Let me begin by defining Bonus Shares for you. Companies provide you with rewards. Some of them come in the form of cash, which are dividends; another type of reward is bonus shares, which are some additional shares given to existing shareholders free of charge.
The bonus shares distributed are nothing but profits of the company and by distributing these shares, it increases the value invested by the investors. To manage these shares, we need to have a DEMAT account where we can manage or hold our shares electronically to keep them safe and secure.
When are Bonus shares issued?
Companies, whenever they earn big profits or have large free reserves that practically have no use, issue bonus shares, which is also called a scrip issue or capitalization issue.
The bonus shares are always issued in ratios. For example, a bonus issue with a 1:2 ratio will have the shareholders awarded two shares for every share they own in the company, which tells us that the issue happens based on the existing stake of the investor in the company.
The process of crediting bonus shares into a DEMAT account
Qualification
There is an eligibility criterion according to which bonus shares are issued to investors, one such being that the bonus shares are only issued if the investor were the shareholder on the record date.
Record Date
A specific date is set by the company, which is called the record date, and this date is very crucial to receiving the issued bonus share. This is because only those who are shareholders on this date are eligible to receive the bonus shares.
Allotment of ISIN
Once the company finds out that you were a shareholder on the record date, there is an International Securities Identification number, or ISIN, given to the securities issued to you. These codes are unique and are used for uniform identification of securities across different markets and exchanges.
Crediting of Shares
Once the ISIN is allotted, the next thing is to wait for about fifteen days for the bonus shares to be credited to your DEMAT account. And if it is not credited within fifteen days, it is advised to contact the company’s customer care.
Notification
The final step in receiving bonus shares is to notify the shareholder with a text message. This process is typically done by the CDSL or Central Depository Services Limited. The notification sent is a confirmation that the shares have been credited to the DEMAT account and it is important to keep this notification in your records.
The Reason to know this-
Gaining insight into how bonus shares are credited to demat accounts is crucial for investors looking to expand their understanding. Bonus shares enhance the value of investors' portfolios and indicate strong company performance. However, certain criteria must be met to qualify for receiving bonus shares.
Also Read: How Do Companies Issue Bonus Shares? An Insightful Guide
