A bonus share
is a free share of stock
given to current shareholders
in a company
, based upon the number of shares that the shareholder already owns. While the issue of bonus shares increases the total number of shares issued and owned, it does not increase the value of the company. Although the total number of issued shares
increases, the ratio of number of shares held by each shareholder remains constant.
An issue of bonus shares is referred to as a bonus issue.
Depending upon the constitutional documents of the company, only certain classes of shares may be entitled to bonus issues, or may be entitled to bonus issues in preference to other classes.