Bonus issue processing is the work that custodians, depositories and registrars carry out when a company distributes additional shares to its shareholders free of charge, in proportion to what they already hold. A bonus issue, also called a capitalisation or scrip issue, converts reserves such as the share premium account into share capital; no cash changes hands and the total value of each holding is, in principle, unchanged.
The event is a mandatory corporate action, so holders give no instruction. Operations teams capture the announcement, record the entitlement ratio, and calculate each client's entitlement from positions on the record date. On the payment date, the new shares are credited, the market price adjusts on the ex-date, and unit costs in client records are restated. Any fractional entitlement is rounded down, sold or settled by a cash-in-lieu payment. The procedure closely resembles stock dividend processing.