Capitalisation of Bonus Issues of Shares
The capitalisation of bonus issues of shares in Northern Ireland refers to the process by which a company issues additional shares to its existing shareholders as a bonus without requiring any payment from the shareholders. This can be done for various reasons, such as increasing the liquidity of shares in the market and rewarding existing shareholders. Our expert team will be able to ensure that your company is in compliance with the applicable regulations and tailor the advice to your situation.
How we can help
The capitalisation of bonus issues of shares can present legal issues. At P.A. Duffy & Co., our legal team, who specialise in corporate law and governance, will ensure ease and understanding during the complex process. We will make sure your company restructuring is handled with care, serving the best interests of the company and its stakeholders.
The capitalisation of bonus issues of shares involves several legal considerations. Our expert team can provide advice on issues regarding:
Company Articles of Association – The articles must provide the necessary authority procedures for such capitalisation.
Shareholder Approval – This could involve the passing of a special resolution at a general meeting.
Regulatory Compliance – The capitalisation process must comply with the Companies Act 2006 and other relevant regulations.
Tax Considerations - Consider the tax implications for both the company and its shareholders resulting from the bonus issue capitalisation.
Documentation: Proper documentation is crucial. This includes preparing a resolution for shareholder approval, updating the company's register of members, and maintaining records of the capitalisation.
Call us on 028 8772 2102 (Dungannon/Belfast).
Why do companies issue bonus shares?
Companies in Northern Ireland issue bonus shares for various reasons, and such issuances can serve several purposes. Here are some common reasons why companies issue bonus shares:
Rewarding Shareholders: Bonus issues are a way for companies to reward their existing shareholders. By providing additional shares free of charge, the company acknowledges the shareholders' loyalty and participation.
Improving Liquidity: Bonus shares can enhance the liquidity of a company's shares in the market. With more shares available for trading, it can attract more investors and increase the overall trading volume.
Boosting Shareholder Confidence: Issuing bonus shares can signal to the market and shareholders that the company is in good financial health. It's often seen as a positive indicator and can boost confidence in the company.
Retaining Earnings: Bonus shares are often issued by capitalizing a company's reserves or retained earnings. This allows the company to convert its accumulated profits into share capital, which can be useful for future expansion or investment.
Corporate Mergers: Companies undergoing restructuring or mergers may issue bonus shares as part of the reorganization process. This can be a way to realign the shareholding structure.
What are the tax implications of shareholders receiving bonus shares?
Shareholders receiving bonus shares may encounter specific tax implications, which can vary depending on their individual circumstances and the nature of the bonus shares.
For individual shareholders, bonus shares are generally not subject to income tax when issued. Shareholders receive the shares without any immediate tax liability, as they haven't received cash or other assets. However, if bonus shares are subsequently sold, any capital gains realized may be subject to Capital Gains Tax (CGT).
Regarding corporation tax for companies issuing bonus shares, there are generally no immediate tax implications as they are not treated as income. However, any future sale of bonus shares by the company may result in Corporation Tax liability on any capital gains.
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