Bonus share valuation must reflect spread cost across original and bonus shares, not face value

For section 23A(1), bonus shares should not be valued at face value; the proper method is to spread the original cost of the holding across the original and bonus shares where they rank pari passu, with suitable adjustment if necessary. The text notes that this valuation principle governs the computation of the holding for determining applicability of the provision, and that any contrary face value approach is inconsistent with the earlier rule on bonus share valuation.

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Issues: Whether, for determining the applicability of section 23A(1), bonus shares were to be valued at their face value or by spreading the cost of the original shares over the original and bonus shares together, and whether the matter required reconsideration on that basis.

Analysis: The prior view that bonus shares could be taken at face value was held to be inconsistent with the governing principle already stated in the earlier decision on bonus share valuation. The correct approach was to recompute the cost of the holding by spreading the original cost over the old shares and the bonus shares taken together where they rank pari passu, with suitable adjustment where necessary. Since the applicability of section 23A(1) depended on that recomputation, the reference could not be answered without applying the correct valuation method and, if needed, a supplementary statement of the case.

Conclusion: The face value method was rejected, and the question of applicability of section 23A(1) had to be reconsidered after recomputation of the bonus share value on the correct principle.

Final Conclusion: The appeal succeeded, the High Court's answer was set aside, and the reference was sent back for fresh decision in light of the correct rule for valuing bonus shares.

Ratio Decidendi: For section 23A(1), bonus shares cannot be valued at face value or nil; the cost of the original holding must be spread over the original and bonus shares, subject to adjustment where the shares do not rank pari passu.

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