The Securities and Exchange Commission of Pakistan (SECP) has decided to lay down certain conditions for companies, including listed companies, for issuance of bonus shares. In this regard, the SECP has issued draft Companies (Further Issue of Shares) Regulations, 2018, here on Wednesday.
These regulations shall apply to companies issuing further capital by way of right shares, otherwise than right shares or bonus shares, employee stock option scheme, except initial public offering or offer for sale of shares.
According to the draft regulations issued by the SECP, the Commission has proposed conditions for bonus issue.
A company, in accordance with the provisions of articles of association of the company, may issue bonus shares subject to the following conditions: Firstly, board shall approve the decision to issue bonus shares.
Secondly, the resolution of board to issue bonus shares shall be communicated to the Commission and in case of said decision by listed company, also to the respective stock exchange, on the day of the decision by board for public dissemination.
Thirdly, a company can issue bonus either out of share premium account under section 81 of the Companies Act or out of free reserves.
Fourthly, a listed company making bonus issue out of free reserves, calculated in the manner as specified under regulations, shall retain at least fifteen per cent of the enhanced paid-up capital as free reserves and a certificate shall be obtained by the company from the auditor certifying that the free reserves retained after the issue of bonus shares are not less than fifteen per cent of the increased paid-up capital of the company and all contingent liabilities have been deducted while calculating the minimum residual reserve of fifteen percent.
Fifthly, the auditor's certificate shall be sent to the Commission for information and the respective stock exchange on the day of decision by board for the public dissemination.
The SECP said that the bonus shares shall not be issued in a manner that may confer on any person superior rights as to voting or dividend vis-a-vis the rights of equity shares that are already listed.
Once the decision to make a bonus issue is announced, the issue cannot be withdrawn, the SECP added.
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