Holder of record definition
/What is a Holder of Record?
A holder of record is the registered owner of a security as of the close of business on the record date. This person or other entity must be listed in the security issuer's stock ledger in order to be the holder of record. The concept is of most importance when determining who should receive dividend or interest payments as of the date when they are to be distributed, as well as the ability to vote in corporate elections. When a security is sold, its owner ceases to be the owner of record.
Example of a Holder of Record
As an example of the holder of record concept, Active Corporation’s board of directors announces that it will pay a dividend to all shareholders of record as of March 31. This means that March 31 is the record date. Anna has owned 1,000 shares of Active for the past few years, and so is a holder of record on the record date. She will receive the dividend. Enoch bought 1,000 shares of Active on April 1. He was not a holder of record by the close of business on the record date, and so will not receive a dividend from the company.
This example illustrates the importance of the record date in determining who is a holder of record, and whether that holder will be paid a dividend.
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Roles and Responsibilities of the Holder of Record
The key roles and responsibilities of a holder of record are as follows:
Ownership recognition. The holder of record is legally recognized as the owner of the securities and has their name listed on the company's records or through a brokerage firm or transfer agent.
Receiver of dividends and distributions. Holders of record are entitled to receive dividends, distributions, or other benefits issued by the company. To qualify, their ownership must be recorded by the record date set by the company.
Ability to vote shares. Shareholders of record typically have the right to vote at annual general meetings or special meetings. Voting can pertain to key corporate matters like electing board members, approving mergers, or changing corporate policies.
Receiver of notices. A holder of record receives official communication from the company, such as annual reports, proxy statements, and meeting notices.
Initiates transfers. Holders of record can initiate the transfer of ownership of their shares to another party. This is typically facilitated through a transfer agent or brokerage.
Tax reporting obligation. The holder of record is responsible for tax obligations tied to their ownership of securities, such as reporting dividends or capital gains on their tax filings.
Custodianship. If the securities are held in custody by a third-party broker or financial institution, the broker is often listed as the holder of record, while the investor is considered the beneficial owner. In this case, the record holder acts as an intermediary.
The holder of record acts as the formal link between the corporation and its shareholders, ensuring that ownership is documented, benefits are distributed, and the shareholder's legal rights are upheld.