Companies undertake book closure or fix record date for various corporate actions such as payment of dividend, bonus or rights shares, sub-division of shares, for the purpose of AGM etc.  Sometimes, book closure dates are announced, whereas sometimes a record date is announced.

Lets us understand how the ex-date is calculated, with a real-life example:

1. When book closure dates are announced:

For ICICI Bank, the following announcement was made on BSE titled ‘Fixes Book Closure for Dividend & AGM’:

ICICI Bank Ltd has informed BSE that the Register of Members & Share Transfer Books of the Bank will remain closed from June 07, 2014 to June 30, 2014 (both days inclusive) for the purpose of Payment of Dividend & AGM of the Bank to be held on June 30, 2014.

The payment date for the dividend, subject to approval of the same by the shareholders at the AGM, will be July 01, 2014.

Since the book closure begins from 7^th June 2014 (both days inclusive includes 7^th June 2014), the members list a day prior i.e. on the evening of 6^th June 2014 will be considered for dividend payment and AGM. As T + 2 settlement cycle is followed, names of those shareholders on close of 4^th June 2014 will appear in the members list after two days i.e. on 6^th June 2014. Thus, 4^th June is the last cum-dividend date, while 5^th June 2014 is the ex-dividend date, as shareholders purchasing shares on 5^th June will not be eligible for dividend payment and attendance at AGM.

Cum-dividend means with dividend while Ex-dividend means without the dividend. So, ex-dividend date determines when the right to dividend is no longer transferred with the sale of stock.

Conversely, if one wants to pocket the dividend, hold shares till end of trade on 4^th June, and exit the stock on or after 5^th June. If one has sold shares of ICICI Bank on 5^th June, he will get dividend on the same on 1^st July 2014.

While record date or book closure date, as the case may be, is announced by the company, the stock exchanges fix the ex-dividend date based on the trading holidayes of the exchange. When counting back two days from the record date to determine the ex-dividend date, one must be careful of weekends and exchange holidays.  

Let us consider an example when there are holidays in between:

TCS Ltd has informed BSE that the Register of Members & Share Transfer Books of the Company will remain closed from June 10, 2014 to June 13, 2014 (both days inclusive) for the purpose of Payment of Final Dividend & 19th Annual General Meeting (AGM) of the Company to be held on June 27, 2014.

Since the book closure begins from Tuesday 10^th June 2014 (both days inclusive includes 10^th June 2014), the members list on Monday evening i.e. 9^th June 2014 will be considered. Counting back two days due to T + 2 settlement cycle, Saturday 7^th June and Sunday 8^th June being exchange holidays, Friday 6^th June and Thursday 5^th June. Thus, names of shareholders on close of 5^th June 2014 will appear in the members list on 9^th June 2014. This means that 5^th June is the last cum-dividend date, while 6^th June 2014 is the ex-dividend date, as those purchasing shares on 6^th June will not be eligible for dividend payment.

2. Now let’s understand calculating ex-date, when record date is fixed by the company:

Gruh Finance Ltd has informed BSE that the Company has fixed June 10, 2014 as the Record Date for the purpose of ascertaining the entitlement for issue of Bonus Shares in the ratio of 1:1; i.e. (one bonus share of Rs. 2/- for every one paid up equity share of Rs. 2/- each held by the shareholder on the record date).

Record date of Tuesday 10^th June 2014, means end of day on Tuesday 10^th June 2014. Thus Tuesday 10^th June is included in the calculation of T + 2 days. So counting back, Tuesday 10^th June and Monday 9^th June, Friday 6^th June (Saturday and Sunday being holidays) is the last cum-date. Names of shareholders on close of Friday 6^th June 2014 will appear in the members list on 10^th June 2014. This means that 6^th June is the last cum-dividend date, while Monday 9^th June 2014 is the ex- date, as those purchasing shares on 9^th June will not be eligible for bonus.

If all the above is too intimidating for you, simply refer to our Databank section to know the ex-dates on https://www.sptulsian.com/databank/book_closure.