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Book closure

Kanika Gupta (C.S Trainee) (100 Points)

15 July 2010

What is the difference between record date and book closure?? plzz explain with an example , its urgent

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Yogesh Bhatt (Company Secretary) (475 Points)
Replied 15 July 2010

Book closure and record date help a company determine exactly the shareholders of a company as on a given date.

Book closure refers to the closing of register of the names or investors in the records of a company. Companies announce book closure dates from time to time.

The benefits of dividends, bonus issues, rights issue accruing to investors whose name appears on the company's records as on a given date, is known as the record date.

Regards.

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Yogesh Bhatt (Company Secretary) (475 Points)
Replied 15 July 2010

Book Closure Dates: Transfer of shares is a continuous process. Shares change hands at a rapid pace every day. So it may not be possible for the companies to find out eligible investors for the corporate benefits. So they fix a date and announce that the investors who are in their records on that date would be eligible for the benefits. They close the share transfer books for a period for this purpose. This period is called Book Closure period. During this period companies after identifying the eligible investors, pass the benefits to depositories which in turn to investors. In NSE website this period is given as BC Start Date and BC End Date.

Record Date: A day before Book Closure period is Record Date. Only the investors who are in the share transfer books of a company on the end of the day on Record Date is eligible for the corporate benefits.

Ex-Date: It is the date on which the corporate benefit is reflected in the share price. The investors who hold the securities just before this day are eligible for corporate benefits. The people who buy shares on or after this date are not eligible for the benefits.

Record date and Ex-Date both sound similar? There is a difference. If we buy a security today the share will get delivered to your account after T+2 days. Usually there is a difference of 1 or 2 trading days between Record date and Ex-date. If you buy a security 1 day before Ex-date the share will be on your name in the books of share holders of the company before the record date and you will be eligible for the benefits. Buyers who buy the shares on or after the Ex-Date are not eligible for the same.

Example :

Let’s say Reliance Power announced Bonus issue of shares. Book Closure dates are from 2008 July 23^rd to 25^th. Ex date is 21st July and record date is 22nd July. That is if you buy Reliance Power shares before 21^st July your name will be there in the share holders books of the company and you will get bonus shares. Usually it takes 7 – 8 days for the bonus shares to get credited to your account. The person who buys Rel Power shares on or after 21st July is not eligible for the bonus issue because company considers the entries in share holders books end of the day on Record Date. Company will close its books from July 23^rd to 25^th