Question

Bonus shares can be issued by a company _________________.

• A. Out of reserves created by revaluation of fixed assets.
• B. Out of share premium not collected in cash.
• C. Without any provision for it in the articles of association of the company.
• D. Out of free reserves built out of genuine profits.

Answer 1

The correct option is D Out of free reserves built out of genuine profits.

Bonus shares are the shares which are issued by the company without any consideration. They are issued out of the free reserves available with the company. Bonus shares are issued to the existing shareholders on the basis of the number of shares they are currently holding.