Bonus Shares and Right Shares
As per the Companies Act, the subscribed capital of the companies can be increased by issuing shares as right shares to existing shareholders.
Learn the difference in Bonus Shares and Right Shares.
- What is the difference between bonus share and right share,
- how it is issued and how much it can cost?
They all understand why bonus shares and right shares are issued, what are the main differences .
The capital of any company is divided into small shares of fixed price. In which each share is considered as a unit of ownership which is offered for sale to the general public to raise money from the market.
Differences between Bonus Shares and Right Shares
As per the Companies Act, the subscribed capital of the companies can be increased by issuing shares as right shares to existing shareholders.
On the contrary, when a company has a large profit-collected reserve, the company converts such profits into capital and divides them into proportions to their holdings among shareholders.
These are known as bonus shares and do not require the shareholder to pay anything for it. This article will explain the difference between your bonus share and the right share.
Right Shares
Right shares are shares issued by the company which are issued to current shareholders with the objective of increasing the subscribed share capital of the company. Right shares are issued mainly to existing equity shareholders on pro-rate basis.
The company sends an offer letter to each shareholder who gives the option to buy shares offered to him by the company at concessional prices. Read about the right share in detail on our site.
Bonus Shares
Bonus shares refer to free shares issued to existing shareholders based on the number of shares already in place. The bonus issue only increases the total number of shares issued, but it does not change the net worth of the company.
Bonus shares do not add fresh capital to the company as they are issued to shareholders at no cost.
In a way, it is a way to distribute the share of the company's profit to shareholders as new shares
Diffrance
This difference can be understood from the following points:
Issue Process
Bonus shares are free of cost to shareholders from the company's reserves. This reserve is collected from the company's income. Wright, on the other hand, has shares given by the company to existing shareholders to raise additional capital from the stock market.
Price
Right shares are offered to existing shareholders at a price lower than the market price. The share premium is usually associated with the face value of the share. On the contrary, bonus shares are issued free of cost to shareholders.
Propose Objectives
The basic objective of the right issue is to raise additional capital for the company. On the contrary, the bonus issue aims to increase its active trade by increasing the number of outstanding shares. That is, it increases the liquidity of the company's shares.
Difference between bonus share and right share
Whether it is bonus shares or right shares, after issuing them, the company lists them on the stock exchange so that they can buy and sell.
The difference between the largest bonus share and right share is that
👉 by right share, the company raises additional capital by issuing new shares to existing shareholders,
👉whereas bonus share is a way of distributing the company's income to shareholders like dividends.
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