Book closure
Encyclopedia
When shares of a joint stock company
invariably change hands during market
trades, identifying the owner of some shares becomes difficult. So it is difficult to pass on certain benefits (like share bonus issue, split
s and dividend payments) to shareholder
s.
So, when a joint stock company declares dividends or bonus issues, there has to be a cut-off date for such benefits to be transferred to the shareholders. This date is termed as "Book Closure" date or "Record Date". It is the date after which the company will not handle any transfer of shares requests until the benefits are transferred. Only shareholders marked in the company's register at the Book Closure Date or the Record Date would be entitled to receive these benefits. In other words, shareholder
s that are on the company's records as on that date are eligible for these benefits.
If a company announces book closure as 1 January, shareholders who as on that day own the stock will be entitled to the dividend/bonus/split benefit. e.g. If Mr. Y buys this stock from Mr. X on 2 January, the benefit of bonus issue or split
s or dividend will still be transferred to Mr. X by the company.
A company generally announces such a date along with the announcement of the bonus issue or split
s or dividend announcement, as the case may be.
In an efficient market as per the efficient-market hypothesis (EMH) the effect of the price change due to bonus issue or split
s or dividend as on the Book Closure date gets adjusted in the price of the stock in the market
effective with the opening of the trade floor on the book closure date.
Joint stock company
A joint-stock company is a type of corporation or partnership involving two or more individuals that own shares of stock in the company...
invariably change hands during market
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
trades, identifying the owner of some shares becomes difficult. So it is difficult to pass on certain benefits (like share bonus issue, split
Stock split
A stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. Options and warrants are included....
s and dividend payments) to shareholder
Shareholder
A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
s.
So, when a joint stock company declares dividends or bonus issues, there has to be a cut-off date for such benefits to be transferred to the shareholders. This date is termed as "Book Closure" date or "Record Date". It is the date after which the company will not handle any transfer of shares requests until the benefits are transferred. Only shareholders marked in the company's register at the Book Closure Date or the Record Date would be entitled to receive these benefits. In other words, shareholder
Shareholder
A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
s that are on the company's records as on that date are eligible for these benefits.
If a company announces book closure as 1 January, shareholders who as on that day own the stock will be entitled to the dividend/bonus/split benefit. e.g. If Mr. Y buys this stock from Mr. X on 2 January, the benefit of bonus issue or split
Stock split
A stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. Options and warrants are included....
s or dividend will still be transferred to Mr. X by the company.
A company generally announces such a date along with the announcement of the bonus issue or split
Stock split
A stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. Options and warrants are included....
s or dividend announcement, as the case may be.
In an efficient market as per the efficient-market hypothesis (EMH) the effect of the price change due to bonus issue or split
Stock split
A stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. Options and warrants are included....
s or dividend as on the Book Closure date gets adjusted in the price of the stock in the market
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
effective with the opening of the trade floor on the book closure date.