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Will everyone get bonus shares?

Published in Bonus Shares Eligibility 3 mins read

No, not everyone will receive bonus shares.

Receiving bonus shares is conditional, and eligibility is strictly determined by specific criteria set by the issuing company. Only individuals who hold shares of the company by certain crucial dates are entitled to these additional shares.

Who Is Eligible for Bonus Shares?

Eligibility for bonus shares is primarily based on share ownership and timing. To qualify, an investor must be a registered shareholder of the company before both the record date and the ex-date. These dates are critical cut-offs established by the company to determine which shareholders are on record to receive the bonus issue. For instance, in some financial systems, like that in India which operates on a T+2 rolling settlement system for share delivery, the ex-date typically precedes the record date by two business days. This means shares must be purchased and settled before the ex-date to ensure ownership by the record date.

Criteria Description
Shareholder Status Must currently own shares of the company.
Ownership Timing (Ex-Date) Shares must be acquired and settled before the ex-date.
Ownership Timing (Record Date) Must be listed as a shareholder in the company's records on or before the record date.

Understanding Key Dates

  • Ex-Date: This is the date on or after which a stock trades without its bonus share entitlement. If you buy shares on or after the ex-date, you will not be eligible for the bonus shares.
  • Record Date: This is the specific date on which the company checks its records to identify eligible shareholders. Only shareholders whose names appear in the company's register on or before this date will receive the bonus shares. Due to settlement cycles (e.g., T+2), the ex-date is typically set a few days before the record date to ensure shares are in the buyer's account by the record date.

Why Some Shareholders Might Not Receive Bonus Shares

Several scenarios can lead to a shareholder not receiving bonus shares, even if they own shares of the company:

  • Purchasing Shares Too Late: If shares are purchased on or after the ex-date, the buyer will not be eligible for the bonus issue.
  • Not Being a Registered Shareholder: Individuals who do not own shares of the company at all, or those whose share purchases have not yet been settled and registered by the record date, will not qualify.

Therefore, the distribution of bonus shares is not universal among all individuals but is exclusively for existing shareholders who meet precise temporal criteria related to their share ownership.