Corporate actions

What is a corporate action?

It’s activity that materially changes an organisation and impacts the organisation’s stakeholders and shareholders. Corporate actions are usually approved by a company's board of directors. Some corporate actions require shareholders to submit a response or are permitted to vote on some events.

Examples of corporate events include; stock splits, dividends, mergers and acquisitions, rights issues, and spin-offs.

How do I find out about corporate actions?

Where possible, we’ll notify you as and when these affect your investments. Log in to your Share Dealing account and select ‘Account Management’ and then ‘Important Notifications’.

Questions regarding corporate events? Please read the below before contacting us as we’ve included the answers to questions you ask us the most.

1. Tender Offers and Dutch Auctions

 

  • A Tender Offer is a cash offer to all shareholders for their shares. Often this is used when a company is looking to buy back a certain number of their shares, they will ask shareholders if they would like to offer their shares for tender. This may be at a fixed price or it may be at a price determined by the company’s net asset value on a given date.

    A Dutch Auction allows shareholders to choose a price at which to tender their shares within a range. The company then looks at the offers and sets a ‘strike price’ (an agreed price for the company to buy shares from the shareholder). Everybody who has offered their shares on or below the strike price will have tendered their shares. Even if a shareholder’s original offer was lower than the strike price, they will receive the strike price.

    The number of shares that can be tendered can vary. There may be a given number that will definitely be tendered, this is the basic entitlement. More shares can be offered by any shareholder, however your offer may be scaled back depending on how many people have decided to participate. In the case where a strike price is set, a lower original offer is more likely to be completed in full.

2. Rights Issues

 

  • When a rights issue takes place, shareholders have the option to purchase additional shares at a discounted price.

    If a shareholder chooses to action these rights then new shares will be allocated to them on receipt of payment and completion of the event. These shares will then become ordinary shares and will be tradeable at the current market price.

  • By choosing not to action these rights a shareholder will not lose any shares, rights are offered by a company at a discounted price in addition to a shareholders existing shares.

    Please note: While you won’t lose any existing shares your share holding will become more diluted as there will be more shares on a stock market.

  • When a company announces a rights issue, holders of the stock will be issued ‘nil paid rights’ which each represent a ‘right’ to buy a new share.

    As these ‘nil paid rights’ are tradable on the stock market, they are apportioned a value using the book cost of your total share holding.

    When choosing to action your ‘rights’ and purchase additional shares, new shares will be given a book cost which will include the discounted offer price you paid and the stock market value of the nil paid rights.

3. De-Listing or stock suspension

 

  • This means that the company is intending to cancel or has cancelled the listing of its shares on the stock market.

    We will contact you via email or post with further details if this happens to any of your investments.

    Please note: Communications are not sent out when a company’s stock is suspended however, if we receive any information such as a notice of administration then we will contact you.

4. Takeovers

 

  • Takeovers depend on shareholders accepting offers from a bidding company. Offers usually consist of money and/or shares in their company in exchange for your existing shares. A pre-agreed percentage of total shareholders must agree to the bidding company’s offer before they can declare their takeover bid as 'unconditional in all respects’.

    I had accepted the offer before it was 'unconditional in all respects'

    If you agreed before the offer was declared ‘unconditional in all respects’, you receive your cash 10 working days from when we instruct the company's registrars.

    Please note: For each acceptance we combine your instructions with those of other customers so it will be approximately 10 working days from the advice date of the event.

    I did not accept the offer

    Once the offer is declared 'unconditional in all respects' we will write to you and give you the opportunity to agree to the terms of the takeover.

    If you agree to the terms of the takeover you will usually receive the money within ten working days from the date we receive your instruction. This money will then be transferred to your share dealing account.

    Log in to Share Dealing

5. Stock splits

 

  • A company may decide to split its stock into new shares to increase its liquidity on the market, this usually happens when the share price is very high and makes it harder for smaller investors to buy into the company. Companies will usually use a 2-for-1 or 3-for-1 ratio which means for every share you had before you would receive 2 or 3 shares.

  • The stock split will not add any value to your holding as the share price will decrease to accommodate the additional shares. Your valuation will still be based on the number of shares you own and the current market price.

Corporate actions | Investing | Bank of Scotland

Bank of Scotland Share Dealing Service is operated by Halifax Share Dealing Limited. Halifax Share Dealing Limited. Registered in England and Wales no. 3195646. Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN under registration number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.