Corporate Actions Definition

 

 

What is a Corporate Action?

 

There are several definitions of Corporate Actions:

 

Definition 1:

Corporate Actions are events called by the issuer of securities (equity or debt) that affects the security and the holder of the security.

 

Definition 2:

An action taken by a company that causes a material change in structure. The change can relate to for example name, price, shares, capitalization etc.

 

Definition 3:

A process initiated by a publicly traded company that will bring change to its stock (equity and debt).

 

To define Corporate Actions more indepth there are several viewpoints to look from:

  • Issuer's point of view
  • Shareholder's point of view
  • The point of view from any party between or related to the above parties

 

There are three main types of Corporate Actions:

 

  • Mandatory Corporate Actions

    • The event is mandatory for the shareholder, meaning that they have no choice in whether to participate when the issuer calls for it. A shareholder does not have to do anything in a Mandatory Corporate Action. Mandatory Corporate Actions are often subject to shareholder's approval at the AGM though.
  • Voluntary Corporate Actions

    • The event is voluntary for the shareholder, meaning that they can elect and make their choice known by sending an instruction. Shareholders may chose to take no action which will leave their securities unaffected by the Corporate Action.
  • Mandatory Corporate Actions with Options

    • The event is mandatory for the shareholder but they are being presented with options. In case the shareholder does not make his choice known by sending an instruction, often the default option will be applied.

 

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