Glossary · 61 terms
Corporate Actions
All corporate actions terms in the EquitiesIndia.com glossary — plain-English definitions written for Indian retail investors.
Amalgamation(Merger)
Amalgamation is the merger of two or more companies into a single entity, where either one company absorbs the other (merger by absorption) or both companies combine to form an entirely new company.
Amalgamation vs Merger vs Acquisition(merger)
Under Indian law, an amalgamation is a court- or tribunal-approved consolidation of two or more companies into one entity, a merger broadly refers to the coming together of two entities with one surviving, and an acquisition is the purchase of a controlling stake in a target company without necessarily dissolving either entity — each carrying distinct legal treatment under the Companies Act 2013.
Annual General Meeting(AGM)
An Annual General Meeting (AGM) is a mandatory yearly meeting of a company's shareholders, required under the Companies Act, 2013, at which the company presents its audited financial statements, declares dividends, appoints directors and auditors, and transacts other ordinary business.
Bonus Issue(Scrip Issue)
A bonus issue (or scrip issue) is a corporate action where a company distributes additional shares to existing shareholders free of cost, funded from its reserves and surplus, in a specified ratio to existing holdings.
Bonus Ratio(bonus ratio)
The bonus ratio describes the proportion in which a company issues free additional shares to existing shareholders from its accumulated reserves, with common ratios being 1:1 (one bonus share for every share held) or 2:1 (two bonus shares for every share held), resulting in an automatic reduction in the market price per share while leaving total shareholder value unchanged.
Buy-Back Through Stock Exchange(Open Market Buyback India)
The open market route buyback allows a company to repurchase its own shares through normal stock exchange trading sessions over a period of up to one year, subject to a maximum of 25% of daily trading volume on any day and aggregate buyback size limits under SEBI regulations.
Buy-Back Through Tender Offer (Detailed)(Buyback Tender Offer India)
A buyback through tender offer is an open offer made by a company to all existing shareholders to tender their shares at a fixed price, with SEBI regulations mandating a minimum 15% small shareholder quota, proportionate acceptance ratios for oversubscribed offers, and escrow arrangements.
Buyback(Share Repurchase)
A share buyback (or share repurchase) is a corporate action where a company uses its own funds to repurchase its equity shares from the open market or through a tender offer, reducing the total shares outstanding.
Capital Reduction(Share Capital Reduction India)
Capital reduction under Section 66 of the Companies Act 2013 allows a company to reduce its paid-up share capital with National Company Law Tribunal approval, used to extinguish accumulated losses, return surplus cash to shareholders, or simplify the capital structure.
Composite Scheme
A composite scheme of arrangement is a single court-approved corporate restructuring document that combines multiple transactions — such as a merger, demerger, capital reduction, and share issuance — into one unified scheme to be executed simultaneously or in a defined sequence.
Composite Scheme of Arrangement(Combined Scheme India)
A composite scheme of arrangement combines multiple corporate restructuring actions — such as a merger, demerger, and capital reduction — into a single NCLT-approved scheme, allowing companies to execute complex reorganisations efficiently within one unified legal framework.
Compulsory Acquisition(squeeze-out)
Compulsory acquisition — also called a squeeze-out — is the mechanism under SEBI's Delisting Regulations 2021 by which an acquirer who has reached 90% or more of total shareholding can compulsorily acquire the remaining shares from minority shareholders at a price determined by the regulations, thereby completing the delisting process.
Conversion of Debentures(OCD Conversion)
Conversion of debentures into equity shares — applicable to Optionally Convertible, Partially Convertible, and Fully Convertible Debentures — dilutes existing shareholders when conversion is exercised, with the conversion ratio, timing, and dilution mechanics governed by the debenture trust deed and SEBI regulations.
Convertible Debenture(CCD)
A convertible debenture is a debt instrument issued by a company that carries a fixed interest rate and, upon the occurrence of a defined trigger or at the holder's or issuer's option, converts into equity shares of the company at a pre-agreed conversion ratio or price.
Corporate Restructuring(restructuring)
Corporate restructuring encompasses the broad range of transactions through which a company reorganises its business, capital, or ownership structure — including mergers, demergers, slump sales, hive-offs, debt restructuring, and divestments — with the objective of improving operational efficiency, unlocking value, addressing financial distress, or complying with regulatory requirements.
Cum-Dividend vs Ex-Dividend(cum-dividend)
Cum-dividend refers to shares trading with the right to receive an upcoming declared dividend included in the price, while ex-dividend refers to shares trading after the ex-date when the entitlement to that dividend has been detached, with the share price theoretically adjusted downward by the dividend amount on the ex-date.
Delisting(Share Delisting)
Delisting is the process by which a company's shares are removed from the trading platform of a stock exchange, either voluntarily (at the company's initiative) or compulsorily (by SEBI or the exchange for regulatory non-compliance).
Demerger(spin-off)
A demerger is a corporate restructuring event in which a company separates one or more of its business undertakings into a distinct legal entity, with shareholders of the original company typically receiving shares in the newly formed or resulting company.
Dividend(Cash Dividend)
A dividend is a distribution of a portion of a company's profits to its shareholders, declared by the board of directors and paid out of retained earnings or current-year profits.
Dividend Declaration Process(Dividend Payment Process)
The dividend declaration process in Indian listed companies involves a board recommendation of the dividend amount, followed by shareholder approval at the AGM (for final dividends), with payment required within 30 days of declaration, as governed by the Companies Act, 2013.
Dividend Reinvestment(DRIP)
Dividend reinvestment is the process by which cash dividends received from a company or mutual fund are automatically used to purchase additional shares or units of the same instrument, allowing the investor to compound returns without manual intervention.
Dividend Reinvestment Plan (DRIP)(DRIP India)
A dividend reinvestment plan allows shareholders to automatically reinvest cash dividends into additional shares of the company, often without brokerage costs; while common globally, DRIPs remain nascent in India with limited formal adoption by listed companies.
ESOP (Employee Stock Option Plan)(Employee Stock Option)
An Employee Stock Option Plan (ESOP) grants employees the right — but not the obligation — to purchase company shares at a predetermined exercise price after completing a vesting period, regulated for listed companies under SEBI's Share Based Employee Benefits and Sweat Equity (SBEB & SE) Regulations, 2021 and for unlisted companies under the Companies (Share Capital and Debentures) Rules, 2014.
Ex-Date(Ex-Dividend Date)
The ex-date (or ex-dividend date) is the first trading day on which shares trade without the entitlement to an upcoming corporate action benefit such as a dividend, bonus, or rights issue.
Extraordinary General Meeting(EGM)
An Extraordinary General Meeting (EGM) is a shareholder meeting convened outside of the AGM schedule to transact urgent or special business that requires shareholder approval, such as a major acquisition, preferential allotment, or change in capital structure.
Forfeiture of Shares(Share Forfeiture India)
Forfeiture of shares is a procedure under the Companies Act 2013 by which a company cancels shares of a member who fails to pay a valid call or instalment, extinguishing the member's rights and enabling the company to reissue the forfeited shares.
Hive-Off(hive off)
A hive-off is a corporate restructuring transaction in which a company transfers a specific division, business unit, or set of assets to a newly created or existing subsidiary, with the parent company retaining ownership of the subsidiary rather than distributing its shares to existing shareholders — distinguishing it from a demerger where shareholders directly receive shares in the separated entity.
Interim Dividend vs Final Dividend(interim dividend)
An interim dividend is declared and paid by a company's board of directors during the financial year before accounts are finalised, while a final dividend is proposed by the board and approved by shareholders at the Annual General Meeting after the financial year ends.
Leveraged Buyout (LBO)(LBO)
A Leveraged Buyout (LBO) is an acquisition in which the purchase price is funded primarily by debt, secured against the assets and cash flows of the acquired company itself, with the acquirer contributing a relatively small amount of equity, creating a highly leveraged capital structure post-acquisition.
Listing of Securities Post-Corporate Action(Post-Corporate Action Listing)
After a corporate action such as a bonus issue, stock split, rights issue, merger, or debenture conversion, a company must follow stock exchange procedures to list the newly issued or revised securities, including obtaining exchange approval and updating the depositories with the revised capital structure.
Management Buyout (MBO)(MBO)
A Management Buyout (MBO) is a transaction in which the existing management team of a company — sometimes in partnership with financial investors — acquires a controlling stake in the listed entity, typically leading to delisting from the stock exchanges, with the process governed by SEBI's Delisting Regulations 2021.
OFS (Offer for Sale)(OFS)
An Offer for Sale (OFS) is a mechanism through which existing shareholders — including promoters and large investors — of a listed company can sell their shares to the public through the stock exchange platform, without the company itself raising any fresh capital.
Open Offer(Takeover Offer)
An open offer is a mandatory or voluntary public announcement by an acquirer to purchase at least 26% of the total shares of a target listed company from its public shareholders at a specified price, triggered by SEBI's Takeover Code.
Phantom Stock(shadow equity)
Phantom stock is a cash-based long-term incentive plan in which employees receive a notional allocation of hypothetical company shares, entitling them to a cash payment equal to the appreciation in the company's share price (or full share value) over a vesting period, without actual equity issuance or shareholder dilution.
Postal Ballot(E-Postal Ballot)
Postal Ballot is a mechanism under Section 110 of the Companies Act, 2013 and SEBI LODR that allows shareholders to vote on specified resolutions without physically attending a general meeting, now conducted predominantly through electronic means.
Preferential Allotment
A preferential allotment is the issuance of equity shares, convertible securities, or warrants by a listed company to a select group of investors — such as promoters, institutional investors, or strategic partners — outside the regular public offer route, subject to SEBI's pricing and lock-in regulations.
Proxy Voting(Proxy)
Proxy voting allows a shareholder who cannot personally attend a general meeting to authorise another person (the proxy) to attend and vote on their behalf, a right enshrined under Section 105 of the Companies Act, 2013.
QIP (Qualified Institutional Placement)(QIP)
A Qualified Institutional Placement (QIP) is a capital-raising mechanism available exclusively to listed Indian companies, through which equity shares, convertible securities, or warrants are issued to Qualified Institutional Buyers (QIBs) without the requirement of filing a fresh prospectus with SEBI.
Record Date(Record Date for Dividend)
The record date is the cut-off date set by a company to determine which shareholders are eligible to receive a corporate action benefit such as a dividend, bonus issue, rights issue, or stock split.
Record Date vs Ex-Date (Detailed)(ex-date)
The record date is the date on which a company determines the list of eligible shareholders for a corporate action (dividend, bonus, rights issue, or split), while the ex-date — in India's T+1 settlement cycle — is set one trading day before the record date, meaning that a buyer must purchase shares at least on the ex-date to be credited on time and qualify for the corporate action.
Reverse Stock Split(share consolidation)
A reverse stock split is a corporate action in which a company consolidates its existing shares into a smaller number of shares, proportionally increasing the face value or market price per share without altering the total market capitalisation.
Rights Issue(Rights Offering)
A rights issue is a corporate action in which a company offers additional shares to its existing shareholders at a discounted price, in proportion to their current holdings, as a means of raising fresh capital.
Scheme of Arrangement
A Scheme of Arrangement is a court-approved restructuring mechanism under Section 230–232 of the Companies Act, 2013, through which a company can reorganise its capital, merge with another entity, or redistribute assets among shareholders in a legally binding manner.
Scheme of Arrangement (Detailed)(NCLT Scheme)
A scheme of arrangement is a court-sanctioned restructuring mechanism under Sections 230 to 232 of the Companies Act 2013, requiring National Company Law Tribunal approval and separate class meetings of shareholders and creditors, used for mergers, demergers, capital reductions, and debt restructurings.
Scrip Dividend(scrip issue in lieu of dividend)
A scrip dividend is a corporate action where a company offers shareholders the option to receive additional shares instead of a cash dividend, effectively allowing the company to conserve cash while still distributing value to shareholders.
Share Buyback Tax (Detailed)(Buyback Distribution Tax India)
Prior to October 2024, buyback proceeds were taxed at the company level under Section 115QA at an effective rate of 23.296%; the Finance Act 2024 shifted the tax incidence to shareholders by treating buyback proceeds as deemed dividends under Section 2(22)(f), fundamentally altering the after-tax economics of buybacks.
Share Consolidation(reverse stock split)
Share consolidation—also called a reverse stock split—is a corporate action where a company combines multiple existing shares into a single new share, increasing the face value and market price per share while proportionally reducing the total number of shares outstanding.
Share Swap(stock swap)
A share swap is a merger or acquisition transaction in which the consideration paid to the shareholders of the target (transferor) company is entirely or partly in the form of newly issued shares of the acquirer (transferee) company, rather than cash, with the exchange ratio — the swap ratio — determining how many shares of the acquirer each shareholder of the target receives.
Slump Sale(slump sale)
A slump sale is the transfer of a business undertaking as a going concern — including all its assets and liabilities — for a lump sum consideration, without assigning individual values to the separate assets or liabilities, and is taxed under Section 50B of the Income Tax Act 1961 on the difference between the sale consideration and the net worth of the undertaking.
Special Dividend(one-time dividend)
A special dividend is a one-time, non-recurring cash distribution to shareholders that is separate from a company's regular dividend schedule, typically declared when a company realises an extraordinary gain—such as the sale of an asset or a business unit—and wishes to return the windfall to shareholders.
Special Resolution vs Ordinary Resolution(Ordinary Resolution)
A Special Resolution requires at least three-fourths of the votes cast to be in favour to be passed, while an Ordinary Resolution requires only a simple majority of more than half the votes cast, with the Companies Act specifying which business requires each type.
Stock Appreciation Rights (SAR)(SAR)
Stock Appreciation Rights (SARs) are employee incentive instruments that entitle the holder to receive a payment — in cash, shares, or a combination — equal to the increase in the company's share price over the SAR's base price from grant date to exercise date, offering upside participation without requiring the employee to invest capital at exercise.
Stock Buyback Tender Offer(tender offer buyback)
A stock buyback tender offer is a method of share repurchase in which a company invites its existing shareholders to tender (submit) their shares for buyback at a fixed price within a specified time window, as distinct from an open market buyback conducted through stock exchange transactions.
Stock Dividend vs Cash Dividend(Bonus Issue vs Cash Dividend)
A stock dividend distributes additional shares proportional to existing holdings (equivalent to a bonus issue in Indian practice) rather than cash, with the key differences lying in cash flow impact, accounting treatment, and shareholder wealth implications.
Stock Split(Share Split)
A stock split is a corporate action that divides existing shares into a larger number of shares at a proportionally lower price, increasing share count without changing the company's total market capitalisation.
Stock Split Ratio(stock split)
The stock split ratio specifies how many new shares replace each existing share in a stock split — for example, a 1:2 split gives each shareholder two shares for every one held, a 1:5 split gives five, and a 1:10 split gives ten — with the face value per share reduced proportionately in each case.
Sweat Equity(sweat equity shares)
Sweat equity shares are equity shares issued by a company to its employees or directors at a discount or for non-cash consideration such as intellectual property, know-how, or other value additions, governed under Section 54 of the Companies Act, 2013 and SEBI's SBEB & SE Regulations, 2021 for listed companies.
Takeover vs Acquisition(hostile takeover)
In the Indian regulatory context, a takeover specifically refers to a change of control event that triggers mandatory obligations under SEBI's Substantial Acquisition of Shares and Takeovers (SAST) Regulations 2011, while an acquisition is the broader act of purchasing shares or control; a takeover may be friendly (negotiated with the target board) or hostile (opposed by the target board), though hostile takeovers are rare in the Indian listed market.
Trading Lot Adjustment Post-Split and Bonus(Lot Size Adjustment Post-Bonus)
After a stock split or bonus issue, stock exchanges adjust the trading lot size and the market lot for derivatives to reflect the new face value and share count, and odd-lot shares arising from fractional entitlements in bonus issues are handled through a special trading window.
Treasury Stock(buyback shares)
Treasury stock refers to shares that a company has repurchased from the open market or through a buyback offer and holds on its own balance sheet, reducing the total number of shares outstanding in the market without formally cancelling them.
Warrant
A warrant is a financial instrument issued by a company that gives the holder the right, but not the obligation, to subscribe to a specified number of equity shares of the company at a predetermined price within a defined time period.