What is a book-closure/record date?

Book closure refers to the closing of register of the names or investors in the records of a company. Companies announce book closure dates from time to time. The benefits of dividends, bonus issues, rights issue accruing to investors whose name appears on the company’s records as on a given date, is known as the record date. Thus, book closure and record date help a company determine exactly the shareholders of a company as on a given date.
An investor might purchase a share-cum-dividend, cum rights or cum bonus and may therefore expect to receive these benefits as the new shareholder. In order to receive this, the share has to be transferred in the investor’s name, or he would stand deprived of the benefits. The buyer of such a share will be a loser. It is important for a buyer of a share to ensure that shares purchased at cum benefits prices are transferred before book-closure. It must be ensured that the price paid for the shares is ex-benefit and not cum benefit.

What is the difference between book closure and record date?

In case of a record date, the company does not close its register of security holders. Record date is the cut off date for determining the number of registered members who are eligible for the corporate benefits. In case of book closure, shares cannot be sold on an Exchange bearing a date on the transfer deed earlier than the book closure. This does not hold good for the record date.

What is a no-delivery period?

Whenever a company announces a book closure or record date, the Exchange sets up a no-delivery (ND) period for that security. During this period only trading is permitted in the security. However, these trades are settled only after the no-delivery period is over. This is done to ensure that investor’s entitlement for the corporate benefit is clearly determined.

What is an ex-dividend date?

The date on or after which a security begins trading without the dividend (cash or stock) included in the contract price.

What is an ex-date?

The first day of the no-delivery period is the ex- date. If there is any corporate benefits such as rights, bonus, dividend announced for which book closure/record date is fixed, the buyer of the shares on or after the ex -date will not be eligible for the benefits.

Why is “new share dividend” deducted from the sale price of shares?

In case a company issues new shares in any financial year, then these shares are eligible only for pro rata dividend in respect of the financial year in which these are issued. The old and the new shares thus carry disproportionate rights as to dividend, although their market price remains the same. To compensate the buyer to whom these new shares are delivered for loss of pro rata dividend, the seller of new shares has to pay to the buyer, the dividend declared in respect of old shares. This old-new compensatory value is called as new share dividend. The Exchange publishes a list of the scrips that are eligible to receive the pro rata dividend per settlement.

What is a bonus issue?

While investing in shares the motive is not only capital gains but also proportionate share of surplus generated from the operations once all other stakeholders have been paid. But t