In a bid to streamline the process of issuing bonus shares and expedite their trading, the Securities and Exchange Board of India (SEBI) has reduced the time taken for trading of bonus shares to 2 working days.
As per a notification by SEBI on Monday, it has introduced significant changes to the timeline for crediting and trading such shares.
This initiative, aimed at reducing the time taken for bonus shares to become tradable from the record date.
Time to credit bonus share reduced
"It has been decided to reduce the time taken for credit of bonus shares and trading of such shares from the record date of the bonus issue under SEBI (ICDR) Regulations, 2018," said the circular.
As per the circular, starting from October 1, 2024, companies issuing bonus shares under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, will be required to adhere to a faster operational procedure.
The new process mandates that companies must apply for in-principle approval under Regulation 28(1) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, within five working days of their board approving the bonus issue.
Bonus issuer must set date and allotment date
As per the circular, the issuer must also set a record date (T day) as per Regulation 42(1) of the SEBI (LODR) Regulations, 2015, while designating the day immediately following the record date (T+1 day) as the deemed date of allotment.
It stated that the stock exchanges, upon receiving notice of the record date and necessary documents from the issuer, are tasked with notifying the acceptance of the record date and confirming the number of shares under the bonus issue, as well as the allotment date.
Issuer is supposed to notify exchanage by 12 pm
To ensure swift credit of bonus shares to shareholders, the issuer is required to submit the relevant documents to depositories by 12 p.m. on T+1 day, with the shares being credited to the depository system. Furthermore, issuers must upload the distinctive number (DN) ranges into the depository's DN database, and stock exchanges must update relevant information before crediting the shares.
As per SEBI, the newly allotted bonus shares will be available for trading on the next working day following the allotment (T+2 day).
Bonus shares with temporary ISIN
Additionally, SEBI has exempted the requirement for crediting bonus shares in a temporary ISIN, allowing shares to be credited directly in the existing permanent ISIN.
SEBI has also advised stock exchanges and depositories to amend their respective rules and regulations to accommodate these changes. Failure to comply with the stipulated timelines will attract penalties. This circular will apply to all bonus issues announced from October 1, 2024, onwards, marking a significant improvement in the bonus issue process.
