Bonus Shares Defined:
Bonus shares are additional shares that companies issue to their existing shareholders, free of charge, as a reward. These shares are distributed in proportion to the shareholder’s current holdings as on record date. While dividends are cash rewards, bonus shares reflect the company’s profitability and enhance the shareholder’s value in the company.
Bonus Shares Jargons:
Below are some key terms related to the issuance of bonus shares:-
Qualification Criteria: Bonus shares are issued only to shareholders who meet specific eligibility criteria, one of which is being listed as a shareholder on the record date. This date is set by the company and is crucial for determining who qualifies for receiving the bonus shares.
Record Date: The record date is the official cut-off date established by the company. Only shareholders who hold shares on this specific date are eligible to receive the bonus shares. Being on the company’s records as of this date is critical to receive the bonus shares.
Crediting of Shares: It typically takes around 15 days for the bonus shares to be credited to the shareholder's DEMAT account. If shares are not credited within this period, the shareholder is advised to contact the company.
Notification: Once the shares are credited, the Central Depository Services Limited (CDSL) or National Securities Depository Limited (NSDL) sends a notification, usually via SMS or email, confirming the credit of bonus shares to the DEMAT account.
Why Is This Process Important?
Understanding the crediting process for bonus shares is crucial for shareholders seeking to enhance their investment knowledge. Bonus shares boost portfolio value and reflect the company’s strong performance. Ensuring eligibility and monitoring the process helps shareholders maximize this benefit.
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