Corporate Actions
A corporate action is an event, instigated by the company, that directly affects the issued securities and shareholders. This is a broad term and covers events such as dividends, rights issues, and takeovers.
There are many kinds of corporate action, which can be categorised into three types:
- Mandatory – Shareholders must take part in the event.
- Mandatory with Options – Shareholders must take part in the event, but also have an option as to the benefit received.
- Voluntary – Shareholders have an option whether to take part in an event.
Corporate actions can be complicated with heavy administrative burden. Avenir’s expert staff are at hand to make the process as easy as possible.
As a CREST registrar and receiving agent, Avenir offers full corporate action functionality for its issuers, including processing of elections, calculating entitlements, and distributing proceeds.
From basic dividends to more complicated schemes of arrangement, both staff and systems are prepared to assist issuers throughout the entire lifecycle of a corporate action.
Example actions we support:
Bonus Issue
The issue of new securities to current holders.
Buybacks
A firm that buys its own securities back to reduce the number outstanding.
Consolidation (often called a Reverse Stock Split)
A decrease in the number of units of a security outstanding by one of a number of possible means.
Capital Repayment
A Capital Repayment (or Return of Capital) is a corporate actions event whereby the initial capital paid by the shareholders is paid back to those shareholders. A Capital Return differs from a Cash Dividend as a Capital Repayment is paid by decreasing a company’s equity, whereas a Cash Dividend is paid from the Company’s profits.
Consolidation
A consolidation is used to increase the share price of a security by consolidating the stock.
Conversion
This is a voluntary or mandatory corporate action that allows one line of stock to be converted into another line of stock.
Dividends/Coupons
Payments of entitlements due to holders of securities (dividends for equities, coupons for bonds).
Liquidation
How a company is brought to an end of existence, with any proceeds of assets distributed by a statutory process.
Mergers & Acquisitions
The consolidation of companies though a number of possible transactions.
Name Changes
Where the name of a firm is changed and at times the Issuer chooses to instruct replacement holders certificates.
Open Offers
An offering of securities to existing shareholders. The number of new securities offered is typically in proportion to the number of existing securities held by each holder. Holders are not obligated to purchase the securities offered, the rights to which are non-transferable.
Redemptions, Partial Redemption & Early Redemptions
The redemption of securities (typically bonds) on or before the date of maturity, usually where a call option for the Issuer is inbuilt.
Rights Issue
An offering of securities to existing shareholders to comply with pre-emption rights of existing holders. The number of new securities offered is typically in proportion to the number of existing securities held by each holder. Holders are not obligated to purchase the securities offered, but can sell the rights to the new shares.
Spinoffs
A new company, often created from a part of an existing firm. New company securities are typically issued to current shareholders.
Stock Splits
An increase in the number of units of a security outstanding by issuing more units to holders of record on a given date.
Subdivision
A subdivision is used to decrease the share price of a security by splitting the stock.
Subscription
An Offer for Subscription is similar to a Rights Issue or an Open Offer in that shareholders are invited to subscribe for additional shares in a company, usually (but not always) at a fixed price. However, unlike these two event types, no proportional entitlement is credited to shareholders’ accounts, but instead the terms of the offer are stated and shareholders may subscribe for however many shares they wish to apply for, subject to the terms of the offer.
Tender Offer
This is a form of takeover, usually a hostile takeover as it does not require the consent of the company’s board of directors. The acquiring company will offer to buy shares from the target’s shareholders, usually at a premium to market price.