Also known as a scrip issue or capitalisation issue. An issue of new shares or debentures ( www.practicallaw.com/7-107-6043) to existing members, generally in the same proportions as their existing holdings. No payment is required from members as the bonus shares or debentures are paid up using the company's profits or reserves.
A bonus issue of shares is excluded from the definition of "distribution" in section 829 of the Companies Act 2006. This means that, except where the bonus issue is being carried out for the purpose of paying up any amounts unpaid on existing shares, a bonus issue of shares can be paid up out of either distributable or non-distributable reserves. Any amounts outstanding on existing shares or a bonus issue of debentures, however, must be paid up using realised profit, that is, profit available for distribution (section 849, Companies Act 2006).
For more information on bonus issues of shares, see Practice note, Bonus issues ( www.practicallaw.com/3-617-4714) .