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NISM-Series-VI: Depository Operations · Investor Services (NISM VI)

Corporate Actions and Benefits to Investors in Depository Operations

Updated 11 October 2026

Corporate actions are decisions by an issuer, such as dividend, bonus, split or rights, that give benefits to shareholders. The depository uses the record date to fix who is entitled, and the benefit goes to the demat account of the holder on that date. Bonus and split shares are credited electronically.

Understand Corporate Actions and Benefits to Investors

A corporate action is a step taken by a company that affects its securities or its shareholders. Common ones are dividend, bonus issue, stock split, rights issue, buyback and merger. Each one gives investors a benefit or changes their holding.

The company must decide who gets the benefit. It fixes a cut-off day called the record date. Whoever is on the company's list of holders on that day is entitled. For demat shares, the depository gives the issuer or its Registrar and Transfer Agent (RTA) the beneficiary position (BENPOS), which lists the beneficial owners as at the close of the record date.

The ex-date (ex-entitlement date) is different. It is the first day on which the share trades without the benefit. The exchange fixes it for each action in line with the settlement cycle. A buyer on or after the ex-date does not get the benefit. For most equity corporate actions under T+1 settlement, the ex-date is generally the same day as the record date, but the exchange fixes the ex-date for each action and the two may differ. The two terms remain distinct. Do not mix them up. The rule is simple: you must own the share, in demat form, by the cut-off to get the benefit.

Once entitlement is fixed, the issuer or its RTA acts. For cash benefits like dividend, the issuer or RTA pays the money electronically to the bank details held in the depository records (as shown in BENPOS). For bonus, split and rights entitlements, the issuer or RTA instructs the depository, and the depository credits the securities to the accounts of the beneficial owners through the DPs. No physical certificate is needed. Investors can see the credit in their demat statement.

The depository does not decide the benefit. It only holds the records and passes on the credit. The issuer decides the terms. Questions in NISM VI test who does what, what the record date does, and how the credit reaches the investor.

Key formulas to remember

Bonus shares received
Bonus shares = Shares held × bonus ratio (new ÷ old)
For a 1:2 bonus (1 new for every 2 held), 1,000 shares give 500 bonus shares. Total holding becomes 1,500.
Split holding
New shares = Old shares × (old face value ÷ new face value)
A split from ₹10 to ₹2 gives 5 shares for each 1 held. Total value of holding does not change at the time of split.
Rights entitlement
Rights shares entitled = Shares held × rights ratio
For 1:4 rights, 400 shares entitle you to 100 new shares at the issue price. You pay only if you subscribe.
Dividend amount
Dividend = Shares held on record date × dividend per share
Dividend is declared per share. Face value is not the same as the market price.
Entitlement rule
Entitled holder = beneficial owner on the record date
Holding at the close of the record date in the depository records decides entitlement.

How to solve Corporate Actions and Benefits to Investors questions

Use this order for any corporate action question in the exam.

  1. 1Identify the action: dividend, bonus, split, rights, buyback or merger.
  2. 2Find who decides and who acts. The issuer decides terms; the depository and DP carry out the credit.
  3. 3Check the date in the question. Entitlement depends on holdings on the record date, not on the announcement date.
  4. 4If shares are bought or sold near the date, check whether the trade was before the ex-date.
  5. 5For calculations, apply the ratio to the number of shares held and add or multiply as the action requires.
  6. 6Confirm how the benefit reaches the investor: shares by electronic credit to the demat account, cash to the bank account.
  7. 7Match your result with the four options and reject any that confuse record date with ex-date or announcement date.

Quickest way: Date-and-ratio check

When to use it: Use it for short MCQs with limited time.

  1. Ask: is it a date question or a ratio question?
  2. For date questions, remember: record date fixes entitlement, ex-date marks trading without the benefit.
  3. For ratio questions, write holding × ratio and decide if the result is the new shares alone or the total.
  4. Check that the answer is a whole number of shares. Fractions are handled as per the issuer's terms.
  5. Pick the option that matches and move on.

Common mistakes in Corporate Actions and Benefits to Investors

  • Treating the record date and ex-date as the same concept.

    For most equity actions under T+1 they are generally the same day, so students assume they mean the same thing.

    Fix: Record date decides who is entitled. Ex-date is the first day the share trades without the benefit.

  • Thinking the announcement date decides who gets the benefit.

    News of the benefit comes at announcement, so it feels like the key date.

    Fix: Only the holding on the record date counts, not the date of announcement.

  • Giving the total holding when the question asks for bonus shares only.

    Students rush and add the old shares automatically.

    Fix: Read the question. Bonus shares = held × ratio. Total = held + bonus.

  • Believing the depository declares the dividend or bonus.

    The credit appears in the demat account, so the depository seems responsible.

    Fix: The issuer declares and decides terms. The depository only credits through DPs.

  • Saying a split changes the value of the total holding.

    Share count rises, so students think wealth rises.

    Fix: In a split the number of shares goes up and face value and price go down. Total value is unchanged at that point.

Worked examples

Example 1

A company announces a bonus issue of 1 share for every 4 held. Mr. Rao holds 2,000 shares in his demat account on the record date. How many shares will he hold after the bonus credit?

Show the solution
  1. Bonus ratio is 1 new for 4 held, so 1 ÷ 4.
  2. Bonus shares = 2,000 × 1 ÷ 4 = 500.
  3. Total holding = 2,000 + 500 = 2,500.
  4. The 500 shares are credited electronically to his demat account.

Answer: 2,500 shares, of which 500 are bonus shares.

Example 2

Ms. Iyer holds 300 shares of face value ₹10 on the record date for a split into shares of face value ₹2. How many shares does she hold after the split?

Show the solution
  1. Split factor = old face value ÷ new face value = 10 ÷ 2 = 5.
  2. New holding = 300 × 5 = 1,500 shares.
  3. Face value per share falls to ₹2, and total value of her holding does not change at the time of split.

Answer: 1,500 shares of face value ₹2 each.

Exam tips

  • Learn the record date definition word for word. It is the most repeated point.
  • Expect scenario questions. Under T+1 the ex-date and record date are generally the same day for most equity actions. So a buyer must purchase before the ex-date, so that settlement completes and the name is on record by the record date. Such a buyer is entitled to the dividend. A buyer who purchases on or after the ex-date is not entitled, and the seller keeps the benefit.
  • Check whether the question asks for bonus shares or total shares after bonus.
  • Remember that the issuer decides the action and the depository facilitates the credit.
  • Read all four options before answering, because wrong options often swap record date and ex-date.

Practice questions from Investor Services (NISM VI)

Corporate Actions and Benefits to Investors: frequently asked questions

What is the difference between record date and ex-date?

The record date is the cut-off day on which holders are identified for the benefit. The ex-date is the first day the share trades without that benefit. A buyer on or after the ex-date is not entitled.

How are bonus shares credited to a demat account?

The issuer fixes the record date. The issuer or its RTA then instructs the depository, using the beneficiary position (BENPOS) as at the record date. The depository credits the bonus shares electronically to the demat accounts of beneficial owners through their DPs. The credit shows in the demat statement.

Who pays the dividend, the depository or the company?

The company declares the dividend, and the issuer or its RTA pays it. The depository provides the beneficiary position (BENPOS) as at the record date, including the bank details held in its records. It does not pay dividend itself.

Do I need to apply to get bonus or split shares?

No. If you hold the shares in your demat account on the record date, the credit is automatic. For rights issues you must choose to subscribe and pay.