Prohibition on issue of bonus shares out of reserves created by revaluation of fixed assets - Companies Law - CIRCULAR NO. 9/94,

CIRCULAR NO. 9/94, DATED 6-9-1994, ISSUED BY THE DEPARTMENT OF COMPANY AFFAIRS, MINISTRY OF LAW, JUSTICE AND COMPANY AFFAIRS, GOVERNMENT OF INDIA Subject:- Prohibition on issue of bonus shares out of reserves created by revaluation of fixed assets 1. I am directed to say that it has come to the notice of the Department that a number of unlisted companies (existing private/closely-held public companies) are resorting to revaluation of their assets and issuing bonus shares therefrom. The latest SEBI's guidelines on bonus shares dated 13-4-1994, inter alia, stipulate that the bonus issue has to be made out of free reserves built out of the genuine profits or share premium collected in cash only and reserves created by revaluation of fixed assets cannot be capitalised for this purpose. These guidelines are applicable only to listed companies. 2. This matter had been considered in the Department and the existing private/closely-held and unlisted companies are hereby advised not to issue bonus shares out of the reserves created by revaluation of fixed assets.