The Securities and Exchange Commission of Pakistan (SECP) has directed companies that the decision to issue bonus shares, once announced by the board, cannot be withdrawn. The SECP has issued Companies (Further Issue of Shares) Regulations, 2018 here on Friday through issuance of SRO 1399 (I)/2018.
According to the notification, the regulations shall apply to companies issuing further capital by way of right shares; other than right shares; bonus shares; employee stock option schemes and shares with differential rights including preference shares.
The SECP said that a company, in accordance with the provisions of articles of association of the company, may issue bonus shares subject to the laid down conditions.
Firstly, the board shall approve the decision to issue bonus shares. Secondly, the resolution of board to issue bonus shares shall be communicated to the Commission on the same day and in case of listed company, the decision shall also be communicated to the securities exchange on the same day.
Thirdly, a company can issue bonus shares either out of share premium account under section 81 of the Act or out of free reserves. Fourthly, a listed company making bonus issue out of free reserves, calculated in the manner as specified under regulation 3, shall retain at least fifteen per cent of the enhanced paid up capital as free reserves.
Fifthly, a certificate shall be obtained by the listed 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 per cent.
Sixthly, the auditor's certificate as provided shall be sent to the Commission for information and to the securities exchange on the day of decision by board for the public dissemination. The decision to issue bonus shares, once announced by the board, cannot be withdrawn, SECP added.