Corporate actions processing is crucial for protecting investor interests and ensuring market efficiency in contemporary capital markets. Each corporate decision – from mergers and acquisitions to dividend payout – can significantly influence shareholder value. For financial institutions, fund managers, and custodians, managing these actions accurately is critical to reducing risk and maintaining client trust. Understanding voluntary and mandatory corporate actions and managing them efficiently is essential for maintaining trust and operational agility.
understanding corporate actions
Corporate actions are decisions that directly impact a company’s securities and stakeholders. These events reflect strategic, financial, or structural changes that can shape a company’s future direction.
Some of the key examples of corporate actions include:
- Mergers and acquisitions (M&A): Combine or acquire entities to strengthen market position and unlock synergies.
- Spin-offs: Create new, independent companies to maximise shareholder value.
- Rights issue: Offer existing shareholders the right to buy additional shares, usually at a discount.
- Bonus issue: Distribute additional shares to shareholders without cost, boosting share liquidity.
- Share buyback: Repurchase shares to consolidate ownership and improve earnings per share.
- Tender offer: Invite shareholders to sell their shares at a specified price, often during takeovers.
- Cash and special dividends: Pay out profits to shareholders, either regularly or as one-time rewards.
- Stock and reverse splits: Adjust the number of shares outstanding to influence share price and market perception.
- Open offers and conversion events: Enable shareholders to convert securities or buy new ones under specific terms.
- Name change or voluntary dissolution: Reflect major shifts in brand identity or closure of operations.
These events, while routine, demand accuracy and timeliness to ensure compliance and maintain investor confidence.
voluntary vs. mandatory corporate actions
Corporate actions fall into two categories — voluntary and mandatory. Mandatory corporate actions occur automatically and apply to all shareholders. Examples include dividends, stock splits, mergers, and company name changes. Investors have no choice but to accept the outcome.
On the other hand, voluntary corporate actions, such as tender offers, rights issues, or share buybacks, require investors to make a decision. Each participant can choose whether to act, making accuracy in communication and tracking essential.
The impact of voluntary vs. mandatory corporate actions varies for stakeholders. While mandatory actions ensure uniform treatment, voluntary ones demand timely communication and efficient systems to manage investor elections and responses.
streamlining corporate actions processing
Managing the corporate actions lifecycle efficiently requires a combination of coordinated workflows and technology-enabled accuracy. Here is how corporate action processing automation can help streamline every stage of the corporate actions’ lifecycle:
capturing issuer announcements
The process starts with issuers announcing corporate events through exchanges or media. AI-powered systems help capture, validate, and structure this data instantly, eliminating manual interpretation errors.
distributing information to intermediaries
Intermediaries such as custodians and depositories need immediate updates. Automated dissemination tools ensure consistent, real-time communication across networks, reducing timing delays and data mismatches.
processing and validation
During validation, firms verify details like record dates, eligibility, and event type. Corporate actions processing automation can compare data across multiple sources to flag discrepancies early, enhancing accuracy and compliance.
communicating with investors
Clear and timely investor communication is crucial. Modern communication platforms simplify the generation and distribution of investor notifications, ensuring all parties receive uniform and accurate information.
managing investor responses
Handling investor elections is often the most complex step in both voluntary and mandatory corporate actions. Workflow automation tools help track, aggregate, and validate investor instructions, reducing manual input and the risk of missed deadlines.
executing and settling events
The final stage involves executing actions such as payments or share distributions. Integrated settlement tools and real-time tracking capabilities ensure seamless transaction execution, enhancing transparency and control.
Corporate actions processing automation across these stages helps organisations boost efficiency, enhance accuracy and compliance, and lower operational costs.
corporate actions lifecycle management challenges
While automation enhances the accuracy and efficiency of corporate actions lifecycle management, the process still poses several operational challenges, including:
- Interpretation risk: Inconsistent announcement formats can lead to misinterpretation of event details.
- Timing delays: Manual data handling and multi-party dependencies can cause late communication and missed deadlines.
- Accuracy issues: Human errors in validation and election processing can increase operational risk and non-compliance.
These challenges underline the need for advanced automation and analytics-driven oversight to ensure seamless corporate action processing and management. Infosys BPM offers end-to-end capital market BPM services, supporting global enterprises in transforming their corporate actions lifecycle management. Leveraging these AI-powered, next-gen solutions, businesses can enhance accuracy, reduce operational risk, and deliver faster, more reliable lifecycle management.
conclusion
Corporate actions processing has evolved from a simple back-office task into a strategic enabler for operational excellence and investor confidence. Whether voluntary or mandatory, these actions demand precision, speed, and transparency. Automation-led corporate actions lifecycle management helps organisations process events seamlessly, ensuring timely execution and stakeholder satisfaction. As financial ecosystems evolve, embracing intelligent technology becomes essential for firms striving to remain resilient, compliant, and future-ready.
