SEBI Introduces Faster Credit, Trading Timelines For Bonus Shares

In order to bring more efficiency to the process of issuing bonus shares, SEBI has decided to reduce the time for crediting and trading these shares from the record date of the bonus issue.

Bonus shares are the ones issued to the shareholder in a particular ratio. For example, if a company opts for a ratio of 4:1, a person will receive four shares for one. They are basically the extra shares received.

An issuer must implement the bonus issue within 15 days of board approval. If shareholder approval is needed for capitalising profit or reserves, the bonus issue must be implemented within two months from the board's decision, subject to shareholders' approval.

The date of commencement of trading marks the implementation of the bonus issue.

Currently, while the ICDR Regulations outline overall timelines for implementing a bonus issue, there are no specific guidelines for the crediting and trading of bonus shares from the record date.

This leads to non-uniform timelines for when shares are credited and available for trading. To deal with this, the issuer proposing a bonus issue must apply for in-principle approval from the stock exchange within five working days of the board meeting that approves the bonus issue.

When fixing and notifying the record date (T day) to the stock exchange, the issuer must also record the deemed date of allotment on the next working day (T+1 day).

Upon receiving the intimation of the record date and requisite documents from the company, the exchanges will issue a notification accepting the record date and specifying the number of shares in the bonus issue, including the deemed date of allotment (T+1 day).

After this notification, issuers must ensure that the necessary documents are submitted to depositories for the credit of bonus shares in the depository system by 12 p.m. on T+1 day.

The issuer must also upload the distinctive number ranges in the database of the depository, and the stock exchanges must update the relevant dates before the credit of bonus shares.

The shares allotted as part of the bonus issue will be made available for trading on the next working day after the allotment (T+2 day).

The requirements for crediting bonus shares in temporary International Securities Identification Numbers, as per previous SEBI circulars, are exempted for bonus issues of equity shares, allowing credit directly into the permanent ISIN.

The exchanges and depositories are instructed to amend their bye-laws, rules, and regulations as necessary to implement this decision.

This circular applies to all bonus issues announced on or after a specified date. Any delays in complying with these timelines will attract penalties.