Corporate action explained

Corporate Actions

1. What is a corporate action?

A corporate action is when a company makes a change that affects its shareholders. This could mean you receive extra shares, lose some shares, get cash, or you may be able to make a decision.

Corporate actions are grouped into three types:

• Mandatory – happens automatically, no action needed by you.
  
  
• Mandatory with options – you’re affected, but you may get a choice.
  
  
• Voluntary – nothing happens unless you decide to take part.

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Can I participate in Corporate Actions?

2. Freetrade can support some Corporate Actions

Freetrade does not promise to support all corporate actions (see section 21 of our Terms and Conditions), though we do often support them where it is feasible for us to. 

Where we do support a corporate action, we will contact you to let you know what the corporate action is, and whether you need to take any action (in which case we will also let you know how and by when you will need to respond to us). 

Sometimes, where it is in our customers’ best interests, we can decide to exercise corporate action on behalf of all of our customers. 

Where we receive benefits (such as extra shares or cash) as a result of a corporate action in relation to your shares, we will receive and hold these for you. 

3. Not participating means you might lose out

If you do not make a selection in relation to a corporate action, or if Freetrade does not support a particular corporate action, this means that you will not be able to make a choice as a shareholder and/or receive benefits (such as extra shares, cash payments, or special offers) that you might otherwise have been entitled to. 

You should look out for messages from Freetrade telling you about corporate actions that we can support, so that you can take any necessary action before the deadline. 

If you have any questions about a corporate action you can contact us at [hello@freetrade.io]. 

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Mandatory Corporate Actions

4. What is a stock split?

A stock split is when a company increases the number of shares in the market. You get more shares, but each is worth less.

Example: If you own 5 shares and there’s a 5-for-1 split, you’ll now hold 25 shares. The total value of your investment stays the same.

5. What is a consolidation (reverse split)?

A consolidation reduces the number of shares. You own fewer shares, but each is worth more.

Example: In a 1-for-5 consolidation, if you had 25 shares, you’ll now have 5. Your investment value stays the same.

6. What is a dividend?

A dividend is when a company shares profits with shareholders, usually as cash.

Example: If you hold 100 shares and the dividend is £0.50 per share, you’ll receive £50.

At Freetrade:

• We add dividends to your account once we’ve received them (normally within 2 working days).
  
  
• They’re paid into the same account you hold the shares in.
  
  
• If paid in another currency, we’ll convert them into pounds at the market rate (no FX fee).
  
  
• You’ll be notified when a dividend arrives.
  
  

Fractional shares also earn dividends, rounded down to the nearest 1p.

7. What is a bonus issue (scrip issue)?

A company gives you extra shares for free, instead of cash.

Example: Own 100 shares, and a 1-for-10 bonus issue means you’ll get 10 more shares for free.

8. What is a merger?

A merger is when two companies join to form a single company.

How it affects you: Your shares may be replaced with cash or new shares. Sometimes new shares cannot be supported on Freetrade, in which case you may receive cash instead.

9. What is a demerger?

A demerger is when a company splits up, and part of it becomes a new company.

How it affects you: You may receive shares in the new company (if we can support them) or cash.

10. What is a spin-off?

A spin-off is a type of demerger. A company separates part of its business into a new, independent company.

How it affects you: You may receive new shares or cash, depending on whether the new stock can be added to the Freetrade app.

11. What is a mandatory takeover?

A mandatory takeover is an offer made by one company (the “acquiring company” or “bidder”) to purchase some or all outstanding shares of another company as required by securities laws and regulations or stock exchange rules governing corporate takeovers.

Mandatory with Choice

12. What is a scrip dividend?

Instead of only cash, you can choose to receive extra shares instead.

13. What is a rights issue?

A company raises money by offering shareholders new shares at a discount.

Example: If you own 200 shares and the offer is 1 new share for every 5 held, you could buy 40 new shares at the discounted price.

At Freetrade:

• You may not always be able to take part in rights issues or similar offers.
  
  
• Our Corporate Actions team will contact you if we can support your participation.
  
  

Voluntary Corporate Actions

14. What is a tender offer?

A company (or investor) offers to buy your shares at a set price. You choose whether to sell or keep them.

15. What is a buyback offer?

A company offers to repurchase its own shares, often at a premium. You decide whether to sell.

16. What is an exchange offer?

You’re offered the chance to swap your shares for something else, like different shares or bonds.

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Proxy Voting 

1. What is proxy voting?

Proxy voting lets you, as a shareholder, have your say in company decisions. When there’s a shareholder meeting, you’ll be invited to vote on key issues. Freetrade collects your preferences and submits them on your behalf.

2. Can I vote on all my securities?

Currently, proxy voting is available only for UK and US securities held with Freetrade.

3. How will I know when to vote?

When a shareholder meeting is scheduled:

• You’ll get an email with a link to your ballot.
  
  
• The ballot will list the items you can vote on.
  
  
• You can select and update your choices until the cut-off date (usually 1–3 days before the meeting).
  
  

4. Do I have to vote?

No. Voting is optional, and you can ignore the invitation if you don’t want to take part.

5. What is a beneficial owner?

A beneficial owner is the individual who ultimately owns and benefits from a security - in this case, you as a Freetrade customer!

6. How do I change my beneficial ownership status?

You can update your beneficial ownership status directly in the Freetrade app under:
Portfolio → Profile icon → Contact us → Send us a message → My investments → Dividends and corporate actions → Proxy voting. Here, select either “yes” or “no” to whether or not you would like your details passed onto issuing companies of your US holdings

7. What types of events can I vote on?

Common examples include:

• Election of directors: You can vote to approve or reject the nominated candidates for the board when changes occur.
  
  
• Mergers and acquisitions: If the company is considering a merger, acquisition, or other significant corporate transactions, you may be asked to vote on the proposed deal.
  
  
• Approval of financial statements: Shareholders often have the opportunity to vote on the approval of the company's financial statements, including the annual report and audited financial statements.
  
  
• Executive pay packages: Companies sometimes seek shareholder approval for executive compensation packages, including salaries, bonuses, stock options, and other forms of remuneration. You can vote to approve or reject these proposals.
  
  
• Changes to company rules (charter/bylaws): Significant changes to a company's charter or bylaws, such as amendments to voting rights, share classes, or other governance provisions, may require shareholder approval.
  
  
• Dividend policies: In some cases, companies seek shareholder approval for dividend policies, such as the frequency and amount of dividends to be paid.
  
  
• Corporate governance matters: Shareholders may be asked to vote on matters related to corporate governance, such as changes to the board structure, the appointment of auditors, or the implementation of specific governance practices.
  
  

8. Can I vote with fractional shares?

Yes. Votes from fractional holdings may be combined with other shareholders’ to form full votes, according to your instructions.

9. Can I attend the meeting myself?

Yes, if the company allows it. Your ballot will show whether you can attend virtually or in person. Not all companies offer this option.

10. Can I use proxy voting to take part in voluntary corporate actions?

New: No. Proxy voting may include approving a voluntary corporate action (VCA), but you cannot take it up directly through Freetrade.

This means that if Freetrade cannot support a particular voluntary corporate action, you may not be able to participate in benefits - like cash payments, additional shares, or special offers - that you might otherwise receive.

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Important Information