Bonus Issue: How Singapore Companies Reward Shareholders Without Spending a Cent of Cash
Last updated: October 2026
A bonus issue, also called a scrip issue, is the allotment of additional free shares to existing shareholders in a fixed ratio, funded by capitalising the company’s reserves rather than raising new cash, leaving each shareholder’s proportional ownership of the company unchanged. It is a popular Singapore corporate action precisely because it costs the company nothing in cash.
Not financial advice. All figures for educational reference only. Data as at October 2026.
Key Takeaways
- Bonus shares are allotted free, in a fixed ratio such as 1-for-2, funded from the company’s existing reserves rather than new capital raised.
- A bonus issue does not change a shareholder’s proportional ownership of the company, and the share price mechanically adjusts downward on the ex-bonus date.
- It is economically similar to a stock split, though structured differently under company law as a capitalisation of reserves into paid-up capital.
- In Singapore, bonus shares received are generally not treated as taxable income to the shareholder, and Singapore has no capital gains tax on the eventual sale.
- Bonus issues can create odd-lot holdings, since SGX trades in board lots of 100 shares.
What Is Bonus Issue?
Under the Companies Act, a Singapore company’s reserves — typically retained earnings or certain other reserve accounts — can be capitalised and converted into new paid-up share capital, which is then distributed to existing shareholders as fully paid bonus shares in proportion to their existing holdings. This requires shareholder approval, usually by ordinary resolution, and a record date is set to determine who is entitled. Because no new money comes into the company and no new money leaves shareholders’ pockets, a bonus issue is often described as a purely cosmetic restructuring of the balance sheet between reserves and share capital — but it has real practical effects on share price, affordability, and trading liquidity.
How Does Bonus Issue Work in Singapore?
The company announces a bonus ratio (for example, 1-for-5, meaning one new bonus share for every five existing shares held), a record date, and an ex-bonus date from which shares trade without entitlement to the bonus. On the ex-bonus date, the share price mechanically adjusts downward to reflect the increased share count — the total value of a shareholder’s position is unchanged, but it is now split across more shares at a lower price per share. Because SGX trades in board lots of 100 shares, a bonus ratio that doesn’t divide a shareholder’s holding evenly can create an odd lot, which trades at typically wider spreads on the Unit Share Market. In Singapore, bonus shares are generally not taxed as income when received, and since Singapore has no capital gains tax, there is usually no tax event on receipt — though cost basis allocation matters if the shares are later sold.
Bonus Issue Example
A shareholder holding 1,000 shares at S$2.00 each (S$2,000 total value) receives a 1-for-5 bonus issue, giving them 200 new shares for a new total of 1,200 shares. The share price mechanically adjusts to approximately S$1.67 (S$2.00 × 1,000 ÷ 1,200), so the shareholder’s total position value remains approximately S$2,000 — unchanged in substance, just represented by more shares at a lower price each.
Advantages of Bonus Issue
- No cash cost to the company. Because it is funded from existing reserves rather than new capital, a bonus issue doesn’t drain the company’s cash position the way a cash dividend would.
- Can signal reserve strength and management confidence. Companies sometimes use a bonus issue to demonstrate a healthy balance sheet and confidence in continued performance.
- Improves share price affordability and liquidity. Lowering the per-share price (while keeping total value unchanged) can make the stock more accessible to smaller retail investors and improve board-lot trading liquidity.
- No dilution of percentage ownership. Every shareholder receives bonus shares in the same proportion, so relative ownership stakes are unaffected.
Risks and Limitations
- No real economic value is created. A common investor misconception is that a bonus issue makes them wealthier; in reality, the same total value is simply divided across more shares.
- Odd-lot complications. A bonus ratio that doesn’t divide a shareholder’s existing holding evenly into board lots of 100 can leave them with an odd lot that is more cumbersome and often more expensive to trade.
- Slightly higher aggregate trading costs. With more shares outstanding at a lower price each, brokerage minimum fees can represent a larger percentage of a given trade size.
- Can be used to create a “feel-good” distraction. Occasionally, companies with otherwise weak fundamentals use a bonus issue to generate positive sentiment without addressing underlying performance issues.
Bonus Issue vs Stock Split vs Rights Issue
| Aspect | Bonus Issue | Stock Split | Rights Issue |
|---|---|---|---|
| New cash raised? | No | No | Yes |
| Cost to shareholder? | None — shares allotted free | None — shares allotted free | Shareholder pays the subscription price |
| Effect on % ownership | Unchanged for all shareholders | Unchanged for all shareholders | Diluted if shareholder doesn’t subscribe |
| Legal mechanism | Capitalisation of reserves into paid-up capital | Sub-division of existing par value shares | Allotment of new shares against fresh payment |
| Typical purpose | Reward shareholders, improve affordability, use reserves | Improve share price affordability / liquidity | Raise new growth or deleveraging capital |
Source: Companies Act (Cap. 50); general Singapore market corporate action practice.
The Bottom Line
For Singapore investors, the key thing to remember about a bonus issue is that it rearranges your existing stake rather than growing it — it’s a useful liquidity and sentiment tool for companies, but it shouldn’t be mistaken for a genuine increase in wealth.
Frequently Asked Questions
What is a bonus issue of shares?
A bonus issue is the allotment of additional free shares to existing shareholders in a fixed ratio, funded by capitalising the company’s reserves, leaving shareholders’ proportional ownership unchanged.
Do I have to pay for bonus shares?
No, bonus shares are allotted free of charge — there is no subscription payment required, unlike a rights issue or open offer.
Does a bonus issue increase my wealth as a shareholder?
No. The total value of your shareholding stays the same; it is simply divided across more shares at a proportionally lower price each.
Is a bonus issue taxable in Singapore?
Bonus shares are generally not treated as taxable income when received, and since Singapore has no capital gains tax, there is typically no tax event on receipt.
What is the difference between a bonus issue and a stock split?
They are economically similar — more shares at a proportionally lower price with no change in ownership percentage — but structured differently under company law: a bonus issue capitalises reserves into new shares, while a stock split simply subdivides existing shares.
What happens to odd lots created by a bonus issue?
If the bonus ratio doesn’t evenly divide a shareholder’s holding into SGX’s standard board lot of 100 shares, the leftover amount becomes an odd lot, which typically trades on the Unit Share Market at wider spreads.
