Corporate Actions And The Role Of A Transfer Agent

What, exactly, is a Corporate Action?

A Corporate Action is any undertaking by an organization, public or private, that impacts your stock, the way it is traded, your bondholders or your shareholders. A Corporate Action can be as simple as paying a dividend, or as complex as a Reverse Morris Trust transaction. The more complicated events involve the exchange of securities, a new entity or a new shareholder base being created.

Any Corporate Action that involves shareholders requires a transfer agent, even if you don't currently have one. If two companies are involved, either company's transfer agent can be chosen to handle the Corporate Action.

Common types of Corporate Actions

You only have one opportunity to get it right

Corporate Actions can be stressful for everyone involved. There's a high level of complexity, several different entities involved, with lots of moving parts. They require knowledge, excellent communication and perfect timing. If something goes wrong, there are no do-overs.

An experienced transfer agent can take the pressure off the company's shoulders and guide everyone through the process. They work with your legal team, the trading team and the settlement team to make sure everyone fully understands the transaction, what needs to happen and when. Knowing and following best practices for each type of Corporate Action is essential to anticipating and preventing problems. That experience is something a transfer agent can provide.

“Our Sales and Relationship teams work closely with counsel to provide consultation and the best practices on the most complex deals for our clients,” says Legregin.

Possible challenges you may face

Timing issues, miscommunication, setting proper expectations and a lack of clearly defined responsibilities can cause expensive delays. As Legregin explains, “Clear communication and setting expectations with our clients are keys to a successful transaction.”

Here to help you see the bigger picture

Communication is the most important aspect of a successful Corporate Action. With multiple entities involved, everybody needs to be on the same page. A transfer agent can orchestrate the process and provide the consistency of a single point of contact.

Most companies rely heavily on their legal advisors to guide them through a Corporate Action. While your law firm may fully understand your objectives and the legalities of the transaction, depending on the complexity of the transaction, they may not always be familiar with the trading aspect or the settlement aspect. That's where a transfer agent comes in.

Why experience matters

A transfer agent that has a lot of experience with Corporate Actions is in the best position to facilitate the process. “Let our hands-on approach, knowledge and experience guide your event to ensure a smooth transaction for you and your shareholders,” says Legregin.

The transfer agent then acts as the conduit from your legal team to the trading team (wherever your stock is traded, or not traded), to the settlement team at the DTC. They know who to talk to and when, what's expected and how it all must work. The timing of each step is agreed upon, down to the day.

“Engage your transfer agent early for any Corporate Actions event,” Legregin explains. “Provide specifics of the deal and timing to ensure all potential pitfalls and uncertainty are addressed to allow for a smooth, successful transaction.”

It's not over till the payments go out

Your transfer agent is not just a facilitator, they're a trusted partner acting on your behalf. From up-front strategic thinking to back-office mailings, they should provide guidance, expertise and a disciplined approach to make sure nothing gets overlooked. In addition to strategic advice, the transfer agent assists with the vital functions of payments, reporting and mailings, including:

• Shareholder materials
• Shareholder communication
• Processing and mailing of proceeds
• Advice regarding communication with the Exchanges and settlement facilitators
• Tax reporting
• Post-merger services
• Escheatment Services

Ensure your transaction goes smoothly and shareholder engagement remains strong by choosing the right team for your high-profile event. From our corporate actions team, averaging more than 15 years of experience, to our well-versed Customer Care representatives responding to shareholder inquiries, your event is in safe hands across all functional teams.