Non-elective vs. Elective events
Modified on: Thu, 16 May, 2019 at 2:08 PM
Broadly speaking, there are two types of Corporate Actions you will come across as an investor. Non-elective and elective events.
But what do they mean, and how do they differ?
A non-elective event is an action undertaken by the company which does not require a shareholder to make an election to the event. This means that the shareholder becomes a passive participant in the event, some of which include: Cash Dividends, Name Changes, Delisting etc.
Elective events require more action from a shareholder. Corporate actions which require elections by shareholders participating in an event will be defaulted to an option set by the issuer failing any action taken by the shareholder. For example, a company may declare a dividend option to their shareholders i.e. an option to elect to receive a cash dividend or an option to elect to receive fully paid up new shares in the company, with the default option being set to new shares.
The eligible shareholder will need to make a valid election to their broker / custodian / CSDP by the election deadline if they wish to receive the cash dividend or the new shares. Should a shareholder not make a valid election, the shareholder will automatically receive new shares in the company through the defaulted option.
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