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A book closure is a cutoff used when a company pays out dividends and other benefits to shareholders. Everyone registered as an owner of securities prior to the cutoff date will receive benefits, while people who register after that date will not receive those benefits. Also known as the record date, the book closure is an important concept for investors to be aware of, and people should pay attention when companies make dividend and bonus announcements to make sure they are aware of the date set for the book closure.
Every time securities change hands, their registration must be updated. This is a complicated and ongoing process made even harder by the rapid turnover of some securities. When companies are preparing to transfer benefits to shareholders, they need to establish a cutoff to make sure shareholders understand who will be eligible for that benefit. Under the book closure, people registered before the date get benefits, and transfer requests made after that date will be honored, but the new owners will not be entitled to the benefits paid out.
Companies attempt to maintain an updated list of current owners of their securities. When a book closure is announced, people should make sure their stock registration is up to date. If there is any question about whether they are properly listed, they should contact the registration officer to confirm the accuracy of their registrations, including the number of shares listed and their contact information. Failure to do this can result in missing out on a benefits payment or getting less than one is entitled to.
People preparing to transfer securities may also consider book closure when making investment decisions. If it is in the near future, it can be worth it to wait to sell the stocks in order to get the benefits. After the date passes, the stock can be transferred to another person. Conversely, people buying securities may want to try and get shares before the book closure so they can access the benefits payments. This can result in an irregular market for a company's shares after a dividend announcement.
When companies announce plans to pay out benefits, this information is reported in a number of venues including financial publications. People can also contact companies directly to get information about upcoming benefits and the book closure set for those benefits. For people who leave the management of their securities to a financial consultant, this person is held responsible for keeping registrations up to date and making good investment decisions on behalf of the client.
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