Tax tapers ‘reckless’ bonus shares

The amount of bonus share has decreased this year compared to other times along with the widening of gap between cash dividend and bonus share.

It has been observed that the amount of bonus share has come down in this year than before due to the imposition of additional tax penalty. Accordingly, companies paying more bonus shares than cash will be penalized by an additional 10 percent tax on the entire bonus.

It is learnt that the board of directors of 51 companies listed in the stock exchange have announced to provide 50 crore 25 lakh bonus shares in the 2019-20 financial year. The announcements came at the recent board meetings of the companies which will be approved at the Annual General Meetings (AGM) with the consent of the shareholders of the respective companies.

Forty-two out of 51 companies announced bonus shares alongside cash dividends. Boards of 38 of those companies declared higher cash dividends than bonuses. 

On the other hand, board of directors of only nine companies announced bonus shares in the 2019-20 financial year of which the boards of four companies have announced more bonus shares than cash. Those companies will have to pay additional tax at the rate of 10 percent on bonus shares.

So far, various listed companies have declared cash dividends worth more than Taka 4,300 crore. However, there are 50 crore 25 lakh bonus shares. This will increase the paid up capital of the companies to the tune of Taka 502.50 crore.

In this regard stock market expert Professor Abu Ahmed told The Business Post that many companies do not have the capacity to pay cash dividends because of coronavirus. Nonetheless, amounts of bonus shares have declined this year due to the imposition of cash dividend restrictions. It can't be termed as a bad decision as the stock market suffers for bonus shares. Despite the lack of demand, bonus shares exert pressure on the market every year.

It is learnt that United Power Generation and Distribution Company will also issue bonus shares for the shareholders and cash dividends. The company will provide a total of 5 crore 27 lakh bonus shares for the shareholders at the rate of 10 percent in the 2019-20 financial year.

Next in line is Square Pharmaceuticals. The company will issue 4 crore 22 lakh bonus shares at the rate of 5 percent. Beximco Pharmaceuticals, which is in the third position will issue 4 crore 6 lakh bonus shares at a rate of 10 percent.

Monnu Stafflers will issue the least number of bonus shares this year. The company will give 2 lakh bonus shares to the shareholders. Anwar Galvanizing in the next position will issue 7 lakh bonus shares. Stylecraft and Meghna Cement will issue 13 lakh bonus shares each.

sr/wi