XYZ Ltd proposes to issue bonus shares to all shareholders. But the Company has failed to pay gratuity to its shareholders since 5 years. Can the Company make such issue?
Partly Yes
Incorrect AnswerPartly No
Incorrect AnswerExplanation:
As per Section 63(2) of the Companies Act, 2013,
(2) No company shall capitalise its profits or reserves for the purpose of issuing fully paid-up bonus shares under sub-section (1), unless—
(a) it is authorised by its articles;
(b) it has, on the recommendation of the Board, been authorised in the general meeting of the company;
(c) it has not defaulted in payment of interest or principal in respect of fixed deposits or debt securities issued by it;
(d) it has not defaulted in respect of the payment of statutory dues of the employees, such as, contribution to provident fund, gratuity and bonus;
(e) the partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up;
(f) it complies with such conditions as may be prescribed.
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By: Srishti Gupta