A bonus issue where the transfer was registered after the record date
Vantage Infra Ltd has 24,00,000 equity shares of ₹10 each in issue and announced a bonus issue of 1:2 with a record date of 5 July 2024 (ex-date 4 July). Merlin Advisory, the RTA, completed allotment on 12 July and credited 12,00,000 bonus shares through the depositories and by physical allotment. Two situations surface. First, folio V-2210 held 640 shares in the name of S. Nair. A complete transfer deed for those shares, executed on 28 June, was lodged by broker Harita Finstock for buyer T. Raghavan on 3 July; Merlin registered the transfer only on 22 July. The 320 bonus shares were allotted on 12 July to Nair, who has since dematerialised them. Second, 96,000 of the company's shares are held in the Unclaimed Shares Demat Suspense Account following the 2019 IPO, because allottees never furnished PAN and KYC. Merlin has credited the bonus on those 96,000 shares to the suspense account, but the company's accounts team wants them released to a general reserve.
1. Who is entitled to the 320 bonus shares in folio V-2210, and what should Merlin do about them?
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On the register, Nair was the holder on 5 July, but the register looks that way only because Merlin was slow. The deed was complete, executed on 28 June and lodged on 3 July, before the record date, and should have been registered within 15 days, that is by 18 July. A transferee who lodges a complete and valid instrument of transfer before the record date is entitled to the corporate benefit, and the company cannot keep the benefit with the transferor merely because it processed the deed late. Raghavan bought at a cum-bonus price and has suffered a loss that the company is accountable for.
So the entitlement is Raghavan's. Practically: write to Nair asking for a letter of authority to his DP to move 320 shares to Raghavan; if he refuses, place the matter before the company's share transfer committee or board, which can direct rectification of the register and the movement of the benefit, and inform Raghavan in writing of the action taken. If Nair has already sold the shares on, the company's remedy against him is a separate matter, but it does not dilute Raghavan's claim.
The root cause is a process defect: folios with transfer deeds pending before a record date must be cleared first or flagged so that the corporate action is routed to the transferee.
2. Is the accounts team right to want the bonus on the suspense account shares released to a general reserve?
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No. The 96,000 shares in the Unclaimed Shares Demat Suspense Account are not the company's property. They are held in trust for allottees from the 2019 IPO who never established PAN and KYC, and the company's obligation is to hold them and release them to the allottee on a valid request with complete KYC.
Every corporate benefit attached to those shares therefore follows the shares into the same suspense account. The 48,000 bonus shares must be credited to the suspense account, tagged to the individual allottee entitlements, so that a claimant who now completes KYC receives the original shares plus the bonus accrued on them, plus any dividend. Releasing them to a reserve would convert trust property into the company's own funds and would leave the company unable to satisfy an allottee who claims next year.
Note also that shares in the suspense account do not carry voting rights until released, and that any eventual transfer of unclaimed suspense holdings to the IEPF follows its own notice-based procedure. A journal entry in the accounts is not a lawful substitute for either.
3. What should Merlin change in its record-date processing to prevent a repeat?
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Build a pre-record-date checkpoint into the corporate action calendar, with a defined cut-off a few working days before the record date.
At that checkpoint, run every open item against the register and the depository positions: transfer deeds lodged but not registered, deeds returned with objections, stop-transfer and lien markings, transmission and duplicate-certificate files, and court or statutory orders. For each open folio, either complete the action or flag the entitlement so the allotment or credit is routed to the person actually entitled.
Keep a dated working paper of that review. When an allotment is completed, reconcile the aggregate shares allotted against the register and depository positions before crediting, and investigate any variance rather than adjusting it afterwards. For the disputed folio, record the reasoning in the folio notes and in the committee minutes, because the next inspection will ask why the transfer lodged on 3 July was registered on 22 July, after both the record date and the 15-day service standard.