A bonus issue is an event where the share capital is increased by transferring an internal amount from: the restricted share premium reserve, revaluation reserve, statutory reserve, development expenditure fund, or unrestricted equity. An amount can also be transferred to the share capital by revaluing a fixed asset. A bonus issue can be carried out either with or without issuing new shares.
If a bonus issue is carried out without issuing new shares, the quota value of all shares will increase, as the numerator in the expression (quota value = share capital / total number of issued shares) increases. However, if a bonus issue is carried out with the issuance of new shares, the quota value remains unchanged. In the first case, shareholders will have the same number of shares as before, but each share will have a higher (quota) value, increasing the total value. In the second case, shareholders receive more shares, each with the same (quota) value as before, also resulting in a higher total value.
In a bonus issue where new shares are issued, shareholders are entitled to these new shares in proportion to the number of shares they already hold. If the company has different classes of shares with varying rights to the company’s assets or profits, shareholders are entitled to new shares according to what is stipulated in the articles of association. If the company has different classes of shares without distinction regarding rights to the company’s assets or profits, and the new shares are to be of the same class as the existing shares, new shares must be issued in proportion to the number of shares of each class that currently exist. The old shares will thus entitle shareholders to new shares of the same class, in proportion to their share of the share capital.
The purpose of a bonus issue can be, for example, to change the company’s category from a private limited company (privately held) to a public limited company (publicly held), which requires a minimum share capital of SEK 500,000, or to an SE company (Societas Europaea), where capital requirements are even higher. By increasing the restricted share capital — capital that cannot be distributed — the company and its owners signal financial strength and commitment. This can lead to, for example, increased creditworthiness. A bonus issue through the issuance of new shares can also be motivated by tax reasons if done as an alternative to paying dividends. A shareholder who receives newly issued shares from a bonus issue does not have to pay income tax on this asset, unlike when receiving a cash dividend.