Funds & Tax: Corporate actions

Why this page is structured this way: Corporate actions are the one part of a client’s portfolio the broker neither initiates nor controls, and the resulting date vocabulary is where clients and support desks lose each other. The page fixes the vocabulary first, then splits the events by who moves the asset — the issuer and its registrar for cash, the depository for non-cash, the exchange for voluntary corporate actions the client must act on — and closes with the derivatives adjustment mechanics, which follow a separate arithmetic.

TL;DR

• Cash corporate actions never touch the depository or the broker. The depository supplies the beneficial-owner list as on the record date; the issuer pays the dividend or interest directly to the holder, so there is normally no ledger entry at the broker (CDSL Corporate Actions and IPO FAQ).
• Non-cash corporate actions are the depository’s job. Automatic actions — bonus, merger, split — credit on the effective date from the ratio and ISIN the issuer set up, with no allotment file; voluntary actions — rights, buyback acceptance — need an allotment file from the registrar first.
• Bonus shares now trade on T+2 where T is the record date. Under CIR/CFD/PoD/2024/122 (16 September 2024, applicable to bonus issues announced on or after 1 October 2024) [not yet in index] the deemed allotment date is T+1, documents reach the depositories by 12:00 on T+1, and trading opens on T+2. Credit goes into the existing permanent ISIN, not a temporary one.
• Rights entitlements are dematerialised, tradeable and perishable. Since SEBI/HO/CFD/DIL2/CIR/P/2020/13 (22 January 2020) [not yet in index] REs are credited in a separate ISIN and traded during the RE window; an RE neither applied for nor sold lapses worthless.
• The buyback landscape changed twice in 2026. Exchange-route open-market buybacks reopened from 1 August 2026 under SEBI/LAD-NRO/GN/2026/306 for sizes below 15% of paid-up capital and free reserves, and promoter-group holdings must be frozen at ISIN level during a buyback under HO/49/14/13(11)2026-CFD-POD1/I/16864/2026 (21 July 2026), circulated as CDSL/OPS/DP/POLCY/2026/494 and NSDL/POLICY/2026/0101.
• F&O positions are adjusted, not closed, for stock benefits. The adjustment principle is value neutrality on the cum and ex dates; adjustments are applied after trading hours on the last cum date, to strike price, futures base price, market lot and position (NSE corporate-action adjustment methodology).
• Unclaimed dividends become IEPF property after seven consecutive years and the underlying shares move to the IEPF Authority by corporate action; the route back is e-Form IEPF-5 with nodal-officer verification in 15 days.

Conceptual overview

Every corporate action is a state change at the issuer that has to be projected onto millions of beneficial-owner accounts on an agreed date. The projection runs through three different pipes depending on what is being distributed. Cash goes issuer-to-holder, using the depository only as a list source. Securities go issuer-to-depository-to-holder, with the depository crediting accounts on the effective date. And elective events — rights, buybacks, delisting tenders, open offers — go through the exchange, because the client has to make a decision and that decision has to be collected, matched and settled like a trade.

For the broker this produces an awkward split. It is the client’s interface for elective events and must run an acquisition-window order book, a tender confirmation flow and a settlement path that resembles equity settlement without being it. For non-elective events it is a bystander whose only job is to display the right position at the right time. For cash events it is not in the chain at all — which is why “my dividend has not come” is the commonest corporate-action ticket a broker cannot resolve.

1. Regulatory framework

• SEBI (LODR) Regulations, 2015, Regulations 28(1) and 42(1) — in-principle approval and record-date intimation, the issuer-side timeline every corporate action hangs on.
• CIR/CFD/PoD/2024/122 (16 September 2024) [not yet in index] — T+2 trading of bonus shares where T is the record date, with credit directly into the permanent ISIN, exempting bonus from the temporary-ISIN requirement in CIR/MRD/DP/21/2012 and CIR/MRD/DP/24/2012. Applies to bonus issues announced on or after 1 October 2024.
• SEBI/HO/CFD/DIL2/CIR/P/2020/13 (22 January 2020) [not yet in index] — dematerialised rights entitlements and the streamlined rights-issue procedure; advance notice for the record date reduced from 7 days to 3 working days.
• SEBI (Buy-back of Securities) Regulations, 2018, as amended by SEBI/LAD-NRO/GN/2026/306 (1 July 2026, effective 1 August 2026) — reopens the exchange route for open-market buybacks below 15% of paid-up capital and free reserves, with prescribed opening and closing timelines.
• HO/49/14/13(11)2026-CFD-POD1/I/16864/2026 (21 July 2026) — operationalises ISIN-level freezing of promoter and promoter-group holdings under Regulation 24(i)(ea) of the Buy-back Regulations, while permitting tender-offer participation and the invocation of pre-existing encumbrances.
• SEBI (Delisting of Equity Shares) Regulations, 2021 — reverse book building, the 90% threshold, the counter-offer mechanism and the post-delisting exit window. The September 2024 amendment added a fixed-price alternative to reverse book building. [AI inference — verify before acting]
• Companies Act, 2013, sections 124 and 125, with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 as amended in 2017 — transfer of shares with seven consecutive years of unclaimed dividend to the IEPF Authority, and the IEPF-5 refund route.
• CDSL/OPS/DP/CAIPO/2026/578 (24 August 2026) — creates security type 41, Rights Entitlement Preference Shares, with harmonised value REPRF; DPs must make the corresponding back-office change.

2. Date vocabulary under T+1

Term	What it means	Who fixes it
Board approval and intimation	Issuer decides, then notifies the record date under Regulation 42(1)	Issuer
Exchange notification	Exchange accepts the record date and publishes the ratio and, for bonus, the deemed allotment date	Exchange
Last cum date	The final trading day on which a buyer acquires the benefit	Exchange, derived from the record date
Ex-date	The first trading day on which the security trades without the benefit	Exchange
Record date	The date whose end-of-day beneficial-owner list fixes entitlement	Issuer
Deemed allotment date	For bonus, the working day after the record date	Issuer, on exchange record
Effective date / first trading date	The depository credits securities; the exchange makes them tradeable	Issuer via the depository, then exchange

Under a T+1 cycle the ex-date and the record date coincide for cash-market purposes, so the last cum date is the trading day immediately before the record date: a client buying on the ex-date does not receive the benefit, and a client selling on the ex-date still does. [AI inference — verify before acting]

Positions look wrong between record date and credit

Between the record date and the depository credit, the client’s holding is legally entitled to the benefit but the benefit is not yet in the account, and the market price has already adjusted downward on the ex-date. A holdings screen that shows only the pre-corporate-action quantity against a post-corporate-action price manufactures an apparent overnight loss of exactly the corporate-action ratio. Surfacing a pending-corporate-action row for the interval is the fix, and for bonus the interval is now only two trading days.

3. Cash corporate actions

The depository provides the issuer or registrar with the beneficial-owner list and holdings as on the record or book-closure date. The registrar computes entitlement and pays directly — to the bank account registered in the demat account, which is why the nine-digit MICR bank code captured at account opening exists in the first place. The depository is not involved in the distribution of cash benefits and cannot resolve a dividend complaint; discrepancies go to the issuer or registrar. Only discrepancies in non-cash entitlement can be escalated to the depository.

Dividend is taxed in the shareholder’s hands as income from other sources, with withholding at 10% for residents above Rs.10,000 a year per company and 20% for non-residents before treaty relief. See Tax reporting. A stale bank mandate in the demat account is the commonest cause of a genuinely missing dividend, and the fix is a bank-detail modification at the DP — see Lifecycle: Modifications.

4. Non-cash corporate actions

Action	Depository mechanic	Allotment file needed	Client action
Bonus	Automatic; credit on the deemed allotment date into the existing permanent ISIN	No	None
Stock split / consolidation	Automatic; balance restated on the effective date	No	None
Merger / amalgamation	Automatic; old ISIN extinguished, new ISIN credited in ratio	No	None
Demerger	Automatic; resulting-company ISIN credited in ratio	No	None; cost basis must be apportioned for tax
Rights issue	Voluntary; RE credited, then allotment against application	Yes	Apply, sell the RE, or let it lapse
Buyback acceptance	Voluntary; accepted quantity debited, unaccepted quantity returned	Yes	Tender in the acquisition window

Bonus, post-October 2024. The issuer applies for in-principle approval within 5 working days of the board meeting, fixes the record date (T) and takes the deemed allotment date (T+1) on record, submits documents to the depositories by 12:00 on T+1, uploads distinctive-number ranges to the depository database, and the shares become tradeable on T+2. Because credit goes into the permanent ISIN, the client’s existing holding simply grows; there is no separate temporary-ISIN line to reconcile.

Demerger and cost apportionment. The depository credits the resulting company’s shares, but the cost of the original holding must be split between the demerged and resulting entities in the ratio of net book value certified by the company. Neither depository nor broker performs that split, so a capital-gains report shows the resulting-company shares at unknown cost until the client supplies the apportionment.

5. Rights entitlement trading

Since the January 2020 framework, a rights issue produces a tradeable instrument. On the record date the depository credits rights entitlements to eligible holders in a separate ISIN. During the RE trading window — which closes before the issue closes — the RE can be sold on the exchange like any other security, or bought by someone who was not a holder on the record date. At the end of the issue period the registrar files the allotment, the applied REs are extinguished and the new shares are credited.

Three outcomes, one of which is a pure loss:

Client choice	Mechanics	Outcome
Apply	Pay the issue price against the RE through the issuer’s ASBA-based application	New shares credited on allotment
Renounce on-market	Sell the RE in its own ISIN during the RE trading window	Sale proceeds; the buyer applies
Renounce off-market	Off-market transfer of the RE to a specific person	Consideration settled outside the exchange
Do nothing	RE lapses at the end of the issue period	Total loss of the RE value

The rights form is mailed by the issuer or registrar directly; neither the depository nor the DP mails it. A holder of physical shares can elect to receive the rights allotment in demat form by telling the registrar, but cannot receive a bonus allotment in demat form. CDSL added a security type for rights entitlements on preference shares in August 2026 under CDSL/OPS/DP/CAIPO/2026/578.

6. Buyback through the exchange window

A tender-offer buyback is run as a separate acquisition window on the exchange. The broker’s client tenders shares as a bid; the registrar computes acceptance against the entitlement ratio, including the reserved portion for small shareholders; accepted shares are settled and the unaccepted balance returns to the client’s demat account.

Field	Type	Length	Mandatory	Source system	Destination system(s)	Notes
symbol	alphanumeric	12	Yes	Exchange master	Acquisition-window order book	Buyback-specific series, distinct from the cash series
isin	alphanumeric	12	Yes	Exchange master	Order book, registrar	Must match the tendered holding
client_code	alphanumeric	10	Yes	Broker UCC master	Order book, registrar	The tendering client’s UCC
dp_id_client_id	numeric	16	Yes	Broker demat master	Registrar, depository	Where the unaccepted balance returns
quantity	integer	12	Yes	Client input	Order book, registrar	Tendered quantity, subject to available free balance
price	decimal	15,2	Yes	Exchange master	Order book	Fixed buyback price for a tender offer
shareholder_category	code	2	Yes	Computed from holding	Registrar	Small shareholder or general, drives the reserved-portion entitlement
settlement_number	alphanumeric	12	Yes	Clearing corporation	Settlement	Buyback-specific settlement

Field names follow the general shape of exchange acquisition-window specifications rather than a single published file layout. [industry practice — unverified]

Two 2026 changes matter operationally. Promoter-group holdings are frozen at ISIN level for the duration of a buyback under the July 2026 framework, with tender participation expressly permitted and pre-existing encumbrances still invocable — so a promoter client sees a freeze marker that is not an error. And the open-market exchange route reopened on 1 August 2026 for buybacks below 15% of paid-up capital and free reserves, after being phased out from 1 April 2025, following the restoration of capital-gains treatment from 1 April 2026. In an open-market buyback the client simply sells into the market; in a tender offer the client bids into the window.

7. Delisting

A voluntary delisting runs a reverse book building process: the acquirer announces a floor price, public shareholders bid quantities at prices at or above it through the exchange’s book-building platform, and the discovered price is the price at which the acquirer’s shareholding reaches 90% of total equity. The acquirer may accept the discovered price or make a counter-offer at a lower price, which succeeds if enough shareholders accept. The September 2024 amendment added a fixed-price alternative for frequently traded shares, at a premium over the floor price. [AI inference — verify before acting]

Shareholders who do not tender are not extinguished: the acquirer must keep an exit window open after delisting at the same exit price. From the broker’s side the mechanics are the acquisition-window flow above, with the same field set.

8. IEPF

Where dividend on a shareholding has remained unclaimed for seven consecutive years, the shares are transferred to the IEPF Authority’s account by corporate action. The client sees a plain debit in the demat account narrated as a transfer to the IEPF Authority, with no counterparty they recognise.

The route back is e-Form IEPF-5 on the IEPF Authority portal. The claimant files the form online, submits a printed copy with supporting documents to the company, and the company’s nodal officer verifies the claim and files a verification report with the Authority within 15 days; the refund is then released electronically to the claimant’s account. The claim is made to the company first and the Authority second, which is the opposite of what most claimants assume.

9. F&O contract adjustments

The governing principle is that the value of a market participant’s position must remain the same across the cum and ex dates, preserving in-the-money, at-the-money and out-of-the-money status. Adjustments are carried out after the close of trading on the last cum date and applied to all open positions.

Corporate action	Adjustment factor	Applied to
Bonus, ratio A:B	(A+B)/B	Strike divided, futures base price divided, market lot multiplied, position multiplied
Split or consolidation, ratio A:B	A/B	Same directions as bonus
Rights, ratio A:B at issue price S, cum close P	(P-E)/P where E = ((P-S) x A) / (A+B)	Strike multiplied, lot divided, futures price multiplied, position multiplied
Ordinary dividend, below 2% of market value	None	—
Extraordinary dividend, at or above 2% of market value	Total dividend amount deducted	Deducted from every strike price; futures base price is the mark-to-market settlement price less the dividend
Merger	No adjustment	No fresh contracts introduced after the record-date announcement; unexpired contracts compulsorily settled at the last cum-date closing price, and outstanding good-till-cancelled or good-till-date orders cancelled

Rounding is handled by computing position value before and after, rounding strike and lot, and adjusting so that no open position is force-closed. The 2% test uses the closing price on the day before the dividend announcement, or the same day’s close where the announcement is after market hours; where shareholders change the rate at the annual general meeting, the post-meeting rate and the price on the day before that meeting apply.

10. Alternatives

Option A	Option B	When to pick which	Who uses what
Tender into a buyback acquisition window	Sell in the open market during the buyback period	Tender when the buyback price exceeds the market price and the acceptance ratio is favourable; sell when acceptance is likely to be thin	Small shareholders benefit from the reserved portion and usually tender
Apply against a rights entitlement	Sell the RE in the RE trading window	Apply when the issue price is meaningfully below the expected ex-rights price and the client wants the exposure; sell when the client does not want to fund it	Non-participating holders must sell, since doing nothing is a total loss
Let the F&O contract be adjusted	Square off before the last cum date	Adjustment is value-neutral in principle but changes lot size and strike, which breaks strategy legs and stop levels	Systematic and multi-leg traders often square off

Practical notes

• [gotcha] “My dividend has not come” is not a broker-resolvable ticket. The broker is not in the payment chain; the registrar is. The only broker-side check is whether the bank details registered in the demat account are current, which is a different record from the payout bank account in the trading account.
• [gotcha] The bonus interval is now two trading days, not the fortnight it used to be, so a holdings screen that lags the corporate action by a settlement cycle is far more visible than before. Check the pending-corporate-action display against the T+2 rule in CIR/CFD/PoD/2024/122.
• [gotcha] A rights entitlement that is neither applied for nor sold lapses worthless at the end of the issue period. Brokers that notify only once, at credit, leave clients holding a decaying asset; the useful notification is a second one two days before the RE trading window closes. [industry practice — unverified]
• [gotcha] Involuntary corporate-action credits such as bonus and split do not count as transactions when assessing whether a demat account is dormant, while voluntary ones such as a rights subscription do (CDSL DP Operating Instructions Clause 6.5.5.3). A client who has only received bonus shares for a year is still dormant for delivery-instruction verification purposes.
• [risk trade-off] Running the acquisition-window order book on the same RMS path as cash equity is simpler but wrong: a tender bid must validate against the free demat balance and the shareholder category, not against margin. Firms that shortcut this discover it on the first oversubscribed buyback.

Cross-references

• Funds & Tax: Ledger and statements — why a dividend usually produces no ledger line at all.
• Funds & Tax: Tax reporting — buyback taxation, dividend withholding and demerger cost basis.
• Funds & Tax: Demat servicing — off-market renunciation of rights entitlements and freeze markers.
• Deep Dive: IPO and OFS, broker side — the ASBA and acquisition-window plumbing that rights and buyback offers reuse.
• Deep Dive: Surveillance norms, GSM and ASM — price-band interaction around corporate-action dates.
• Deep Dive: T+0 and T+1 settlement — the settlement cycle that fixes the last cum date.
• Lifecycle: Modifications — updating the bank mandate in the demat account so dividends land.
• Lifecycle: Transmission — inherited holdings and IEPF-adjacent unclaimed balances.
• Lifecycle: Voluntary closure — unclaimed balances and the IEPF path on exit.
• Vendors: CDSL and NSDL — depository corporate-action modules.
• Circulars — SEBI other and Circulars — CDSL — the instruments cited above.

Verified through

2026-09-11

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AI-generated and not legal, financial, or compliance advice. See the project README for full disclaimer.