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NISM-Series-VI: Depository Operations · Special Services - Public Offering / Corporate Actions

Corporate Actions: Dividend, Bonus, Split and Rights in Depository Operations

Updated 11 October 2026 · Fact-checked

Corporate actions are decisions by an issuer that give benefits to or change the holdings of shareholders. Dividends are cash. Bonus, split and rights change the number of shares. The record date decides who is entitled. The depository gives the issuer the BO list and credits benefits to BO accounts.

Understand Corporate Actions: Dividend, Bonus, Split and Rights

A corporate action is a decision of a company that affects its securities or its shareholders. Examples are dividend, bonus issue, stock split, rights issue, buyback, merger and demerger. Some benefits are cash (dividend, interest). Others are non-cash (bonus shares, split shares, rights entitlements).

The issuer cannot send benefits to everyone who ever held the share. It fixes a record date. Only investors whose names are on the books on that date are entitled. In a depository system, the books are the list of beneficial owners (BOs) held by the depository. On request, the depository gives the issuer or its RTA this list of BOs and their holdings as at the record date.

The ex-date is the first day on which the share trades without the benefit. If you buy on or after the ex-date, you do not get the benefit. Trades settle on a T+1 cycle in India, so the ex-date is normally the same as the record date. Do not mix this up: the record date is the entitlement date, the ex-date is the trading cut-off.

Cash benefits are paid to the BO by the issuer, usually electronically into the bank account linked to the demat account. Non-cash benefits are credited by the depository to the BO's demat account, at the issuer's instruction. The BO does not need to apply for a bonus or split credit. For a rights issue, the BO must choose to subscribe or renounce the entitlement.

A bonus gives free additional shares out of reserves. A split reduces the face value and raises the number of shares. A bonus keeps face value unchanged and raises share capital. A split leaves share capital unchanged. A rights issue offers new shares to existing holders at a price, in a stated ratio, and they must pay to take them up.

Key formulas to remember

Bonus shares received
Shares received = Holding × (bonus ratio). For 1:2 bonus, new shares = Holding ÷ 2
1:2 means 1 new share for every 2 held. Total after bonus = holding + new shares.
Stock split
New shares = Old shares × (Old face value ÷ New face value)
Face value falls, number of shares rises. Example: ₹10 to ₹2 gives 5 shares for every 1.
Rights entitlement
Rights shares = Holding × (rights ratio). For 1:4, entitlement = Holding ÷ 4
Amount payable = rights shares taken × rights issue price.
Dividend amount
Dividend = Shares held on record date × dividend per share
Dividend is declared per share, often as a percentage of face value.
Record date and ex-date
Buy before ex-date = entitled. Buy on or after ex-date = not entitled
Entitlement is based on the BO holding on the record date.
Nature of benefit
Cash: dividend, interest. Non-cash: bonus, split, rights entitlement
Non-cash benefits are credited by the depository to the BO's demat account.

How to solve Corporate Actions: Dividend, Bonus, Split and Rights questions

Use this method for any question on corporate actions, whether it is a calculation or a concept question.

  1. 1Identify the action: dividend, bonus, split or rights.
  2. 2Decide whether it is a cash or non-cash benefit.
  3. 3Note the record date and the holding on that date. Ignore later trades.
  4. 4Read the ratio carefully. Check whether it is a 'for' ratio (1 for 2) or a total ratio.
  5. 5Apply the formula to find new shares, cash or amount payable.
  6. 6For bonus and split, check what changes: number of shares, face value, share capital.
  7. 7For rights, check whether the question asks for entitlement or payment amount.
  8. 8Match your result with one option and check units (shares or rupees).

Quickest way: Action, date, ratio

When to use it: Use for MCQs where you have under a minute per question.

  1. Name the action and mark it cash or non-cash.
  2. Ask: who is entitled? The holder on the record date.
  3. Do the one-line calculation with the ratio.
  4. Eliminate options that show a wrong face value effect or a wrong date rule.

Common mistakes in Corporate Actions: Dividend, Bonus, Split and Rights

  • Treating bonus and split as the same thing

    Both increase the number of shares.

    Fix: Bonus: face value unchanged, reserves capitalised, share capital rises. Split: face value falls, share capital unchanged.

  • Saying a buyer on the ex-date gets the dividend

    Students confuse ex-date with the last day to buy.

    Fix: Buying on or after the ex-date gives no entitlement. You must have bought before it.

  • Confusing record date with ex-date

    Both are close together and often the same day under T+1.

    Fix: Record date fixes entitlement. Ex-date is when the share starts trading without the benefit.

  • Reading a 1:2 bonus as 1 new share for 1 held

    The ratio is read as total shares.

    Fix: 1:2 means 1 new share for every 2 held. 100 shares give 50 new, total 150.

  • Believing the BO must apply for a bonus or split credit

    Students mix it with rights, which needs action.

    Fix: Bonus and split are credited automatically. Rights need the BO to subscribe or renounce.

  • Thinking the depository pays the dividend

    The depository handles the BO records, so students assume it handles money too.

    Fix: The issuer pays cash benefits. The depository supplies BO details and credits non-cash benefits.

Worked examples

Example 1

A BO holds 600 shares on the record date. The company announces a 1:3 bonus issue. How many shares will the BO hold after the bonus credit? Options: (a) 800 (b) 900 (c) 1,200 (d) 1,800

Show the solution
  1. 1:3 means 1 bonus share for every 3 held.
  2. Bonus shares = 600 ÷ 3 = 200.
  3. Total holding = 600 + 200 = 800.

Answer: (a) 800 shares.

Example 2

A company with shares of face value ₹10 splits each share into shares of face value ₹2. A BO holds 150 shares on the record date. How many shares will the BO hold after the split? Options: (a) 300 (b) 450 (c) 750 (d) 1,500

Show the solution
  1. Split factor = old face value ÷ new face value = 10 ÷ 2 = 5.
  2. Each old share becomes 5 new shares.
  3. New holding = 150 × 5 = 750.

Answer: (c) 750 shares. The value of each share falls, but total value of the holding does not change due to the split alone.

Exam tips

  • Learn the cash versus non-cash split. Questions often ask which benefit the depository credits to the demat account.
  • Read the date in the question: record date holding decides entitlement, not the holding today.
  • For ratio sums, write the ratio in words first, such as '1 for every 2', then calculate.
  • Remember what stays fixed: face value in a bonus, share capital in a split.
  • Check the exam's negative marking: NISM-Series-VI deducts 25% of the marks for a wrong answer, so skip only if you cannot narrow down options.

Practice questions from Special Services - Public Offering / Corporate Actions

Corporate Actions: Dividend, Bonus, Split and Rights: frequently asked questions

What is the difference between a bonus issue and a stock split?

A bonus issue gives free additional shares from reserves, so share capital rises and face value stays the same. A split divides each share into smaller face value shares, so share capital stays the same. In both cases the number of shares held goes up.

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

The record date is the date on which the holder's name must be on the books to receive the benefit. The ex-date is the first day the share trades without the benefit. Buyers on or after the ex-date are not entitled.

How are dividends credited through a depository?

The depository gives the issuer or its RTA the list of BOs and holdings as on the record date. The issuer then pays the dividend, usually electronically to the bank account linked with the demat account. The depository does not pay the cash itself.

Do I need to apply to get bonus shares in my demat account?

No. Bonus and split shares are credited to the BO's demat account automatically based on the record date holding. A rights issue is different, because you must subscribe or renounce.