Table of Contents
What are Right Shares?
Right Shares are a type of business shares that a company issues to its already existing shareholders at a lesser cost. The shareholders have the option to accept or decline the offered deal. They can even sell these shares in the market to someone else.
These shares can only be bought on specific terms and conditions. There is a minimum subscription that the buyer has to meet. Companies have to release Right Shares when they need to add more money to their already-held revenue.
As for the paid-up value of these shares, the company is entitled to pay half or the total amount – in varying situations. Basically, they are created as additional shares to be given out to the already shareholders to maximize the accumulated revenue.
Experts suggest that such shares have a decremental impact on the market shares’ value if they are sold by those who buy them. They work well as long as they are in the hands of their buyers. This makes Right Shares one of the significant financial moves of a business.
What are Bonus Shares?
Bonus Shares are a given privilege for the existing shareholders of a large business. They are issued without any additional cost to be paid by the buyer. Every business has its own date of issuing Bonus Shares to its members in stakes.
The primary purpose of these shares is that when a company wants to refrain from paying dividends to its shareholders, it gives out Bonus Shares. In this way, both the company and shareholders benefit. Experts consider them a financial strategy to regulate its revenue and expenditures.
No subscription is required by the company to get Bonus Shares. They are feasibly issued to the shareholders who do not get dividends out of the profits. In place of money, they get more shares. Hence, their investment in the business is multiplied.
The effect of Bonus Shares on the shares market is that it always reduces the value; however, companies try to regulate this decrement by maintaining a proper ratio. This is a financial strategy of a business to avoid paying dividends and increasing shares of shareholders.
Difference Between Right Shares and Bonus Shares
- The main difference between Right Shares & Bonus Shares is in their purpose, impact, paid-up value, required subscription, and prices.
- Right Shares are additional shares created by the company.
- Bonus Shares are created as an alternative to dividends.
- Right Shares are issued on a proportioned cost.
- Bonus Shares are given free of cost.
- Right Shares do not affect the market if remain controlled.
- Bonus Shares have a direct impact on the market value.
- Right Shares allow the buyer to decide whether to buy or not.
- Bonus Shares are not to be refused or declined by the buyer.
Comparison Table Between Right Shares and Bonus Shares
|Parameters of Comparison||Right Shares||Bonus Shares|
|Purpose||Created as additional shares to be sold on terms||Created as an alternative to paying dividends|
|Cost||Requires a minimum subscription from buyers||Entirely free of cost but sold specifically|
|Paid-Up Value||Partially or fully paid in varying situations||No decrements, fully-paid|
|Impact||Not necessarily cause a decrease in the market unless sold||Decreases the market in an obvious way|
|Recipient’s Choice||Shareholders can either accept, refuse or sell||Recipients cannot refuse to take these shares|