scrip issue
C2Formal, Technical, Business/Finance
Definition
Meaning
A corporate action where a company distributes additional shares to existing shareholders free of charge, without receiving any payment, thereby increasing the total number of shares in issue.
A method of capitalising reserves (e.g., retained earnings) by converting them into share capital, effectively a bonus issue of shares. It does not change the total value of a shareholder's stake but increases the number of shares they hold, typically reducing the share price proportionally.
Linguistics
Semantic Notes
Often used interchangeably with 'bonus issue' or 'capitalisation issue'. It is distinct from a 'rights issue', where shareholders must pay for new shares. The term 'scrip' historically refers to a provisional certificate or document representing a share.
Dialectal Variation
British vs American Usage
Differences
The term is standard in both UK and US finance, but 'stock dividend' is a more common synonym in American English, especially for smaller distributions. 'Scrip issue' is understood but may be perceived as slightly more British/Commonwealth.
Connotations
Neutral technical term in both varieties.
Frequency
Higher frequency in UK, Commonwealth, and international financial reporting. In the US, 'stock dividend' is more prevalent in everyday financial news.
Vocabulary
Collocations
Grammar
Valency Patterns
The company [verb: announced/proposed/made] a scrip issue.A scrip issue [verb: was approved/was implemented/took place].Shareholders received new shares [preposition: via/through] a scrip issue.Vocabulary
Synonyms
Strong
Neutral
Weak
Vocabulary
Antonyms
Phrases
Idioms & Phrases
- “[No specific idioms; this is a technical term]”
Usage
Context Usage
Business
Primary context. Used in corporate announcements, financial reports, and investment analysis.
Academic
Used in finance, economics, and accounting textbooks and papers.
Everyday
Very rare. Only used by investors discussing their portfolios.
Technical
Standard term in securities regulation, corporate finance, and stock exchange communications.
Examples
By Part of Speech
verb
British English
- The board voted to scrip-issue new shares to capitalise reserves.
American English
- The company will scrip-issue a 10% stock dividend next quarter.
adverb
British English
- [Not applicable; no standard adverbial form]
American English
- [Not applicable; no standard adverbial form]
adjective
British English
- The scrip-issue proposal was detailed in the annual report.
American English
- Investors reviewed the scrip-issue announcement.
Examples
By CEFR Level
- [Too complex for A2]
- The company gave its shareholders more shares in a scrip issue.
- Following a one-for-ten scrip issue, each shareholder received one free share for every ten they owned.
- The firm's decision to implement a scrip issue was a strategic move to capitalise its substantial revenue reserves while conserving cash.
Learning
Memory Aids
Mnemonic
Think of 'scrip' as a 'script' for free shares. A company issues a new 'script' (scrip) of ownership, giving you more 'lines' (shares) without you having to 'pay for the play'.
Conceptual Metaphor
CORPORATE VALUE IS A PIE. A scrip issue cuts the existing pie (company value) into more, smaller slices (shares), but the total size of the pie doesn't change.
Watch out
Common Pitfalls
Translation Traps (for Russian speakers)
- Do not confuse with 'эмиссия акций' (share issue), which is a broader term. A scrip issue is specifically 'выпуск акций за счет капитализации (бонусная эмиссия)'.
- Avoid translating 'scrip' as 'скрипт' (script/computer code). It is a financial term.
Common Mistakes
- Confusing it with a 'rights issue'. (A rights issue requires payment; a scrip issue is free.)
- Thinking it increases the total value of an investment. (It dilutes the price per share.)
- Using 'script issue' as a spelling error.
Practice
Quiz
What is the primary financial effect of a scrip issue for a shareholder?
FAQ
Frequently Asked Questions
No. While both increase the number of shares and reduce the price, a scrip issue capitalises reserves (moves money from reserves to share capital), while a stock split changes the nominal/par value of each share without altering the company's reserves.
To capitalise retained earnings, make shares more liquid and affordable on the market, reward shareholders without using cash, and signal confidence in future earnings to maintain the dividend per share.
Tax treatment varies by jurisdiction. Often, it is not an immediate taxable income event, but it adjusts the cost base of your holding for future capital gains calculations. Always consult a tax advisor.
It is set by the company's board (e.g., 1-for-5). The ratio depends on the amount of reserves being capitalised and the desired impact on the share price and number of shares in circulation.