Understanding Bonus Shares
Bonus shares are additional shares that a company distributes to its existing shareholders without any extra cost. These shares are allocated in a predetermined ratio based on the number of shares a shareholder already owns.
Key Points:
Bonus shares are free additional shares given to current shareholders.
The company decides the ratio for issuing bonus shares, determining how many new shares each shareholder receives relative to their existing holdings.
Examples:
1:2 Bonus Issue: If a company announces a bonus share issue in the ratio of 1:2, shareholders receive one additional share for every two shares they hold.
Scenario: A shareholder with 10 shares would receive 5 bonus shares (10 shares ÷ 2 × 1 = 5).
2:1 Bonus Issue: If a company announces a bonus share issue in the ratio of 2:1, shareholders receive two additional shares for every share they hold.
Scenario: A shareholder with 10 shares would receive 20 bonus shares (10 shares × 2 = 20).
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