Corporate Actions

CORPORATE actions refer to any event that brings change to securities of a company and the company itself. The effect can either be positive or negative. Corporate actions are proposed by the company’s board of directors and approved by the company’s shareholders at AGMs or EGMs.

While, some corporate actions may be exclusively authorised by the company’s board of directors, other corporate actions may be so fundamental that they require the approval of shareholders.

As such, it is the responsibility of the shareholders to ensure that they appoint a competent and responsible board that would manage their company in good faith.

Some of the reasons listed companies undertake corporate actions include the following: Restructure the business so as to improve its profitability, Influence the company’s share price by either reducing or increasing the number of shares in issue, Rewarding existing shareholders through the distribution of excess cash in the business. Investors should always note that corporate actions can either be mandatory, mandatory with option or voluntary. In the case of mandatory corporate actions like bonus issue, share splits or share consolidation, all existing shareholders are required to participate.

Meanwhile, a mandatory with option corporate action is compulsory although shareholders are given an opportunity to choose from available options (for example a dividend in form of cash or scrip).

However, for a voluntary corporate action such as rights issues and share buybacks, shareholders have the right to choose either to participate in the corporate action or not.

Investors should also remember that corporate actions may either have a direct financial impact (e.g. dividend or coupon payment) or an indirect financial impact (e.g. share split). It is therefore advisable for investors to be well versed with any proposed corporate actions as they can have a bearing on the performance and value of the business invested in.

Upcoming AGMs/EGMs Simbisa Brands Limited, Royal Harare Golf Club, March 21, 0900 Hrs