According to the company act, issuing shares in the form of right shares to existing shareholders can increase the subscribed capital of the companies. On the contrary, when a company has a reserve collected from a large amount of profit, then the company turns such profits into capital and divides the proportion between the shareholders between the shareholders. These are known as bonus shares and for this, the holder does not need to pay anything.

Right shares: Rights shares issued by the company are those shares which are issued to the current shareholders for the purpose of raising the subscribed share capital of the company. Rights share is mainly issued to existing equity shareholders on a pro-rated basis. The company sends an offer letter to each shareholder who gives the company the option of buying shares offered at concessional prices.

Bonus share: Bonus shares are the free shares issued to existing shareholders based on the number of shares already present. Bonus issue increases the total number of shares issued only, but it does not make any change in the company's net worth. Bonus shares do not add fresh capital to the company as they are issued to the shareholders at no cost. In a way, it is the way of sharing shareholders' profits in new shares to shareholders. Read about the bonus share in detail at our site.

Difference Between Bonus Share and Right Shares:

  • Process: Bonus Share Shareholders are the shares given in the company's reserve for free. It is collected from the reserve company's income. On the other hand, the right share market share is given to the existing shareholders by the company to raise additional capital.
  • Cost: Rights shares are offered to existing shareholders at a lower price than market value. In contrast, bonus shares are issued to shareholders free of charge.
  • Objective: The basic purpose of the right issue is to raise additional capital for the company. On the contrary, the purpose of the bonus issue is to increase its active business by increasing the number of outstanding shares. That is, it increases the liquidity of the company's shares.
  • Whether it is a bonus share or a right share, after issuing them, the company lists them on the stock exchange, in which they can purchase the sale. The difference between the largest bonus share and rights share is that the company raises additional capital by issuing new shares to the existing shareholders, while bonus shares are a way of dividing the company's revenue into shareholders like dividends.
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I'm Mansi Dandekar, I am sharing an article about Difference Between Bonus Share and Right Shares. Here is more information on the Free Trading Tips and Free Nifty Trading Tips.