On September 16, 2024, SEBI issued a circular announcing the introduction of T+2 day trading for bonus shares, which will take effect from October 1, 2024. The new process is aimed at reducing the time taken for the credit and trading of bonus shares under the SEBI ( ICDR ) Regulations, 2018.
Under the new framework, issuers will be required to seek in-principle approval from the stock exchange within five working days of the board meeting that approves the bonus issue.
Navigate Global Finance: Your Guide to the Foreign Exchange Management Act!
They will need to set a record date (T day), and the deemed allotment will take place on the next working day (T+1 day). Issuers must also ensure that the bonus shares are credited to the depository system by 12 PM on the following day (T+1 day), ensuring that the process is completed swiftly.
The shares will be made available for trading on the second working day after the record date (T+2 day). This means that investors will have access to trading in the bonus shares much sooner than before. Additionally, the bonus shares will be credited directly to the permanent ISIN, eliminating the need for the temporary ISIN that was previously used in such cases.
The procedure to implement the same is as given below:
(i) The Issuer proposing a bonus issue shall apply for the in-principle approval under Regulation 28(1) of SEBI (LODR) Regulations, 2015, to the Stock Exchange within 5 working days from the date of board meeting approving the Bonus issue.
(ii) The Issuer while fixing and intimating the record date (T day) to the Stock Exchange as required under Regulation 42(1) of SEBI (LODR) Regulations, 2015, for the proposed bonus issue, shall also take on record deemed date of allotment on next working date of record date (T+1 day).
(iii) Upon receipt of intimation of the record date (T Day) and requisite documents from the Issuer, the Stock Exchange(s) shall issue notification accepting the record date and notifying the number of shares considered in the bonus issue. The notification shall include the deemed date of allotment (T+1 day).
(iv) After issuance of notification issued by the Stock Exchange for acceptance of record date, the Issuers shall ensure submission of the requisite documents to Depositories for credit of bonus shares in the depository system latest by 12 P.M. of next working day of the record date (i.e. T+1 day).
Navigate Global Finance: Your Guide to the Foreign Exchange Management Act!
(v) The Issuer shall ensure upload of the distinctive number (DN) ranges in the DN database of the depository and stock exchange(s) shall ensure updation of relevant dates before credit of bonus shares.
(vi) The shares allotted pursuant to the bonus issue shall be made available for trading on the next working date of allotment (T+2 day).
(vii) The directions issued pursuant to SEBI Circular No. CIR/MRD/DP/21/2012 dated August 02, 2012 and CIR/MRD/DP/ 24 /2012 dated September 11, 2012 requiring credit of bonus shares in temporary ISIN shall be exempted in case of bonus issue of equity shares, and credit of shares directly in permanent ISIN (existing ISIN) shall be permitted in case of bonus issue of equity shares.
Issuers who fail to comply with the prescribed timelines will face penalties, as outlined in point 4.1 of SEBI circular SEBI/HO/CFD/DIL2/CIR/P/2019/94 on non-compliance with ICDR Regulations from dated August 19, 2019, the SEBI Circular added.
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