What is a corporate action?

A corporate action is an event carried out by a company that materially impacts its stakeholders (e.g. shareholders or creditors). Common corporate actions include the payment of dividends, stock splits, tender offers, and mergers and acquisitions. Corporate actions must often be approved by a company's shareholders and board of directors.

Who approves corporate actions?

Corporate actions must often be approved by a company's shareholders and board of directors. Corporate actions include stock splits, dividends, mergers and acquisitions, rights issues and spin-offs. All of these are major decisions that typically need to be approved by the company's board of directors and authorized by its shareholders.

What are mandatory corporate actions?

Mandatory corporate actions are enacted by a company’s board of directors. A mandatory action – such as the issuance of a cash dividend – affects all of the company’s shareholders. It is performed by the governing body of the company. Shareholders need to do nothing aside from collecting the cash dividend on their shares.

How do shareholders respond to a corporate action?

In order for the company to move forward with the corporate action, the shareholders must respond. A prime example of voluntary action is a tender offer. Because it is voluntary, shareholders may participate in the tender offer or refuse. Each shareholder must submit a response regarding his or her participation.