Shares of a listed company invariably change hands during market hours while trading. Therefore, it is difficult to decide ownership of shares on a particular day. In case of delivery of shares, it has to undergo the stock exchange’s clearing and settlement process before showing in the Demat account to know exactly who owns the shares.
Therefore, there has to be a cut-off date in order to transfer the benefits of corporate action such as bonus shares, stock splits, right issues, dividends and any other rights pertaining to shares.
This cut-off date is known as a record date.
Instead of fixing a record date, the company might choose to close the registrar of shareholders for registration for a specific period.
Such period of closing registrar of shareholders is referred to as book closure period.
Therefore, book closure is the periodic closure of the Register of Members to take a record of the shareholders to determine their entitlement to corporate actions.
Company will decide the book closure start date and end date to let everyone know the period of book closure.
The company will consider all transfer requests received before the commencement of the book closure. After the book closure start date, the company will not handle any transfer of shares.
The members whose names appear in the register of members on the end date of book closure are entitled to receive the benefits of dividend, right shares or bonus shares as the case may be.
This means, the book closure end date is the date on which a shareholder must hold the stock in their demat account to be eligible for corporate action benefits such as bonus shares, splits, and dividends.
The record date and book closure date are the same in their cut-off requirement for the eligibility for corporate action benefits. In case of a record date, the company does not close its registrar of shareholders.
