SEBI Mandates Faster Issuance of Bonus Shares by Listed Companies
Bonus Shares to be Issued Within Two Business Days of Record Date
New Delhi : The Securities and Exchange Board of India (SEBI) has issued a circular instructing all listed companies to issue bonus shares within two business days following the record date. This new directive marks a significant reduction in the timeframe, as previously, companies took up to two weeks after the record date to issue bonus shares. SEBI has also warned that any delay in adhering to this timeline will result in penalties.
The new regulations, effective from October 1, emphasize the importance of compliance to ensure efficiency in the issuance process. The record date is crucial as it determines which shareholders are eligible to receive bonuses or dividends. Shareholders must own the company’s shares by this date to qualify. Those who sell their shares before the record date or purchase shares afterward will not be eligible for bonus shares or dividends.
SEBI’s circular introduces the T+2 trading day rule, where 'T' refers to the record date. The guidelines also clarify the process of issuing bonus shares. Failure to meet the timeline will result in penalties as per SEBI’s 2019 regulations under the Issue of Capital and Disclosure Requirements (ICDR).
According to the circular, the bonus issuance process must comply with the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015. Companies are required to apply for approval from stock exchanges within five business days of the board's approval of the bonus issue. Once approved, the company must notify the stock exchange about the record date and bonus allocation, with the exchange issuing an official notification thereafter.
After the notification, companies must submit relevant documents to depositories to ensure the credit of bonus shares to eligible shareholders. The allocated shares will be made available for trading the next business day following the credit.
SEBI has made it clear that all listed companies must adhere to these new guidelines starting October 1, and any violations will result in severe penalties.
