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Corporate Action

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Key Highlights

  • A Corporate Action refers to an event initiated by a listed company that results in a material change to its securities or impacts shareholders directly.

  • Common corporate actions includes dividends, bonus issues, stock splits / consolidation, rights issues, buybacks, mergers & demergers.

What is Corporate Action?

A Corporate Action refers to an event initiated by a listed company that results in a material change to its securities or impacts shareholders directly. These actions are approved by the company’s board and, in some cases, by shareholders, and are communicated to the market through stock exchanges and regulatory filings. Corporate actions play an important role in shaping shareholder value, capital structure, and investor returns.

Types of Corporate Actions

Mandatory Corporate Actions

These actions apply automatically to all eligible shareholders, without requiring any response.

  • Dividends

  • Bonus issues

  • Stock splits

  • Mergers and amalgamations

Voluntary Corporate Actions

Shareholders may choose whether or not to participate.

  • Share buybacks

  • Tender offers

  • Voluntary delisting

Mandatory with Choice

Shareholders must act to select one of the available options.

  • Rights issues

  • Open offers

Common Corporate Actions in Capital Markets

  • Dividends: Distribution of profits to shareholders

  • Bonus Issues: Issue of additional shares without cost

  • Stock Splits / Consolidation: Adjustment of share face value

  • Rights Issues: Offer to existing shareholders to purchase shares at a specified price

  • Buybacks: Repurchase of shares by the company

  • Mergers & Demergers: Restructuring of business entities

Key Dates in a Corporate Action

  • Announcement Date: Public disclosure of the corporate action

  • Record Date: Cut-off date to determine shareholder eligibility

  • Ex-Date: Date from which the security trades without entitlement

  • Payment / Allotment Date: Date on which benefits are credited

Role of Advisors and Market Intermediaries

Investment banks, registrars, and depositories play a key role in:

  • Structuring and executing corporate actions

  • Ensuring regulatory compliance

  • Managing shareholder communication

  • Coordinating with exchanges and clearing corporations

FAQs

1. Do corporate actions always impact share prices?

Not always. Some actions are value-neutral, while others can influence prices depending on market perception and fundamentals.

2. What happens if I miss a corporate action deadline?

For voluntary actions, missing deadlines may result in loss of participation or benefits.

3. Are corporate actions taxable?

Tax treatment varies by type of action and investor category and should be assessed individually.

4. Where are corporate actions officially announced?

Corporate actions are announced through stock exchanges and company regulatory filings.

5. How are corporate actions reflected in demat accounts?

Benefits such as shares or cash are credited automatically by depositories after completion.