TABLE OF CONTENTS
- What is a Corporate Action?
- What is a Record Date?
- When should I buy a stock to be eligible for the Corporate Action Benefit?
- What is Ex Date?
- What is last Cum Date?
- Can I sell the shares and still get the corporate action benefit?
- Why are the bonus shares not visible in my holdings even though the company has issued it?
- To which account will my Dividend credits be given?
- Will TDS be deducted on dividend credits?
- Will Corporate actions affect F&O Contracts?
- What could be the changes in F&O contracts due to Corporate action?
- What will happen to the contracts that I hold before the Corporate action?
What is a Corporate Action?
Corporate Action is a special event in a company that impacts the existing shareholders. This includes activities such as issue of bonus, dividend credit, issue of rights, split of face value, issue of amalgamated company shares, etc.,
What is a Record Date?
Record date is the date fixed by a Company on which the shares are to be held in demat account to be eligible for a Corporate action.
When should I buy a stock to be eligible for the Corporate Action Benefit?
To be eligible for a corporate action such as Dividend credit, Bonus credit etc., you should have the shares in your demat account on the record date. Hence, you should buy such stocks 1 working day prior to the record date, which is called the Ex Date. Let's understand with an example
Company A announces 1 bonus share for every 1 share held on 3rd April, Thursday. The record date therefore, for the corporate action is 2nd April. If you wish to be eligible for bonus issue, you should then buy the shares on or before 2nd April. This is because, the shares that you buy on 2nd April will be delivered to your demat account on 3rd April, under T+1 settlement cycle.
What is Ex Date?
Ex Date is the first day from when you will not be eligible for the corporate action, even if you buy the shares. It is basically, Ex Corporate Action benefit date.
Record date - 3rd April
Ex Date - 3rd April
This implies that if you buy the shares on 3rd April, you will not eligible for the corporate action when the stock is settled under T+1 settlement cycle. This is because, the shares bought on 3rd April will be delivered to your demat account only on 4th April, under T+1 settlement cycle. You will therefore, not hold the shares in your demat account on the record date which is 3rd April in this illustration. Hence, shares bought on 3rd April are ex corporate action benefit.
What is last Cum Date?
Last Cum Date is the last date of purchase to be eligible for the corporate action.
If Record date is 3rd April, then
Ex Date will be 3rd April and
Last Cum Date will be 2nd April
Shares bought up to 2nd of April, will be eligible for the Corporate action benefit
Can I sell the shares and still get the corporate action benefit?
Yes, you can. You may sell it any time on or after the Ex date. Shares sold on ex date will be removed from your demat account only after the record date, hence, you will be eligible for the corporate action.
Why are the bonus shares not visible in my holdings even though the company has issued it?
It is possible that you had received the bonus shares credited to your demat account but the same doesn't reflect under Holding in the Trading App/ page. This occurs when the bonus shares await approval from Exchange for listing which generally takes a day or two after allotment. Once approved for listing, it will automatically reflect in your Trading Page.
To which account will my Dividend credits be given?
It will be credited directly in your bank account provided
a) You had held the shares in your demat account on the record date and
b) You had updated your bank account correctly in your demat account
Will TDS be deducted on dividend credits?
Yes. This occurs when your shares are held in our CUSA (Client Unpaid Securities Account). CUSA is a an account that belongs to the Trading Member (i.e., Navia) where shares of clients are held if they have a debit balance in their ledger. The shares will be held for a maximum of 6 trading days from the date of purchase, if the debits are not cleared. In such instances, the dividend amount gets credited to our bank account but after deducting TDS. Hence, when we pass back the dividend credit to your ledger, it will be after the Tax been deducted at source.
Will Corporate actions affect F&O Contracts?
Yes, definetly depending on the impact of the Corporate action. The basic principal is that the traders and investors holding the derivative contracts subject to corporate action should have the same market value as much as possible on the date before the corporate action and on the date after the corporate action.
What could be the changes in F&O contracts due to Corporate action?
There could be various changes or various adjustment factors attached to each corporate action. It could end up in a change in lot size or base price or strike price, expiry date etc.,
What will happen to the contracts that I hold before the Corporate action?
Those contracts will automatically lose its value and become worthless on the expiry day. Hence, you need to square off the contract to avoid making loss (depending on the scenario). The expiry date will be annouced well in advance to alert you and you need to taken necessary action.
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