bonus-shares makes it affordable for new investors to invest and quickly accessible to them. Investors can also exit their position with an immediate effect as per their formed strategies.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Disadvantages_of_Bonus_Shares\"><\/span>Disadvantages of Bonus Shares<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-content\/uploads\/2024\/05\/Disadvantages-of-Bonus-Shares-1024x275.webp\" alt=\"Disadvantages of Bonus Shares\" class=\"wp-image-4151\"\/><\/figure>\n\n\n\n<p>Apart from benefits, bonus-issues can turn out to be risky for investors and companies as well. Shareholders have to analyze the risks associated and negatives when a company makes a decision to increase liquidity in the market.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"For_Investors\"><\/span>For Investors<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Issuance of extra shares results in increasing the number of shares held by the investors which dilutes the earnings per share. Reduced earnings per share affect the valuation in a negative way because the profits don\u2019t get changed. Earnings per share for shareholders are decreased despite an increase in the number of shares.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"For_Company\"><\/span>For Company<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The company has a disadvantage of issuing additional shares as it limits the capacity for a company to reduce its debts and invest in new projects. Also, the company reduces its flexibility to raise capital in future because of the distribution of a large number of shares. Issuing shares also suggests that the company has a lack of sufficient cash to pay a dividend. Moreover, the cost associated with this is burdensome.<\/p>\n\n\n\n<p><strong><em>Dilution of Ownership:<\/em><\/strong> Issuing bonus-shares means that the company is diluting its ownership to the shareholders in the form of bonus share which indicates that the company might face difficulties in raising capital in future which is why dilution of ownership is a disadvantage for a company.<\/p>\n\n\n\n<p><strong>Also Read:<\/strong> <a href=\"https:\/\/uat1.gettogetherfinance.com\/blog\/effects-of-bonus-issues\/\" target=\"_blank\" rel=\"noreferrer noopener\">Effects of Bonus Issues<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The blog sums up that bonus shares are issued by a company in place of dividends which signifies sound financial health of the business to the investors. Issuing bonus shares has its potential advantages and disadvantages which should be understood to make future predictions about a company\u2019s growth.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1714728155679\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"u003cstrongu003eQ1_What_is_the_bonus_issueu003cstrongu003e\"><\/span>u003cstrongu003eQ1. What is the bonus issue?u003c\/strongu003e<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>When a company distributes additional shares to its existing shareholders at no cost, this corporate activity is known as bonus issue.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1714728167692\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"u003cstrongu003eQ2_Why_does_a_company_issue_bonus_sharesu003cstrongu003e\"><\/span>u003cstrongu003eQ2. Why does a company issue bonus shares?u003c\/strongu003e<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Bonus shares are issued by a company to increase the liquidity of shares and display sound financial position of the company.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1714728175854\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"u003cstrongu003eQ3_How_does_a_bonus_issue_benefit_an_investoru003cstrongu003e\"><\/span>u003cstrongu003eQ3. How does a bonus issue benefit an investor?u003c\/strongu003e<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Investors get tax benefits through bonus issues as they are not required to pay the tax on shares distributed by the company as bonus.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1714728184471\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"u003cstrongu003eQ4_What_are_the_types_of_bonus_issuesu003cstrongu003e\"><\/span>u003cstrongu003eQ4. What are the types of bonus issues?u003c\/strongu003e<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>There are two types of bonus issue i.e. fully paid bonus shares and partly paid bonus shares. In a fully paid bonus issue, shares are distributed at no cost while in the other one investors have to partially purchase the shares.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1714728192013\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><span class=\"ez-toc-section\" id=\"u003cstrongu003eQ5_Can_I_sell_the_bonus_shares_immediatelyu003cstrongu003e\"><\/span>u003cstrongu003eQ5. Can I sell the bonus shares immediately?u003c\/strongu003e<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Yes, you can sell the bonus shares received immediately as per your u003ca href=u0022https:\/\/uat1.gettogetherfinance.com\/blog\/buy-and-hold-investment-strategyu0022 target=u0022_blanku0022 data-type=u0022URLu0022 data-id=u0022https:\/\/uat1.gettogetherfinance.com\/blog\/buy-and-hold-investment-strategyu0022 rel=u0022noreferrer noopeneru0022u003einvestment strategiesu003c\/au003e and plans.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Bonus issue is a corporate action taken by a company to offer extra shares to the existing shareholders which is an alternative of dividend payout. When additional shares are issued&#8230;<\/p>\n","protected":false},"author":6,"featured_media":7972,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[62],"tags":[],"class_list":["post-4144","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock-market"],"acf":[],"_links":{"self":[{"href":"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-json\/wp\/v2\/posts\/4144","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-json\/wp\/v2\/comments?post=4144"}],"version-history":[{"count":5,"href":"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-json\/wp\/v2\/posts\/4144\/revisions"}],"predecessor-version":[{"id":7973,"href":"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-json\/wp\/v2\/posts\/4144\/revisions\/7973"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-json\/wp\/v2\/media\/7972"}],"wp:attachment":[{"href":"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-json\/wp\/v2\/media?parent=4144"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-json\/wp\/v2\/categories?post=4144"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/uat1.gettogetherfinance.com\/blog\/wp-json\/wp\/v2\/tags?post=4144"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}