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A rights issue is an issue of shares to existing shareholders in proportion
to their existing shareholding.
Rights issues are usually used when the company wishes to raise further
capital from its existing shareholders.
A shareholder who is provisionally allocated shares under a rights issue
may sell his right to acquire the shares by renouncing their allotment
in favour of another person.
Bonus issues
A bonus issue is the issue of shares to existing shareholders in proportion
to their existing holdings. It differs from a rights issue in that the
shareholder is not obliged to make payment for the shares. Instead the
company's capital reserves are used to effect payment, and for this reason
a bonus issue is sometimes called a 'capitalisation issue'. Bonus issues
are also sometimes called 'scrip issues'.
The effect of a bonus issue is to increase the capitalisation of the company,
so that the permanent capital available to it can more realistically reflect
the assets employed by the company.
As the number of shares in issue increases, the value of each share is
reduced. This can make the shares more marketable. However, as the bonus
shares are issued in proportion to existing holdings, the overall value
of the shareholding is not affected. For example, if before the bonus
issue the shareholder had 100 shares worth £10 each and after the
bonus issue he has 200 shares worth £5 each, in both cases the value
of the holding is £1,000.
Capitalisation of loans into shares
Shares may also be issued to convert a loan in the balance sheet into
permanent capital; ie to effect repayment of the debt owed by the company
by the issue of shares.
To Find out more about other
types of share issues click here.
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Our rights issue,
bonus issue and capitalisation of loans into shares services include:
- Preparation of
all necessary minutes, resolutions and forms in order to effect the
share issue;
- Detailed guidance
and procedure note on the process being undertaken
- The filing of
all required forms and reolutions at Companies House.
Please note that our
rights issue and bonus issue services are only appropriate where the issue
is being made by a private company or unlisted public company.
Next steps
Our fees in relation
these services are as follows:
For more information on our rights issue, bonus issue and capitalisation of loan services please contact
our Corporate Legal Services team.
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