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The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in Exchange for the surrender of their securities. A demerger is a form of corporate restructuring in which the entity's business operations are segregated into one or more components.
Book Closure is the time period when a company will not handle adjustments to the register, or requests to transfer shares. The book closure date is often used to identify the cut-off date determining which investors of record will be sent a given dividend payment. The record date is the cut-off date established by a company in order to determine which shareholders are eligible to receive a dividend or distribution. The shareholders of record as of the record date will be entitled to receive the dividend or distribution declared by the company.
Let us understand the meaning of different important dates for corporate actions: Declaration Date: This is the date on which the board of directors announces to shareholders and the market as a whole that the company will pay a dividend. Ex Date: This is the date on which security trades without the benefit of Corporate Action .An investor buying security on or after the ex-date is not eligible for the Corporate Action by the Company. Record Date: This is the date on which the company looks at its records to see who are the shareholders of the company entitled for the Corporate Action. An investor holding shares on record date will be eligible for the Corporate Action Date of payment:This is the date on which the company mails out the Corporate Action to the holder of shares on the record date. This date is generally a week or more after record date so that the company has sufficient time to ensure that it accurately pays all those who are entitled. Below is the table which will tell on who is eligible for the corporate action: Before Ex Date On Ex Date After Ex Date Buyer Eligible Not eligible Not eligible Seller Not eligible Eligible Eligible Hence if you are holding shares in trading (pool)/demat account on or before record date irrespective of debit or credit balances in your trading or demat account; you are eligible for corporate benefits.
The date on which a stock starts trading without the benefit of corporate action, i.e., ex-benefit, is known as the ex-date. The ex-date and the record date for all the corporate actions are on the same day since all the instruments are moved to the T 1 settlement cycle. A stock will trade with the benefits of the corporate action or cum-benefit (i.e., cum-rights, cum-dividend, etc.) until the ex-date or the record date.
The record date is when the company checks its records to identify the eligible shareholders for a corporate action. Shareholders holding the shares in their demat accounts on the record date are eligible for corporate actions such as entitlement of rights shares, bonus shares, stock splits, dividends, etc.
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Buyback or share repurchase is a corporate action in which a company buys back its shares from their shareholders. Generally, companies buyback shares at a price higher than the current market price. There are two types of buyback: tender offer and open market offer. Companies can choose either of these methods to buy back shares from their shareholders.
A stock split is a corporate action where a company increases the number of shares by reducing the face value of the stock. Companies generally split shares to increase liquidity since the price of the stock reduces after the split. A split increases the number of shares by decreasing the face value, but the total value of the investment remains the same.
A bonus issue is the distribution of free shares by the company to the existing shareholders. A company may decide to distribute additional shares as an alternative to dividend payout. In a bonus issue, the number of shares increases, but the value of the investment remains the same.
Eligible shareholders will receive right entitlements (REs) in their demat accounts, which can be used to apply for the rights issue or traded on the market. However, if the REs are neither sold nor utilized for the rights issue, they will eventually expire and become worthless.