Bonus debentures are issued out of the accumulated profits of the company, free of cost, to its existing shareholders. The present article attempts to understand the concept, features, benefits and implications of the issue of bonus debentures. A comparison of bonus debentures is made with other widely used modes of rewards such as bonus shares, cash dividend and buy back of shares. Many companies in India have used this new innovative instrument to reward their shareholders. The features of the schemes of the issue of bonus debentures used by these companies are discussed in the later part of the article.
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