When Bonus Shares are Credited in Demat Account?

Have you ever thought about when bonus shares not credited to Demat account? Well, Bonus shares are a form of corporate action, and they hold a significant value for investors. It is important to understand when the bonus shares are credited in the Demat Account to manage your investment portfolio effectively. With the help of this blog, we will help you understand what bonus shares are and when will bonus shares be credited to your Demat account.

 What is a Bonus Issue?

  The terms "bonus issue" and "bonus share issue" both refer to the issuance of bonus shares. A bonus issue is dependent on the number of shares that a shareholder owns. The position of liquidity is guaranteed to stay intact with no monetary payments. It is significant to observe that the dividend per share decreases as a result of a bonus issue increasing the total number of shares. The capital or overall worth of the business is not impacted by this. 

  This doesn't erode the shareholder's interest, unlike the right issues of shares. Despite a decline in income per share, the investment's value is unaffected since the shareholder now owns a greater number of shares. The basic goal of issuing bonus shares is to match the Nominal Share Capital's surplus of assets over liabilities.

A bonus issuance is a guarantee that the business can pay down its greater equity. This indicates that if the corporation couldn't ensure growth in the share's earnings and a payout of dividends in the future, it wouldn't have issued bonus shares.

  Consequently, a bonus issuance also fosters business goodwill. The constant ratio method,which allows for a fixed number of shares to be issued to each shareholder depending on the number of existing shares, is used by companies to determine when to issue bonus shares.

 Who is Eligible to Receive Bonus Shares

Companies elect who shall be entitled to receive Bonus Shares through the Record Date. Trading continues after a bonus share issuance has been announced, and new shareholders are being added and removed every minute. 

But with the number of shareholders constantly fluctuating, how can organisations identify the existing shareholders? Companies that intend to offer bonus shares choose a record date to determine the number of current shareholders. 

To identify stockholders, the company's bookkeepers check the records on the record date. In addition to announcing an ex-date, a corporation will declare a bonus share issuance. 

The ex-date is the final day to purchase shares of the corporation to qualify for a bonus share issuance. Bonus shares are not credited to the Demat account for new employees who join the business after the ex-date. India uses a T+2 rolling settlement, which implies that the ex-date is two days before the record date. 

When Will Bonus Shares Be Credited In Demat Account

Knowing when will bonus shares be credited to Demat account is crucial. It gets credited soon after the company's board approves the issuance and sets a record date. The administration of this firm carefully reviews its list to determine who is eligible to be a shareholder when the record date is near. To each bonus share an International Securities Identification Number (ISIN) is assigned as the corporation starts crediting the extra shares to your Demat account as soon as this allocation is finished.

On average, it can take up to 15 days to process from the record date to the bonus shares being credited to your Demat account. If this process is successful you will get to know this through a text message sent by CDSL (Central Depository Services (India) Ltd). 

However, even after 15 days if the bonus shares fail to appear in your Demat account then you should reach out to your company's customer care for clarification and resolution.

Which company offers Bonus Shares?

Any company that is listed on a stock exchange is eligible to award bonus shares to its devoted shareholders. A record-breaking 70 corporations have declared bonus shares to their owners in 2022 alone. Companies reward their current shareholders with bonus share handouts and make sure that these shares are only granted to those who have been with the company for an extended period. Companies reward their current shareholders with bonus shares, ensuring that these shares are restricted to those who have been with the company for an extended period, new tax regulations guarantee that investors profit from the distribution of bonus shares provided they have held their original company shares for a certain period. 

Guidelines To Be Followed By a Company Before Issuing Bonus Shares

• Bonus shares cannot be issued before the Articles of Association approve the bonus issuance. At its general meeting, the firm must approve a special resolution act if the articles of association are unable to do so.
• In the event of a general meeting, the shareholders must also approve the bonus issuance.
• Guidelines published by SEBI must be adhered to.
• The business must make sure that a bonus issuance does not cause the total share capital to surpass the authorised share capital. If such a circumstance arises, the Memorandum of Association's capital provision has to be changed by raising the permitted capital.
• The financial institution or institutions concerned must be notified in advance if the firm has taken out loans.
• A corporation must contact the Reserve Bank and obtain its approval prior to issuing bonuses.
• Any bonus shares that are to be awarded need to be paid in full. In the event that shares are paid in part, the shareholders will be responsible for the outstanding balance.

Benefits of Bonus Share

Here are some benefits of bonus shares:

• It might be difficult for current shareholders to raise their stakes as listed shares are often expensive.
• The corporation issues bonus shares, increasing the total number of shares without imposing any additional costs on owners.
• Bonus shares increase the ownership that shareholders have in the business by increasing the share base.
• The value of bonus shares may eventually increase as a result of the company's growing share price.
• Bonus shares can be sold for a greater price, giving stockholders a positive return in the secondary market.
• The corporation believes that by distributing the share price among a larger number of shares, bonus shares increase liquidity.
• A greater number of retail investors may become interested in the company's stock as a result of the share price reduction.

Conclusion
Obtaining bonus share credit in a demat account may be a rewarding experience for shareholders, but it's important to understand the process and any associated risks. Investors should be kept up to speed on corporate announcements and record dates to guarantee that bonus shares are delivered on schedule. Additionally, investors can make well-informed decisions about issuing bonus shares from their portfolio by consulting with a financial advisor. Consider installing dependable and user-friendly trading applications, such as blinkX, to make your trading experience more enjoyable and easy. The Online trading app offers a user-friendly interface for stock trading, allowing you to trade while on the go.