CSOP—requirements for the options: bonus/rights issues
CSOP—requirements for the options: bonus/rights issues

The following Share Incentives practice note provides comprehensive and up to date legal information covering:

  • CSOP—requirements for the options: bonus/rights issues
  • What is a rights issue?
  • What is a bonus issue
  • Variation of share capital provision in CSOP rules
  • CSOPs and rights issues
  • CSOPs and bonus issues
  • Impact of rights issues and bonus issues on EBTs

What is a rights issue?

A rights issue is:

  1. an offer of new shares or other securities

  2. made to existing shareholders of a company or of a particular class of shares in a company as at a specified date known as the record date

  3. on a pro rata basis (ie in proportion (or as nearly as may be in proportion) to such shareholders' existing holdings of shares (or of a particular class of shares) in that company)

  4. by way of a provisional allotment of the new shares on a nil-paid basis to all the existing shareholders as at the record date

  5. to be subscribed for in cash, and

  6. usually:

    1. with an issue price at a discount to the market price of the issuer's shares, and

    2. on an underwritten basis

For more information on rights issues, see Practice Note: What is a rights issue?

For more information on the corporate law aspects of rights issues, including the types of documents that rights issues involve, see Practice Note: Rights issues—key considerations.

What is a bonus issue

A bonus issue is a free issue of shares to all of a company’s existing shareholders or to all holders of a particular class of share. No money changes hands and the share price falls pro rata. It is a cosmetic exercise to make the shares more marketable. It is also known as a capitalisation

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