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Who is eligible for bonus shares?

Published in Bonus Shares 2 mins read

Shareholders who own shares of a company before the record date and the ex-date set by the company are eligible for bonus shares.

Understanding Bonus Share Eligibility

Eligibility for bonus shares hinges primarily on a shareholder's ownership status by specific cutoff dates. A company announces bonus shares to its existing shareholders, and to receive these, one must be officially recorded as a shareholder before or on certain key dates.

Key criteria for eligibility include:

  • Share Ownership: You must hold shares of the company.
  • Timely Acquisition: Your shares must be acquired and reflected in your demat account before the specified ex-date and record date.

Important Dates for Eligibility

Two critical dates determine eligibility for bonus shares: the Record Date and the Ex-Date. Understanding the relationship between these dates is crucial, especially given the settlement cycles in stock markets.

Date Type Definition/Significance
Record Date This is the specific date set by the company to identify which shareholders are eligible for the bonus shares. Only shareholders whose names appear in the company's register of members on this date will qualify to receive bonus shares.
Ex-Date The ex-date is the date from which a stock begins trading without the entitlement to the bonus shares. To be eligible for bonus shares, an investor must purchase the shares before the ex-date.

In India, the stock market follows a T+2 rolling settlement system for the delivery of shares. This means that if you buy shares today (T), they will be delivered to your demat account two trading days later (T+2). Consequently, for bonus share eligibility, the ex-date is typically two trading days before the record date. This ensures that any shares purchased before the ex-date will be settled and registered in the buyer's name by the record date, making them eligible for the bonus shares.

Practical Considerations for Shareholders

To ensure eligibility for bonus shares:

  • Purchase Timing: Always purchase shares at least two trading days before the ex-date to ensure they are credited to your demat account and registered in your name by the record date.
  • Demat Account: Ensure your shares are held in a demat account, as this is how ownership is recorded electronically.
  • Check Company Announcements: Companies publicly announce the record date and ex-date for bonus share issues. Staying informed through company disclosures or financial news sources is essential.