Corporate Action

A dividend is a distribution of a portion of a company's earnings to its shareholders, typically in cash or additional shares. It is a key mechanism for returning value.

• Cash Dividend: Direct payment to shareholders per share held.
• Stock Dividend: Issuance of additional shares, increasing the total share count (e.g., a 5% stock dividend).
• Impact: Reduces retained earnings on the balance sheet; cash dividends also reduce corporate cash reserves.

These actions alter the number of shares outstanding and the price per share without changing the company's total market capitalization.

• Stock Split: Increases the number of shares (e.g., a 2-for-1 split) and proportionally decreases the share price. Makes shares more accessible.
• Reverse Stock Split: Decreases the number of shares (e.g., a 1-for-10 reverse split) and proportionally increases the share price. Often used to meet exchange listing requirements.

Events where companies combine or one acquires another, leading to significant restructuring of equity.

• Merger: Two companies combine to form a new entity.
• Acquisition: One company (the acquirer) purchases another (the target).
• Consideration: Shareholders of the target company may receive cash, shares of the acquirer, or a combination, as defined in the deal terms.

Mechanisms for companies to raise additional capital from existing shareholders.

• Rights Issue: Offers existing shareholders the right to purchase new shares at a discount, usually proportional to their existing holdings.
• Warrants: Securities that give the holder the right to buy a company's stock at a specific price before expiration. Often issued alongside bonds or preferred stock.

Corporate restructuring where a parent company divests a business unit to create a new, independent public company.

• Spin-off: Shares of the new entity are distributed to existing shareholders of the parent company on a pro-rata basis, tax-free.
• Equity Carve-out: A partial divestiture where the parent sells a minority stake in the subsidiary through an IPO, retaining control.

Events where shareholder participation is not optional, requiring adjustments to securities and positions.

• Callable Bonds: Issuer exercises the right to redeem bonds before maturity.
• Tender Offers: Company offers to buy back its own securities from shareholders at a specified price.
• Class Action Lawsuits: While not initiated by the company, successful settlements result in mandatory payments to shareholders, treated as a corporate action.

Corporate actions require assets to be represented by programmable token standards like ERC-1400 (Security Token Standard) or ERC-3643 (Tokenized Assets). These standards embed the necessary logic for:

• Restrictions and compliance (e.g., investor whitelists, transfer rules).
• Action-specific functions (e.g., issueDividend, executeSplit).
• Proof of ownership snapshots at a specific block height.

Many corporate actions depend on external, verifiable data. Decentralized oracles (e.g., Chainlink) are required to feed authenticated information onto the blockchain, such as:

• Stock prices for calculating dividend amounts.
• Voting results from external tallying systems.
• Regulatory event confirmations (e.g., merger approvals). This creates a hybrid smart contract that reacts to real-world triggers.

Sensitive actions like board votes or major asset transfers require on-chain governance with secure authorization. Technical implementations include:

• Multi-signature wallets (e.g., Gnosis Safe) for corporate treasury actions.
• Governance modules that encode voting power based on token holdings.
• MPC protocols to enable private voting or confidential tallying before on-chain settlement.

The core technical promise is atomic settlement—the simultaneous, irreversible execution of the action and distribution of assets. This requires:

• Deterministic state changes within a single transaction.
• Batch processing capabilities to distribute dividends to thousands of token holders efficiently.
• Failure rollback mechanisms to ensure the entire action either completes fully or reverts, preventing partial states.

On-chain execution must produce an immutable, transparent audit trail. Key technical features include:

• Event logging where every step of the action emits standardized, queryable events (e.g., DividendDeclared, SharesSplit).
• Regulator access keys that allow permissioned viewing of compliance data without exposing all user information.
• Time-locks and delay mechanisms to meet mandatory notice periods before execution.

For assets or stakeholders across multiple blockchains, cross-chain messaging protocols are essential. They enable:

• Unified action execution across different Layer 1 and Layer 2 networks.
• Asset bridging to consolidate holdings for snapshot purposes.
• Verification of proofs from one chain to another (e.g., proving Ethereum-based ownership to trigger an action on Polygon). Protocols like Chainlink CCIP or IBC are commonly used for this.

The automated issuance of rewards or profits to token holders, directly proportional to their holdings. This is executed via smart contracts that calculate entitlements based on a snapshot of the holder registry and distribute assets (native tokens or stablecoins) to qualifying wallets.

• Key Mechanism: Uses a merkle distributor or similar pattern for gas-efficient claims.
• Example: A DAO treasury distributing protocol revenue to governance token stakers.

Corporate actions like mergers, acquisitions, or major strategic shifts are decided through on-chain governance. Token holders vote using their holdings as voting power, with proposals and execution automated via smart contracts.

• Standards: Often implemented using ERC-20 (votes weighted by balance) or ERC-721 (one-token-one-vote).
• Process: A proposal reaches a quorum and supermajority threshold before being queued for execution by a Timelock contract.

Analogous to traditional stock splits and reverse splits, these actions adjust the supply and price of a token without changing the total market capitalization. A 1:10 split increases token supply tenfold, dividing the price per token accordingly.

• On-Chain Execution: Typically requires a token migration to a new contract, with holders swapping old tokens for new ones at the prescribed ratio.
• Purpose: Increases liquidity (split) or meets exchange listing requirements (reverse split/merge).

On-chain actions can be mandatory (applied to all holders automatically) or voluntary (require holder opt-in).

• Mandatory Example: An airdrop of new tokens to all existing holders at a snapshot block.
• Voluntary Example: A tender offer where holders can choose to exchange tokens for another asset at a premium within a specific window.
• Compliance: Smart contracts enforce deadlines and eligibility, creating an immutable record of participation.

Standards like ERC-1400 (Security Token Standard) and ERC-3643 (Tokenized Assets) are explicitly designed for regulated corporate actions. They provide built-in functions for:

• Transfer restrictions (whitelists, lock-ups).
• Forced transfers for mandatory actions.
• Document attachment (prospectuses, legal notices).
• Compliance checks via on- or off-chain verification.

Executing corporate actions on-chain faces key challenges:

• Off-Chain Data Dependency: Events like earnings reports or board decisions originate off-chain.
• Oracle Solution: Decentralized Oracles (e.g., Chainlink) are used to attest and deliver verified off-chain data (e.g., dividend amount, vote result) to trigger smart contract execution.
• Legal Enforceability: The on-chain event must be recognized by off-chain legal frameworks, requiring integration with traditional systems.

A cryptographic asset that grants holders the right to vote on proposals that constitute corporate actions, such as protocol upgrades, treasury management, and fee changes. These tokens encode shareholder rights directly on a blockchain, enabling decentralized autonomous organizations (DAOs) to execute decisions transparently and programmatically.

• Key Function: Represents voting power proportional to token holdings.
• Example: Uniswap's UNI token holders vote on fee switch activation.

The process of recording and tallying votes for corporate actions directly on a blockchain ledger. This ensures immutability, transparency, and verifiability of the governance process. Votes are typically cast by signing transactions with a private key, linking them to a governance token balance.

• Mechanism: Uses smart contracts to propose, vote, and execute actions.
• Benefit: Eliminates reliance on centralized intermediaries for vote custody and counting.

A specific type of corporate action where new tokens are created and allocated to investors, team members, or the community. This includes Initial Coin Offerings (ICOs), airdrops, and liquidity mining launches. The terms, schedules, and recipient addresses are often enforced by smart contracts.

• Purpose: To raise capital, decentralize ownership, or incentivize network participation.
• On-Chain Record: Provides a permanent, auditable ledger of initial allocations.

A critical corporate action that modifies the core logic of a decentralized protocol. Upgrades can fix bugs, improve efficiency, or add features. They often require a governance vote and are executed via mechanisms like Proxy Patterns or Diamond Proxies (EIP-2535) to allow logic changes while preserving the contract's address and state.

• Risk: Poorly executed upgrades can lead to fund loss or protocol forks.
• Example: Compound's upgrade to add multi-chain support via Governor Bravo.

The set of corporate actions concerning the custody, allocation, and spending of a protocol's native treasury (often held in DAOs like MakerDAO or Arbitrum). This includes budgeting for grants, liquidity provisioning, and token buybacks. Decisions are executed via multi-signature wallets or governed smart contracts.

• On-Chain Transparency: All inflows and outflows are publicly verifiable.
• Action Types: Strategic asset sales, stablecoin yield farming, operational funding.

A radical corporate action where a blockchain's existing codebase is copied and modified to create a new, competing network. This can be a hard fork (non-backwards-compatible) or soft fork (backwards-compatible). Forks are often the result of irreconcilable governance disputes, such as Ethereum/Ethereum Classic or Uniswap v2/v3.

• Trigger: Disagreements on technical direction, tokenomics, or community values.
• Outcome: Creates a new asset and splits the community and liquidity.