Corporate Action Basic

What is Corporate action? 

In layman term, any action performed by corporates which turns to affect your security is called corporate action.

In other words, Any decision made by the issuer or board of director which affect shareholder security is corporate action.

Types of Corporate Action

There are mainly three types of Corporate Actions

1. Mandatory Corporate Action

2. Mandatory with choice Corporate Action

3. Voluntary Corporate Action


1. Mandatory Corporate Action: This is a type of Corporate Action where shareholder does not have any choice to elect. Impact of security is Mandatory in nature.

Examples:

Stock split

Reverse split

Merger

Assimilation(Pari Passu)

2. Mandatory with choice Corporate Action: This type of Corporate action where shareholder has choice to election between mandatory election or payout

Example:

Currency Dividend 

Optional Dividend

Dividend Reinvestment Plan(DRIP)

To explain more in this example where Dividend is mandatory but share holder has option to choose dividend in currency or cash/Stock.

3. Voluntary Corporate Action: This type of corporate action where share holder has choice to elect between multiple options. There is no compulsion to elect.

Examples

Tender offer

Repurchase offer

Consent


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