A bonus issue (or “scrip issue”) is the issue of additional shares by a Singapore company to its existing shareholders, free of charge, in proportion to their existing holdings. No cash changes hands. Instead, the company capitalises part of its reserves — retained earnings, share premium account, or capital redemption reserve — and converts them into new issued share capital.
Bonus issues sit between dividends and share splits in the corporate actions toolkit. They are common in privately held Singapore companies after several years of profitability, especially before a Series A or trade sale, when shareholders want to lock in capital structure or refresh share certificates.
1. What a bonus issue actually does
Mechanically, a bonus issue:
- Increases the number of issued shares.
- Leaves each shareholder’s percentage shareholding unchanged.
- Does not raise any new cash for the company.
- Reduces a reserve account (retained earnings or share premium) by an equivalent amount, transferring it into issued share capital.
Net effect on the balance sheet: total equity stays the same; the mix of equity components shifts (reserves down, share capital up).
2. Why issue bonus shares?
- Tidy up the cap table before an investor round or due diligence — e.g. convert a single share into 1,000 shares to allow finer allocation.
- Reduce price per share for psychology and trading purposes (more relevant for listed companies on SGX).
- Capitalise undistributed profits permanently — once issued as share capital, the amount can only be returned to shareholders via a formal capital reduction under Sections 78B-78K of the Companies Act.
- Signal confidence to shareholders without paying cash dividends that would dent cashflow.
- Estate-planning in family-owned companies — finer denomination of shares for succession transfers.
3. The legal framework
Singapore abolished the concept of par value in 2006. There is no statutory minimum issue price for shares, no share premium account in the strict sense (companies have a single “share capital” account), and bonus issues are now done by capitalising:
- Retained earnings (the most common source);
- Capital reserves (where these arose from a permitted capital transaction);
- Any other reserve permitted by the company’s constitution.
Key Companies Act provisions:
- Section 63: share allotments must be reported to ACRA via Return of Allotment (NRA) within 14 days.
- Section 65A: share capital cannot be reduced below the amount required by the constitution without complying with Sections 78B-78K.
- Section 161: directors require shareholder authority to allot shares.
4. The step-by-step procedure
Step 1 — Check the constitution
The company’s constitution must permit a bonus issue. Most modern Singapore constitutions follow the Model Constitution (Fourth Schedule of the Companies Act) which expressly authorises bonus issues by ordinary resolution. If the constitution is silent or restrictive, amend it first by special resolution.
Step 2 — Confirm distributable reserves
The directors must verify that the reserves to be capitalised are legally available — i.e. they are profits available for distribution under Section 403 of the Companies Act. The auditor’s letter or management accounts at the latest practicable date should confirm.
Step 3 — Directors’ resolution
The board passes a resolution:
- Recommending the bonus issue.
- Specifying the ratio (e.g. 1 bonus share for every 10 existing shares).
- Specifying the reserve to be capitalised and the amount.
- Convening an EGM (or proposing a written resolution).
Step 4 — Shareholder resolution
An ordinary resolution (simple majority) of shareholders authorises the bonus issue. The notice of EGM must set out the ratio, the amount, and the source of capitalisation. Where written resolutions are used (most private companies), all shareholders sign.
Step 5 — Allotment
The board passes a further allotment resolution issuing the bonus shares to the existing shareholders in the agreed ratio.
Step 6 — ACRA filing
File the Return of Allotment via BizFile+ within 14 days, indicating “Bonus Issue” as the reason. No stamp duty is payable because bonus shares are issued, not transferred — see our Singapore stamp duty guide.
Step 7 — Update internal records
- Update the Register of Members.
- Issue replacement share certificates (or update electronic register).
- Update the company’s accounting records — debit retained earnings, credit share capital.
- Note in the next set of financial statements as a movement in equity.
5. Accounting treatment under SFRS
Under Singapore Financial Reporting Standards (SFRS), a bonus issue is treated as a transfer between equity components:
| Account | Dr | Cr |
|---|---|---|
| Retained earnings | $X | |
| Share capital | $X |
EPS comparatives in the financial statements must be restated as if the bonus issue had been effective at the start of the earliest period presented — this is required by SFRS(I) 1-33 / IAS 33.
6. Singapore tax treatment
For the company
The bonus issue itself is not a taxable event. No corporate tax arises on the capitalisation of reserves.
For the shareholder
Bonus shares are NOT treated as dividend income for Singapore income tax purposes — they are a capital allocation. The shareholder’s cost base is spread across the total holding (the original cost is divided by the new total number of shares).
Example: a shareholder holds 1,000 shares originally costing SGD 10,000 (SGD 10 each). A 1-for-1 bonus issue gives 1,000 bonus shares free. The cost base is now SGD 5 per share across 2,000 shares.
Stamp duty
No stamp duty on a bonus issue — the shares are issued, not transferred. Stamp duty only applies to transfers of existing shares under the Stamp Duties Act.
Foreign shareholders
Bonus shares to non-resident shareholders do not trigger Singapore withholding tax — they are not a dividend payment. However, foreign jurisdictions may treat bonus shares as taxable income (the US, for example, has specific rules under IRC Section 305). Foreign shareholders should check their home tax position.
7. Bonus issue vs share split — a common confusion
Both increase the number of shares without raising cash. The difference:
| Aspect | Bonus Issue | Share Split (Subdivision) |
|---|---|---|
| Source of new shares | Capitalisation of reserves | Subdivision of existing shares |
| Reserve impact | Retained earnings → share capital | No change |
| Companies Act section | General allotment (Section 63) | Section 71(1)(a) |
| Total share capital amount | Increases | Unchanged |
| Filing | Return of Allotment | Notice of subdivision (Section 71) |
Many founders ask for a “bonus issue” when they actually want a “share split”. The difference matters for the accounting impact and the filings.
8. Practical pitfalls
- Insufficient reserves. A loss-making company cannot do a bonus issue out of retained earnings. Some directors try to circumvent this with creative accounting — auditors will not sign off.
- Fractional entitlements. A 1-for-3 bonus issue on a holding of 100 shares yields 33.33 shares. Round down to 33 and either ignore the fraction or aggregate fractions and sell them — set out the policy in the resolution.
- Different share classes. Where the company has multiple share classes (ordinary, preference), the bonus issue may need separate class-by-class resolutions.
- Late ACRA filing. Late Returns of Allotment incur penalties under the Companies Act.
- Forgetting EPS restatement. Comparative EPS in financial statements must be restated. Auditors will pick this up.
9. Listed companies — additional SGX rules
For SGX Mainboard or Catalist issuers, additional rules apply: the bonus issue must be announced on SGXNet, the SGX-listed company must obtain in-principle approval for the listing of additional shares, and a record date and ex-bonus date must be set. These rules are outside the scope of this guide.
10. Bonus issue in distressed situations — be careful
A company facing solvency concerns should not be capitalising reserves. Bonus issues capitalise distributable profits permanently — they cannot easily be reversed. In a distressed scenario the directors may face questions about whether the company was solvent at the time, and may breach their duties under Section 156 / 157 of the Companies Act. For solvency analysis see our notes on the balance sheet solvency test.
11. Frequently asked questions
Can a single shareholder veto a bonus issue?
Only an ordinary resolution is required, so a single minority shareholder cannot veto a bonus issue. However, where the bonus issue prejudices a particular class of shareholder (e.g. preference shareholders), class consent under Section 74 may be required.
Does a bonus issue dilute existing shareholders?
No — by definition, a bonus issue is pro-rata and percentage shareholdings are unchanged.
Can bonus shares be issued to selected shareholders only?
That would not be a “bonus issue” — it would be a selective allotment, which requires either a waiver of pre-emption rights by all shareholders, or an arm’s-length issue price, and may have tax consequences (a benefit-in-kind issue could be treated as remuneration).
How long does a bonus issue take?
Two to three weeks end-to-end, assuming written resolutions are used. The ACRA filing must be within 14 days of allotment.
Does the company need a fresh authority to allot?
Yes — directors need shareholder authority to allot shares under Section 161. Most private companies obtain this at each AGM via the standard allotment authority resolution. If the authority has lapsed, a fresh resolution is required.
See related reading on how to allot and transfer shares, preference shares, and share buybacks.
Raffles Corporate Services prepares bonus-issue resolutions, drafts share allotment documentation, files ACRA Returns of Allotment, and coordinates with auditors on EPS restatement and statement-of-changes-in-equity presentation. Done in 5 business days for a standard private-company bonus issue.
— The Editorial Team, Raffles Corporate Services