In your recent interaction with the new CFO of Sun Limited, he wanted to know the restrictions on a bonus issue. Elaborate. Can a bonus issue, be withdrawn ?

Regulation 294 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 deals with the restrictions on a bonus issue. As per this regulation: (i) An issuer shall make a bonus issue of equity shares only if it has made reservation of equity shares of the same class in favour of the holders of outstanding compulsorily convertible debt instruments if any, in proportion to the convertible part thereof. (ii) The equity shares so reserved for the holders of fully or partly compulsorily convertible debt instruments, shall be issued to the holder of such convertible debt instruments or warrants at the time of conversion of such convertible debt instruments, optionally convertible instruments, warrants, as the case may be, on the same terms or same proportion at which the bonus shares were issued. (iii) A bonus issue shall be made only out of free reserves, securities premium account or capital redemption reserve account and built out of the genuine profits or securities premium collected in cash and reserves created by revaluation of fixed assets shall not be capitalised for this purpose. (iv) Bonus shares shall not be issued in lieu of dividends. (v) If an issuer has issued SR equity shares to its promoters or founders, any bonus issue on the SR equity shares shall carry the same ratio of voting rights compared to ordinary shares and the SR equity shares issued in a bonus issue shall also be converted to equity shares having voting rights same as that of ordinary equity shares along with existing SR equity shares. (vi) The allotment of shares in a bonus issue shall be made only in the dematerialised form. As per Regulation 295(2) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, a bonus issue, once announced, shall not be withdrawn.