News

Published: September 14, 2024
Updated: September 14, 2024

SEBI Streamlines Process for Bonus Shares: Faster Trading and Transfers

Reduction in Bonus Share Processing Time

The Securities and Exchange Board of India (SEBI) has announced a significant reduction in the time required for the credit and trading of bonus shares. This change is aimed at expediting the process from the record date to the trading of these shares, ensuring a more efficient system for issuers and investors alike.

Application Process for Bonus Issue Approval

According to SEBI’s new guidelines, companies intending to issue bonus shares must now apply for in-principle approval from the stock exchange within five working days of the board meeting where the bonus issue is approved. This ensures that the process begins promptly after the company's decision to issue bonus shares.

Record Date and Allotment Procedures

When the issuer sets and announces the record date (referred to as T day) for the bonus issue, they must also confirm the deemed date of allotment, which is scheduled for the next working day following the record date (T+1 day). This step accelerates the allotment process and ensures a faster turnaround for crediting shares to investors.

Stock Exchange Notification and Document Submission

Once the stock exchange is notified of the record date and receives the necessary documents from the issuer, it will issue an official notification confirming the record date and detailing the number of shares involved in the bonus issue. This notification will also mention the deemed date of allotment (T+1 day). The issuer is required to submit all requisite documents to the depositories by 12 P.M. the following working day (T+1 day) for the credit of bonus shares.

Distinctive Number Database and Credit

Issuers must upload the distinctive number (DN) ranges in the depository's DN database, which will be verified by the stock exchange. Once the database is updated, the crediting of the bonus shares can proceed smoothly. This ensures that the entire process is transparent and timely.

Availability of Shares for Trading

The newly allotted bonus shares will be made available for trading on the next working day after allotment (T+2 day), reducing the waiting time for investors to trade their bonus shares.

Exemption from Temporary ISIN Requirement

Under the updated guidelines, SEBI has exempted issuers from the requirement of crediting bonus shares under a temporary ISIN, which was previously mandated by earlier circulars. Bonus shares will now be credited directly into the existing permanent ISIN, streamlining the entire process.

A Faster and More Efficient Process

SEBI’s new guidelines significantly reduce the time frame for the issuance, crediting, and trading of bonus shares. This streamlined process benefits both issuers and investors, enabling faster access to shares and minimising delays in trading. By eliminating outdated procedures and simplifying the allotment process, SEBI has paved the way for a more efficient bonus share system.