This article provides an overview of voluntary corporate actions—events initiated by a company that give shareholders or bondholders the choice, but not the obligation, to participate
What is Voluntary Corporate Action?
Voluntary corporate action is an event initiated by a company that gives shareholders or bondholders the option to participate but does not require their involvement.
Participants can choose whether to accept the terms of the action based on their investment strategies and financial goals.
Below is a list of common voluntary corporate actions where shareholders or bondholders can choose to participate or opt out:
Rights Issue: Shareholders can purchase additional shares at a discounted price, typically as part of the company’s effort to raise capital.
Share Buyback: The company offers to repurchase its own shares, often at a premium to the market price, reducing the total number of outstanding shares.
Tender Offer: The company or a third party proposes to buy some or all of the shareholder’s shares at a specified price, generally higher than the market value.
Convertible Securities Exercise: Holders of convertible bonds or preferred shares can convert them into common shares based on pre-determined terms.
Dividend Reinvestment Plan (DRIP): Shareholders can reinvest their cash dividends to buy additional company shares instead of receiving a cash payout.
Warrant Exercise: Warrant holders have the option to purchase company shares at a specific price before the warrant's expiration date.
Voluntary Exchange Offer: Shareholders or bondholders may exchange their holdings for a new security or asset offered by the company, usually with different terms.
Scrip Dividend: Shareholders can choose to receive dividends in the form of additional shares instead of cash.
Stock Option Plan: Employees or shareholders may be given the opportunity to buy company shares at a fixed price as part of an incentive or stock option program.
Rights to Sell Additional Shares: Shareholders may be offered the opportunity to sell a portion of their shares through specific buyback programs or arrangements.
These voluntary actions enable shareholders or bondholders to choose whether to participate, depending on their investment objectives and current market conditions.
Is bond restructuring a mandatory or a voluntary corporate action?
Bond restructuring can be either a mandatory or voluntary corporate action, depending on how it is structured and agreed upon by the issuer and bondholders. It is voluntary if bondholders are given the choice to participate and mandatory if it is imposed on all bondholders without individual consent, often in cases of financial distress.
1. Voluntary Corporate Action
If bondholders are given the option to accept or decline the restructuring terms, it is considered a voluntary action. For example, bondholders may be offered the chance to exchange their bonds for new ones with modified terms or convert them into shares.
This type of restructuring typically involves negotiations where bondholders are asked to agree to the changes, often as a means to avoid default.
2. Mandatory Corporate Action
When the issuer unilaterally changes the bond terms for all bondholders, it is considered a mandatory action. This typically occurs when the issuer faces significant financial distress, such as during bankruptcy, and a court or regulatory body orders the restructuring.
In this case, bondholders have no option but to accept the new terms, which may include reduced payments, extended maturities, or other changes.
What choice options are available for voluntary corporate actions?
There are two main options for voluntary corporate actions:
Default Option: This option is automatically selected by the company or issuer if the shareholder does not provide specific instructions by the deadline. It typically requires minimal action from the shareholder.
Non-default Option: This is an alternative to the default option, usually requiring explicit instructions from the shareholder. It typically involves additional steps or actions on the shareholder's part.
How are clients notified about voluntary corporate actions?
When Exante learns about an upcoming voluntary corporate action, we immediately inform the Account Managers, who then notify clients directly. Alternatively, clients already aware of the action can contact us in advance to request participation.
What is the commission for participating in voluntary corporate actions?
A commission of 150 EUR applies when selecting a non-default option for voluntary corporate actions. All commission details are clearly outlined in the corporate action information.
In the Transactions section of your Client’s Area, the fee for participation will appear under the "FEE" transaction type.