Record Date

The record date, also called the date of record, is the date a company's board sets to determine which shareholders are entitled to receive a declared dividend or to take part in another corporate action, such as voting at a meeting, receiving a rights offering or getting shares in a spin-off. Anyone who appears on the company's register of shareholders at the close of business on that date receives the benefit, whether or not they still own the shares when it is paid.

The record date is one of four dates in the dividend timeline: the declaration date, the ex-dividend date, the record date and the payment date. It is mainly an administrative cut-off used by the company and its transfer agent to build the list of payees.

Share trades do not settle instantly. In the United States, most stock trades settle one business day after the trade date, a standard known as T+1 that took effect in May 2024. A buyer therefore only appears on the register once the trade has settled. To account for this, exchanges set an ex-dividend date. Buyers who purchase on or after that date are not entitled to the dividend; the seller keeps it.

Under T+1, the ex-dividend date is normally the same business day as the record date. Under the earlier T+2 cycle it was one business day before. For example, if a company declares a dividend with a record date of Friday, 14 March, an investor must buy the shares by Thursday, 13 March, so that the trade settles by Friday. A purchase on Friday settles on the following Monday, too late to be on the register. On the ex-dividend date the share price usually falls by roughly the amount of the dividend, other things being equal, because new buyers no longer receive it.

The record date itself requires no journal entry. The accounting events happen on the other dates:

• On the declaration date, the board's vote creates a legal liability. The company debits retained earnings, or a dividends declared account that is later closed to retained earnings, and credits dividends payable.
• On the record date, the company or its transfer agent simply identifies the shareholders entitled to payment. The total liability is unchanged.
• On the payment date, the company debits dividends payable and credits cash.

Suppose a company with 2,000,000 outstanding shares of common stock declares a dividend of $0.25 per share on 1 March, with a record date of 14 March and a payment date of 31 March. On 1 March it records a $500,000 liability. On 14 March, the register shows which holders will share that $500,000. On 31 March, cash of $500,000 is paid out and the liability is cleared. If financial statements are prepared at 15 March, the $500,000 appears as a current liability.

Record dates are also used for shareholder meetings, where only holders of record on a set date may vote, including through proxy voting. They apply to preferred stock dividends, bond interest payments, stock dividends and rights issues. Investors who hold shares through a broker are not usually on the company's register by name; their broker or a central depository is the holder of record and passes the dividend on. For companies listed in the United States, the dates are announced publicly and exchanges such as the New York Stock Exchange and Nasdaq set the ex-dividend date under their rules. The Securities and Exchange Commission (SEC) oversees the settlement standard.

• U.S. Securities and Exchange Commission