Corporate Action Life Cycle - Mandatory events

 

Mandatory Corporate Action Life Cycle

Above chart is process flow Mandatory Corporate Action Life cycle. Before explaining of above process flow, let understand Mandatory Corporate action meaning.

Mandatory Corporate Action is event in the market where share holder does not have any choice to participate in the event. Here shareholder affected with price change in shares after completion of Corporate Action Life cycle.

Let us understand above process flow in details.

In above process flow, there is two arrows. Arrow 1(In yellow) denote for Corporate Action event Notification flow and Arrow 2(in Green) denotes for Corporate Action Payment flow.

1. First step of Corporate Action event Life Cycle is to flow of Notification Announcement from the issuer to Agent. Issuer nominate specialized merchant banker as agent

2. Second step of CA event Life cycle is to flow notification announcement from agent to sub custodian/depository.

3. Third step of CA event Life cycle is to flow Notification announcement from sub custodian/depository to all custodians

4. Fourth step of CA event Life cycle is to flow notification announcement from custodian to Investment managers or portfolio manager

5.Fifth and last step of CA event Life cycle is to flow notification announcement from Investment manager or portfolio manager to End client or Share holder

Once Notification reaches from issuer to End client, one part of Mandatory Corporate Action cycle completes.

Now, its time for second part of Mandatory Corporate action Life cycle which is Payments.

If corporate action type is to pay to client then below steps follows(example Mandatory dividend or regular income)

1. First step involves payment from Issuer to Agent

2. Second step involves payment from Agent to Sub custodian/Depository

3. Third step involves Payment from Sub custodian/Depository to Custodian Bank

4. Fourth step involves payment from Custodian bank to Investment manager or Portfolio Manager

5. Fifth step involves payment from Investment manager(IM) or Portfolio Manager to End client or Shareholder.

Once 2nd part completed, Mandatory Corporate action cycles completed.