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Amazing experience
After placing an enquiry, I received a call 20 minutes later, and then 2 hours later, I had a solicitor assigned to me. They were absolutely incredible right from the word go - amazing and very prompt with replies, answering all my questions and keeping the process moving. We finally completed today and I am so unbelievably happy. I wouldn’t hesitate to use Lawhive again in the future if needed.
Lily
First class service
I initially made an online enquiry about a tricky conveyancing matter and received an immediate call back. They understood straight away what was needed and gave me a quote that was very reasonable. It was such a pleasure to find someone who was cheerful, professional and completely reassuring as I’d been getting quite anxious about the sale of my house. The service Lawhive has provided is absolutely first class and I cannot recommend them enough.
Charles
Empathetic, professional and efficient
I am an executor, selling my mother's home. I found the assistance I received from Lawhive first rate - empathetic, professional and efficient.
Mark
Great service from Lawhive
We used Lawhive for our conveyancing needs and our solicitor was very helpful, patient and informative. She helped us with our needs with prompt responses and provided a very efficient service.
Kelvin
Great service when you need clarity and calm
Our solicitor was warm, friendly and provided crystal clear communication. A lot of conveyancers assume customers know everything about the process already, so it was really appreciated to hear each stage included in the price given.
Em
Quick and efficient
We used Lawhive for a transfer of property and conveyancing. Our solicitor was so helpful and thorough with the whole process. He responded quickly and efficiently to any questions or requests that we had and explained some of the more complicated issues regarding the process clearly.
Geri
Fantastic service and experience with Lawhive
I had the pleasure of working with Lawhive doing a transfer of equity on a property. Our solicitor’s service was amazing, she responded quickly to any questions or concerns and kept me updated throughout the process. I can strongly recommend her for any conveyancing work that you may need. Fantastic service all round.
Jane
Amazing experience
After placing an enquiry, I received a call 20 minutes later, and then 2 hours later, I had a solicitor assigned to me. They were absolutely incredible right from the word go - amazing and very prompt with replies, answering all my questions and keeping the process moving. We finally completed today and I am so unbelievably happy. I wouldn’t hesitate to use Lawhive again in the future if needed.
Lily
First class service
I initially made an online enquiry about a tricky conveyancing matter and received an immediate call back. They understood straight away what was needed and gave me a quote that was very reasonable. It was such a pleasure to find someone who was cheerful, professional and completely reassuring as I’d been getting quite anxious about the sale of my house. The service Lawhive has provided is absolutely first class and I cannot recommend them enough.
Charles
Empathetic, professional and efficient
I am an executor, selling my mother's home. I found the assistance I received from Lawhive first rate - empathetic, professional and efficient.
Mark
Great service from Lawhive
We used Lawhive for our conveyancing needs and our solicitor was very helpful, patient and informative. She helped us with our needs with prompt responses and provided a very efficient service.
Kelvin
Great service when you need clarity and calm
Our solicitor was warm, friendly and provided crystal clear communication. A lot of conveyancers assume customers know everything about the process already, so it was really appreciated to hear each stage included in the price given.
Em
Quick and efficient
We used Lawhive for a transfer of property and conveyancing. Our solicitor was so helpful and thorough with the whole process. He responded quickly and efficiently to any questions or requests that we had and explained some of the more complicated issues regarding the process clearly.
Geri
Fantastic service and experience with Lawhive
I had the pleasure of working with Lawhive doing a transfer of equity on a property. Our solicitor’s service was amazing, she responded quickly to any questions or concerns and kept me updated throughout the process. I can strongly recommend her for any conveyancing work that you may need. Fantastic service all round.
Jane
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01 overview
Managing company finances can be difficult, especially when it comes to decisions about rewarding your shareholders and boosting your company’s equity. However, one powerful tool at your disposal is a bonus issue of shares.
At first glance, issuing shares without receiving cash in return might seem counterintuitive, but for many businesses, a bonus issue can be a strategic move that allows you to:
While the benefits of a bonus issue are clear, the process itself is not without some challenges. Companies often face complexities in issuing bonus shares including regulatory compliance with the Companies Act 2006 and getting necessary approvals from the board of directors.
At Lawhive, our network of experienced corporate lawyers will guide you through every step of the bonus issue process, from drafting resolutions and preparing necessary documentation to liaising with regulatory bodies. Our goal is to make the process as smooth and efficient as possible, so you can focus on your business.
Contact us today to schedule a free case evaluation with our legal assessment team and get a no-obligation quote for personalised support with a bonus issue of shares.
A bonus issue of shares (also known as a scrip issue or capitalisation issue) is a way for a company to give additional shares to its existing shareholders at no extra cost.
This means that if you already own shares in a company, you receive more shares for free based on the number you currently hold.
If you’re considering a bonus issue of shares for your company, the process involves several legal and regulatory steps.
At Lawhive, our expert corporate lawyers can guide you through every aspect of issuing bonus shares. Contact us to schedule a free case evaluation and get a no-obligation quote for our services.
Key reasons why your company might consider a bonus issue of shares include:
Bonus shares are given free of charge to existing shareholders based on their current holdings. These additional shares increase their ownership stake in the company over time if the company continues to perform well.
This can be a great way to reward shareholders for their loyalty and investment without paying cash.
By increasing the number of shares in circulation, the individual price per share usually decreases, making shares more affordable. A lower share price and increased liquidity can make your shares more attractive to new investors, leading to increased trading activity, potentially boosting demand and improving the overall perception of your company in the market.
A bonus issue converts part of your company’s retained earnings or reserves into share capital. This strengthens your capital base and can improve the financial stability and credibility of your company.
A stronger equity base can make your company look more financially robust, which can be beneficial when seeking financing or negotiating with business partners.
A bonus issue of shares doesn’t dilute the ownership percentage of existing shareholders. Instead, they receive additional shares proportional to their current holdings.
Since the ownership percentages remain unchanged, the voting power of shareholders at company meetings stays consistent, maintaining the current balance of control.
Announcing a bonus issue can be seen as a positive signal that your company is confident in its financial health and future growth. It indicates that you have sufficient reserves and are willing to share this success with your shareholders.
This can boost confidence among current and potential investors, helping to build a strong, more supportive shareholder base.
While issuing bonus shares can offer several benefits, it’s important to be aware of the potential disadvantages. These drawbacks can impact your company's financial health, market perception, and operational efficiency.
When a company issues bonus shares, the total number of shares increases resulting in a decrease in the price per share because the company’s overall value is now spread across a larger number of shares.
There is the potential for investors to misunderstand the purpose of a bonus issue and see the reduced share prices as a sign of diminished value, even though their overall ownership in the company remains unchanged.
Issuing bonus shares requires approvals from the board of directors and shareholders, compliance with the Companies Act 2006, and possibly adhering to stock exchange regulations if the company is publicly listed. As you might imagine, this can be time-consuming and resource-intensive.
The bonus issue process also generates additional administrative tasks, such as updating the shareholder register, preparing necessary documentation, and communicating with shareholders.
Unlike other forms of equity financing, such as rights issues or public offerings, a bonus issue does not bring any new funds into the company. It only converts existing reserves into share capital. This means that the company doesn’t receive a cash infusion to support growth or operational needs.
Issuing bonus shares also uses up a portion of the company’s retained earnings or reserves, reducing the financial cushion available for future investments or emergency needs.
Issuing bonus shares in the UK involves converting part of a company's reserves into share capital, giving additional shares to existing shareholders at no extra cost. To do this legally, there are several key requirements that a company must follow under UK law:
Reserves eligible for a bonus issue are typically a company’s retained earnings (accumulated profits that have not been distributed to shareholders as dividends) or other distributable reserves.
To determine if your company has sufficient reserves to issue bonus shares you should decide how many bonus shares you plan to issue and at what ratio (e.g. 1 bonus share for every 5 existing shares), then multiply the number of bonus shares by their nominal value to calculate the total amount required from the reserves for the bonus issue.
You should then make sure your company’s retained earnings or other distributable reserves are equal to or greater than the total value required for the bonus issue. If the reserves are insufficient, the company can’t go ahead with the bonus issue without increasing the reserves first.
Example:
Imagine your company wants to issue 1 bonus share for every 5 existing shares, and each share has a nominal value of £1. If there are 100,000 existing shares the calculations would be:
You would then need to make sure your company has at least £20,000 in distributable reserves to cover this bonus issue.
The act of issuing bonus shares does not create a tax liability for the company. Since bonus shares are issued from the company’s reserves and no new funds are raised, there is no taxable income generated from this transaction.
Further, shareholders do not pay income tax when they receive bonus shares nor does the issuance of bonus shares create an immediate capital gains tax event.
In a bonus issue, shares are distributed to existing shareholders in proportion to their current holdings. This means that each shareholder’s percentage of ownership in the company remains the same before and after the bonus issue.
Because bonus shares are distributed proportionally, there is no dilution of control among existing shareholders. Each shareholder retains the same voting power relative to their original holdings.
Both a bonus issue and stock split increase the number of shares in circulation however, while a bonus issue converts reserves into share capital to reward shareholders and bolster equity, a stock split adjusts the share price to enhance affordability and liquidity without impacting the company’s financials.
A private company can issue bonus shares. The process is similar to how public companies issue bonus shares in that private companies must comply with the provisions of the Companies Act 2006 and the Articles of Association must allow for it.
Completing a bonus issue of shares can take between 6-12 weeks.
Here’s a breakdown of the key stages and their typical durations, however, these may vary depending on the complexity of your company’s structure, the readiness of the financial and legal documentation, and the efficiency of the approval process:
| Stage | Estimated Timeframe |
| Initial consultation and planning | 1-2 weeks |
| Board approval | 1-2 weeks |
| Shareholder approval | 2-4 weeks |
| Preparation of documents | 1-2 weeks |
| Filing with Companies House | Up to 1 week |
| Updating shareholder records | 1-2 weeks |
| Communicating to shareholders | 1 week |
| Finalising the issue | 1 week |
Here’s a list of the documents needed for a bonus issue of shares:
The board of directors must approve the bonus issue by passing a formal resolution. Minutes of the board meeting where the resolution is passed must be recorded and kept as part of the company's official records.
The resolution should include:
Depending on the company's Articles of Association and the Companies Act 2006, shareholder approval may be required. The resolution can be passed either at a general meeting of shareholders or through a written resolution. Records of the meeting minutes or the signed written resolution must be maintained.
The resolution should outline the proposal for the bonus issue and confirm that the shareholders agree to the terms and conditions set forth by the board.
If the company’s Articles of Association don’t allow for a bonus issue, they need to be amended with shareholder approval to specify the new provisions.
A copy of the updated Articles of Association should be prepared and filed with Companies House if amendments are made.
The Statement of Capital is required to update Companies House about the changes in the company’s share capital due to the bonus issue, including the number of shares issued and their nominal value.
This must be completed and filed with Companies House within one month of the bonus shares being issued.
The register of members must be updated to include the new number of shares held by each shareholder after the bonus issue.
If the company issues physical share certificates, new certificates must be provided to shareholders reflecting their increased shareholdings. Each certificate should show the new total number of shares owned by the shareholder after the bonus issue.
At Lawhive, we provide comprehensive support to manage the documentation and compliance requirements for a bonus issue of shares. Our experienced corporate lawyers will guide you through every step, ensuring all necessary documents are prepared, filed, and maintained correctly.
Contact us today to schedule a free case evaluation and get a no-obligation quote for our services.
A solicitor can help with a bonus issue of shares by:
At Lawhive, we offer expert legal support for companies planning to issue bonus shares. Our network of experienced corporate lawyers provides comprehensive services tailored to your specific needs, ensuring a smooth and compliant bonus issue process.
Contact us today to schedule a free case evaluation and receive a no-obligation quote for our services.
You should look for a solicitor who specialises in corporate law and has extensive experience with corporate actions like bonus issues.
Ideally, your solicitor should have a proven track record of successfully handling bonus issues for other companies, particularly in your industry.
Choose a solicitor who understands your industry and the specific challenges and opportunities it presents. They should take the time to understand your company’s goals, financial position, and shareholder base to align the bonus issue strategy with your business objectives.
Your solicitor should be able to explain complex legal concepts in simple terms, provide clear guidance, and keep you informed at every stage. Further, they should be accessible and responsive to your needs.
Look for a solicitor who offers transparency and predictable fee structures so you have a clear outline of their costs upfront.
Check the solicitor’s qualifications and reputation in the legal and business community, Look for client testimonials, reviews, and any professional accolades or recognition that indicate their credibility and reliability.
At Lawhive, our network of legal professionals includes seasoned corporate lawyers with extensive experience in handling bonus issues. We also offer end-to-end support for the bonus issue process, and our lawyers are committed to clear, jargon-free communication and proactive engagement.
Contact us today to schedule a free case evaluation and receive a no-obligation quote for our services.
A bonus issue is typically considered a final and irrevocable transaction once the new shares have been issued and recorded.
After receiving bonus shares, shareholders gain legal rights and ownership of these shares. Attempting to reverse this process would involve retracting shares from shareholders, which could infringe on their legal rights and lead to disputes.
Given the complexities and potential consequences of reversing a bonus issue, companies typically explore alternative solutions to address any issues arising from the bonus issue. These alternatives include:
In the event of disputes with shareholders, open and transparent communication can help manage expectations and address concerns, or in some cases negotiate mutually acceptable adjustments or compensations if appropriate.
A bonus issue involves distributing additional shares to existing shareholders without any cash exchange. In contrast, dividends are cash payments made directly to shareholders from the company’s profits or retained earnings.
As such, dividends offer an immediate cash return to shareholders, while a bonus issue increases the number of shares they hold, potentially increasing their long-term value without immediate income.
Companies can establish employee share schemes, such as Employee Stock Ownership Plans (ESOPs) or Share Incentive Plans (SIPs), which may include the issuance of bonus shares as part of the incentive package. These schemes are designed to offer shares or share options to employees under specific terms and conditions.
To do this, the company must define clear terms and conditions for the bonus shares issued under the incentive plan, including eligibility criteria, the number of shares to be issued, vesting periods, and any performance targets that need to be met for employees to receive the shares.
Issuing bonus shares can be a powerful tool for enhancing your company’s financial health and rewarding shareholders, but understanding the legal and regulatory process involved can be challenging.
At Lawhive, we offer expert legal support to streamline the bonus issue process. Our network of experienced corporate lawyers is committed to providing personalised, efficient, and cost-effective services.
We guide you through every step, from planning and approvals to documentation and compliance, ensuring your bonus issue of shares is executed smoothly and successfully.
Contact us today to schedule a free case evaluation and receive a no-obligation quote for our services.
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