The charter of a non-public JSC does not provide for preferred shares. How to release them? Preferred shares Ordinary shares of the company can be converted

1. Shareholders - owners of preferred shares of the company do not have the right to vote on general meeting shareholders, unless otherwise provided by this Federal Law.

(see text in the previous edition)

ConsultantPlus: note.

Requirements of paragraph 2 of Art. 32 do not apply to preferred shares credit institutions, purchased in established by law cases.

2. The company's charter must determine the amount of dividend and (or) the value paid upon liquidation of the company (liquidation value) for preferred shares of each type. The dividend amount and liquidation value are determined on a firm basis. monetary amount or as a percentage of the par value of preferred shares. The size of the dividend and the liquidation value of preferred shares are also considered determined if the charter of the company establishes the procedure for their determination or the minimum amount of the dividend, including as a percentage of the company’s net profit. The amount of the dividend is not considered determined if the company’s charter specifies only its maximum size. Owners of preferred shares for which the size of the dividend is not determined have the right to receive dividends on a par with the owners of ordinary shares.

(see text in the previous edition)

If the company's charter provides for preferred shares of two or more types, for each of which the amount of dividend is determined, the company's charter must also establish the order of payment of dividends for each of them, and if the company's charter provides for preferred shares of two or more types, for each of which the dividend is determined liquidation value - the order of payment of the liquidation value for each of them.

(see text in the previous edition)

The company's charter may establish that an unpaid or incompletely paid dividend on preferred shares of a certain type, the amount of which is determined by the charter, is accumulated and paid no later than the period specified by the charter (cumulative preferred shares). If the charter of the company does not establish such a period, preferred shares are not cumulative.

(see text in the previous edition)

(see text in the previous edition)

2.1. The company's charter may provide for preferred shares of a certain type, dividends on which are paid first - before the payment of dividends on preferred shares of any other types and ordinary shares (hereinafter referred to as preferred shares with priority in the order of receiving dividends).

The size of the dividend on preferred shares with priority in the order of receipt of dividends is determined in a fixed monetary amount or as a percentage of the par value of such shares. Preference shares with priority in the order of receipt of dividends, do not have a liquidation value and provide shareholders - their owners with the right to vote at the general meeting of shareholders only on issues specified in this Federal Law. Preferred shares with priority in the order of receipt of dividends are not taken into account when counting votes and when determining the quorum for making decisions on issues within the competence of the general meeting of shareholders not specified in subparagraph 3 of paragraph 1 of Article 48 of this Federal Law, including in cases provided for in paragraphs 4 and of this article, as well as on issues the decision on which, in accordance with this Federal Law, is made unanimously by all shareholders of the company.

Changing the rights to preferred shares with priority in the order of receiving dividends after the placement of the first such preferred share and reducing authorized capital companies by reducing the par value of such preferred shares are not permitted.

Each shareholder - owner of preferred shares with priority in the order of receiving dividends in the event of a reorganization of the company in the form of a merger or accession must receive in the company created through reorganization in the form of a merger, or in the company to which the merger is carried out, preferred shares providing the same rights, as well as preferred shares belonging to him in the reorganized company with an advantage in the priority of receiving dividends.

3. The charter of the company may provide for the conversion of preferred shares of a certain type into ordinary shares or preferred shares of other types at the request of the shareholders - their owners, or the conversion of all shares of this type within the period determined by the charter of the company. In this case, the company's charter state registration the issue of convertible preferred shares must determine the procedure for their conversion, including the number, category (type) of shares into which they are converted, and other conditions of conversion. Changing the specified provisions of the company's charter after the placement of the first convertible preferred share of the corresponding issue is not allowed.

(see text in the previous edition)

Conversion of preferred shares into bonds and other securities, with the exception of shares, and conversion of preferred shares with priority in the order of receipt of dividends into ordinary shares and other types of preferred shares are not permitted. Conversion of preferred shares into ordinary shares and preferred shares of other types is permitted only if this is provided for by the company's charter, as well as during the reorganization of the company in accordance with this Federal Law.

(see text in the previous edition)

Shareholders - owners of preferred shares participate in the general meeting of shareholders with the right to vote when resolving issues on the reorganization and liquidation of the company, issues provided for in paragraph 3 of Article 7.2 and Article 92.1 of this Federal Law, as well as issues on which decisions are made in accordance with this Federal Law unanimously by all shareholders of the company.

(see text in the previous edition)

Shareholders - owners of preferred shares of a certain type acquire the right to vote when deciding at the general meeting of shareholders issues on introducing amendments and additions to the company's charter that limit the rights of shareholders - owners of preferred shares of this type, including cases of determining or increasing the amount of dividends and (or) determining or increasing liquidation value paid on preferred shares of the previous priority, providing shareholders - owners of preferred shares of a different type with advantages in the order of payment of dividends and (or) liquidation value of shares, or introducing provisions on declared preferred shares of this or another type, the placement of which may lead to an actual decrease the amount of dividend and (or) liquidation value determined by the company's charter, paid on preferred shares of this type. The decision to make such changes and additions is considered adopted if at least three-quarters of the votes of shareholders - owners of voting shares participating in the general meeting of shareholders are cast in favor of it, with the exception of votes of shareholders - owners of preferred shares, the rights of which are limited, and three-quarters votes of all shareholders - owners of preferred shares of each type, the rights of which are limited, unless the charter of the company establishes a larger number of votes of shareholders to make such a decision.

(see text in the previous edition)

Shareholders - owners of preferred shares of a certain type acquire the right to vote when deciding at the general meeting of shareholders the issue of filing an application for listing or delisting of preferred shares of this type. The specified decision is considered adopted provided that at least three-quarters of the votes of shareholders - owners of voting shares participating in the general meeting of shareholders are cast for it, with the exception of votes of shareholders - owners of preferred shares of this type, and three-quarters of the votes of all shareholders - owners of preferred shares shares of this type, unless the company's charter establishes a greater number of votes of shareholders to make this decision.

(see text in the previous edition)

Shareholders - owners of preferred shares of a certain type, the amount of dividend for which is determined in the company's charter, with the exception of shareholders - owners of cumulative preferred shares, have the right to participate in the general meeting of shareholders with the right to vote on all issues within its competence, starting from the meeting following the annual general a meeting of shareholders at which, regardless of the reasons, no decision was made on the payment of dividends or a decision was made on incomplete payment of dividends on preferred shares of this type. The right of shareholders - owners of preferred shares of this type to participate in the general meeting of shareholders is terminated from the moment of the first payment of dividends on these shares in full.

6. The charter of a non-public company may provide for one or more types of preferred shares, providing, in addition to or instead of the rights provided for in this article, the right to vote on all or some issues within the competence of the general meeting of shareholders, including upon the occurrence or termination of certain circumstances (commitment or failure to company or its shareholders of certain actions, the occurrence certain period, adoption or failure by the general meeting of shareholders or other bodies of the company of certain decisions within a certain period, alienation of company shares to third parties in violation of the provisions of the company’s charter on the pre-emptive right to acquire them or on obtaining the consent of the company’s shareholders for their alienation and other circumstances), pre-emptive right to acquire shares of certain categories (types) placed by the company and other additional rights. Provisions on preferred shares with the specified rights may be provided for by the charter of a non-public company upon its establishment, or included in the charter or excluded from it by decision adopted by the general meeting of shareholders unanimously by all shareholders of the company. The specified provisions of the charter of a non-public company can be changed by a decision adopted by the general meeting of shareholders unanimously by all shareholders - owners of such preferred shares and by a three-quarters majority of the votes of shareholders - owners of other voting shares participating in the general meeting of shareholders.

Filimoshin P.M. Advisor to the Department for Regulation of Issue and Circulation of Emission Bonds valuable papers FCSM of Russia http://www.profconsalt.ru

Legislation Russian Federation on securities does not contain a definition of conversion. The author considers it possible to define conversion as the acquisition of ownership rights to placed securities through the alienation of ownership rights to previously placed securities.

From this definition it follows that only persons who, prior to its implementation, have ownership rights to already placed securities can take part in the conversion.

It may seem that conversion is a special case of placing securities through a private subscription, in which payment for securities is made in non-monetary means - other securities. However, this assumption is erroneous. The fundamental difference between conversion is that this method of placement is accompanied by the cancellation (redemption) of the securities “transferred as payment” for the securities being placed. Moreover, the cancellation (redemption) of “old” previously placed securities occurs on the basis and at the time of placement of “new” securities. Thus, the owner loses ownership rights to the “old” securities, acquiring similar rights to the “new” securities being placed, but the “old” securities do not acquire a new owner.

This means that during conversion, a joint stock company - unlike a subscription - does not attract funds as a result of issuing securities, and the owners of securities do not pay for them upon placement and are not, in this sense, investors in the joint stock company.

The legislation of the Russian Federation on securities contains various ways for a joint stock company to place its securities through conversion. Here is a classification (Author's Classification) of the types and types of securities conversion.

In general, conversion can be divided into the following types:

• conversion of shares into shares with a higher par value;
• conversion of shares into shares with a lower par value;
• conversion of shares into shares with other rights;
• conversion of bonds into shares;
• converting bonds into bonds;
• conversion of securities during the reorganization of commercial organizations (Conversion of securities during the reorganization of commercial organizations is regulated by the Standards for the issue of shares and bonds and their prospectuses during the reorganization of commercial organizations, approved by Resolution of the Federal Commission for the Securities Market of Russia dated November 11, 1998 No. 48.

Conversion of common shares into preferred shares of any type is prohibited.

In addition, the legislation of the Russian Federation on securities does not provide for the possibility of converting shares into bonds, which in fact also means that such conversion is prohibited.

Conversion of shares into shares with a higher or lower par value can be carried out either by changing the size of the authorized capital joint stock company, and without such a change.

When converting shares into shares with other rights, it is necessary to distinguish between the conversion of preferred shares of a certain type into preferred shares with a different amount of rights but of the same type, and the conversion of preferred convertible shares of a certain type into ordinary shares or preferred shares of another type (conversion as the exercise of rights under a security ).

Thus, the proposed classification of conversion types needs additional detail. But, before moving on to such detail, we classify these types according to conversion periods.

Depending on the timing of the conversion, there are one-time And not a one-time(deferred or extended in time (Author's terminology)) conversion.

At one-time conversion in accordance with clause 11.1 of the Standards (Standards for issuing shares when establishing joint stock companies, additional shares, bonds and their prospectuses, approved by Resolution of the Federal Commission for the Securities Market of Russia dated September 17, 1996 No. 19 (as amended by Resolution of the Federal Commission for the Securities Market of Russia dated November 11, 1998 No. 47)) FCSM of Russia placement of shares of a joint-stock company (bonds do not participate in the one-time conversion) by conversion must be carried out on one day, which cannot be earlier than the date of state registration of the issue of shares and later than one month from the specified date, according to the register of owners of registered securities of this joint-stock company on the day of conversion.

The mentioned paragraph of the Standards provides for one exception: in the case of conversion of shares into shares with a higher par value, accompanied by an increase in the authorized capital of the joint-stock company at the expense of profits based on the results previous year aimed at paying dividends, the specified conversion must be carried out among shareholders included in accordance with paragraph 4 of Article 42 of the Federal Law “On Joint Stock Companies” in the list of persons entitled to receive dividends for this year. However, such conversion also cannot be carried out earlier than the date of state registration of the issue of shares and later than one month from the specified date.

At not one-time(deferred or extended in time) conversion in accordance with the same clause 11.1 of the Standards, the placement of shares or bonds of a joint-stock company by converting the securities converted into them must also be carried out on one day, which cannot be earlier than the date of state registration of the issue of such shares or bonds and later than one year from the date of approval by the joint-stock company of the decision on their issue, according to the register of owners of registered securities of this joint-stock company on that day.

To others fundamental difference deferred conversion is the need for the mandatory presence in the charter of a joint stock company of declared shares of a certain category (of a certain type), only within the limits of the number of which shares of this category (of this type) can be placed by converting the securities convertible into them.

Having defined two fundamentally different types of conversion, we present the final classification scheme conversion methods:

I. One-time conversion:

• conversion of shares into shares with a higher par value, accompanied by an increase in the authorized capital of the joint-stock company;
• conversion of shares into shares with a higher par value upon their consolidation;
• conversion of shares into shares with a higher par value without increasing the size of the authorized capital of the joint-stock company;
• conversion of shares into shares with a lower par value, accompanied by a decrease in the authorized capital of the joint-stock company;
• conversion of shares into shares with a lower par value, not accompanied by a decrease in the size of the authorized capital of the joint-stock company (split of shares);
• conversion of preferred shares of a certain type into preferred shares with other rights of the same type;

II. Non-one-time conversion:

• conversion of a particular type of convertible preferred stock into common stock or another type of preferred stock;
• conversion of convertible bonds into common shares or preferred shares of a certain type;
• conversion of convertible bonds of a certain series into bonds of another series.

Article 28 of the Federal Law “On Joint-Stock Companies” (Federal Law of December 26, 1995 No. 208-FZ “On Joint-Stock Companies”) refers to the adoption of a decision to increase the authorized capital of a joint-stock company by increasing the par value of shares (decision on the placement of securities) to the competence of the general meeting of shareholders or the board of directors of a joint-stock company if the right to make such a decision is granted to the latter by the charter of the joint-stock company or by a decision of the general meeting of shareholders.

In accordance with clause 6.7 of the Standards, increasing the authorized capital of a joint stock company by increasing the par value of shares is possible only through:

• funds received by the joint-stock company from the sale of its shares in excess of their nominal value (share premium);
• balances of special purpose funds (accumulation fund, consumption fund, social sphere) joint stock company based on the results of the previous year;
• retained earnings of a joint stock company;
• funds from the revaluation of fixed assets of the joint-stock company.

An increase in the nominal value of shares, not accompanied by an increase in the authorized capital of the joint-stock company

Clause 3 of Article 72 of the Federal Law “On Joint-Stock Companies” provides for the possibility of converting shares of a joint-stock company into shares with a higher par value without changing the size of the authorized capital of the joint-stock company by decision of its general meeting of shareholders, but only at the expense of shares previously acquired by the joint-stock company.

In accordance with clause 6.8 of the Standards, an increase in the par value of shares due to the redemption of shares while maintaining the size of the authorized capital is carried out if there are unrealized shares on the balance sheet of the joint-stock company acquired from shareholders by decision of the board of directors of the joint-stock company in accordance with paragraph 2 of Article 72 of the Federal Law "On joint stock companies."

Consolidation is also a case of converting shares into shares with a higher par value without changing the size of the authorized capital of the joint stock company.

In accordance with paragraph 1 of Article 74 of the Federal Law “On Joint-Stock Companies,” a decision on the consolidation of the outstanding shares of a joint-stock company (i.e., a decision on the placement of securities during consolidation) can only be made by the general meeting of shareholders of this joint-stock company.

During consolidation, two or more outstanding shares of a joint stock company are converted into one new share of the same category (type). nominal cost new promotion is formed by summing the par values ​​of two or more previously placed shares of the joint-stock company converted into it.

Obviously, during consolidation, a situation is possible when shareholders - owners of shares of a joint-stock company have fewer shares than necessary for consolidation. In this case, the Federal Law “On Joint-Stock Companies” provides that such shares must be purchased by the joint-stock company, and at the market value determined in accordance with Article 77 of the said Federal Law by the board of directors of the joint-stock company with the mandatory involvement of an independent appraiser (auditor). At the same time, the Federal Law “On Joint-Stock Companies” does not provide for any exceptions to the above norm, and, thus, the repurchase of these shares must be carried out even if their owners refuse to present demands to the joint-stock company for the repurchase of their securities.

Taking this circumstance into account, the consolidation procedure is often used for the purpose of cutting off (forcing to withdraw from participation in a joint stock company) small shareholders.

To avoid the negative consequences of consolidation, shareholders who own a number of shares insufficient for their consolidation, as well as owners of such a number of shares, upon consolidation of which fractional parts (remainders) of a new (consolidated) share are formed, can be recommended to register in accordance with Chapter 16 of the Civil Code of the Russian Federation such shares are jointly owned jointly with other shareholders in a similar position. Moreover, joint shared ownership for these shares must be registered before the moment of consolidation - conversion, which is carried out according to the register of owners of registered securities of the joint-stock company on the day of conversion established in the registered decision on the issue of securities.

In accordance with Article 29 of the Federal Law “On Joint-Stock Companies,” a decision to reduce the authorized capital of a joint-stock company by reducing the par value of shares (decision to place securities) can only be made by the general meeting of shareholders of this joint-stock company.

At the same time, according to paragraph 1 of this article, a joint-stock company does not have the right to reduce its authorized capital if, as a result, its size becomes less than the minimum authorized capital of the joint-stock company, determined in accordance with Article 26 of the Federal Law “On Joint-Stock Companies”.

In addition, in accordance with Article 30 of the Federal Law “On Joint-Stock Companies,” if a joint-stock company makes a decision to reduce its authorized capital, it is obliged to notify its creditors in writing no later than 30 days from the date of adoption of this decision. Creditors have the right, no later than 30 days from the date of sending them the specified notice of reduction of the authorized capital of the joint-stock company, to demand from the latter the termination or early fulfillment of its obligations and compensation for related losses.

A stock split is a case of converting shares into shares with a lower par value without changing the size of the authorized capital of the joint stock company.

In accordance with paragraph 2 of Article 74 of the Federal Law “On Joint-Stock Companies,” a decision on splitting the outstanding shares of a joint-stock company (i.e., a decision on the placement of securities during splitting) can only be made by the general meeting of shareholders of this joint-stock company.

During a split, one outstanding share is converted into two or more outstanding (new) shares of the joint stock company of the same category (type). The par value of each new share is determined by dividing the previously issued share by the number of new shares into which it is converted during the stock split.

The economic meaning of stock splits often lies in the desire of a joint stock company to revive the secondary market for its securities. Obviously, shares with a lower par value may be available for purchase by a larger number of people.

In accordance with paragraph 2 of Article 25 of the Federal Law “On Joint-Stock Companies,” a joint-stock company has the right to place ordinary shares, as well as one or more types of preferred shares. At the same time, each category (each type) of shares of a joint-stock company corresponds to a certain, differing volume of rights secured by them.

In accordance with Article 2 of the Federal Law “On the Securities Market” (Federal Law of April 22, 1996 No. 39-FZ “On the Securities Market”), a set of securities of one issuer that provides the same scope of rights to their owners constitutes an issue of securities papers

Therefore, in order to change the scope of rights on already placed shares, a joint stock company must issue (issue) securities with different rights.

This type of security, such as a share, secures the rights of its owner (shareholder) to:

• receiving part of the profit of the joint-stock company in the form of dividends;
• participation in the management of a joint stock company; And
• part of the property remaining after the liquidation of a joint stock company.

It is obvious that changing these rights for ordinary shares of a joint stock company is impossible. Therefore, when we talk about a change in the scope of rights under shares, this should be understood as a change in the scope of rights exclusively on preferred shares, and exclusively within the framework established by the Federal Law “On Joint-Stock Companies”.

It should be taken into account that preferred shares can be converted into ordinary shares or preferred shares of another type only if the possibility of such conversion is included in the rights to these preferred shares. Otherwise, we can only talk about converting preferred shares of a certain type into preferred shares with a modified scope of rights but of the same type. This means, for example, that in order to convert preferred shares into ordinary shares, if the possibility of such conversion is not provided for by the rights on these preferred shares, the joint stock company must issue preferred shares of the same type with a modified scope of rights, placing them by converting preferred shares, not providing for the possibility of their conversion into ordinary shares, into preferred shares, providing for the possibility of such conversion.

Conversion of securities convertible into shares or bonds represents the realization (exercise) of the rights secured by the convertible securities.

In accordance with Article 18 of the Federal Law “On the Securities Market”, a document certifying the rights secured by a security is a certificate and a decision on the issue of securities, and for the uncertificated form of issuing securities - only the decision on the issue of securities. It is obvious that the right (possibility) of conversion in this case, as well as the remaining rights for each security of the issue, must be contained in the decision on the issue of securities, which in turn is approved by the joint-stock company on the basis and in accordance with the decision on the placement of securities .

It follows from the foregoing that conversion as the exercise of rights under convertible securities is possible only if this is provided for by the decision on the placement of such convertible securities, as provided for in clause 6.3 of the Standards.

The decision on the placement of convertible securities must also clearly define the procedure and conditions for the conversion of securities, including the number of securities into which each convertible security of the joint-stock company is converted.

At the same time, in accordance with paragraph 6.4 of the Standards, next condition: The par value of a share(s) of a certain category (of a certain type) convertible into a share(s) of another category (of a different type) must be equal to the par value of the share(s) into which it is converted.

This means that when converting convertible securities there should not be a change in the size of the authorized capital of the joint-stock company. Please note that this restriction does not apply to bonds of a joint stock company.

The conversion procedure established in the decision on the placement of securities may provide that the conversion is carried out:

• at the request of their owners; or
• upon the arrival of a period determined by a calendar date or the expiration of a period of time.

Conversion, carried out at the request of the owners of convertible securities, is used by joint-stock companies, as a rule, if the rights under convertible securities give their owners the right to choose:

A) convert preferred shares of a certain type into ordinary or preferred shares of another type; convert bonds of a certain series into ordinary or preferred shares of a certain type, or bonds of a different series; or

b) refuse such conversion, preferring to retain ownership of the preferred convertible shares of a certain type in order, for example, to receive a certain amount of dividend on them, or to redeem convertible bonds in another way (if such a method is provided for by the decision on the issue of such convertible bonds).

The option may also include allowing holders of convertible securities the option of converting them into different types of preferred stock or different series of notes.

In this case, in accordance with clauses 6.4 and 11.15 of the Standards, the placement of securities must be carried out on the basis of statements from the owners of the securities convertible into them, and the decision on the placement of convertible securities, as well as the decision on the placement of securities placed by converting the convertible into them securities, a period must be established during which the owners of convertible securities can submit the relevant applications, as well as the period during which the conversion must be carried out on the basis of such statements, taking into account that the latter cannot be more than one year from the date of approval of the decision on the issue of securities placed by converting the securities convertible into them. In this case, no agreements are required.

Note that the conclusion of any agreements is not required in other cases of conversion.

If the conversion is carried out upon the arrival of a period determined by a calendar date, or the expiration of a period of time (i.e. without providing the owners of convertible securities with the right to choose), in accordance with clause 11.1 of the Standards, it (conversion) must be carried out on the day specified calendar date, or on the expiration date of a period defined by a period of time, according to the register of holders of convertible securities on that day. The date corresponding to the specified day must also not be later than one year from the date of approval of the decision on the issue of securities placed by converting the securities convertible into them.

We also note that the description in the decision on the issue of securities placed by converting the securities convertible into them, the rights under these securities, the procedure and conditions of conversion must correspond to such a description in the decision on the issue of the securities convertible into them.

In accordance with clause 8.1.3 of the Standards, state registration of the issue of securities must be accompanied by registration of their prospectus for the following types of conversion:

• conversion of shares into shares with a higher par value, including during consolidation;
• conversion of shares into shares with a lower par value, including during splitting;
• conversion of shares into shares with other rights;
• if the number of purchasers of shares in the issue exceeds 500 and (or) the nominal value of the issue (volume of issue) of shares exceeds 50 thousand minimum sizes wages.

Thus, when converting securities convertible into shares or bonds (exercising rights under convertible securities), registration of a securities prospectus is not required.

In the event that, during conversion, registration of a securities prospectus is not required, the Standards, paragraph 9.8, as well as in the case of a closed subscription, establish the need to submit for state registration of the issue of securities the accounting statements of the issuing joint stock company for the last financial year and for the last quarter preceding date of approval of the decision to issue securities.

In accordance with clauses 12.3 - 12.4 of the Standards, documents for registering a report on the results of the issue of securities placed by conversion must be submitted:

• in the case of a one-time conversion - no later than 30 days from the date of conversion;
• in the case of a non-one-time conversion - no later than 30 days from the end date of the conversion period.

Considering that in case of a one-time conversion, the date of placement of securities (conversion date) cannot be later than one month from the date of state registration of the issue of securities, documents for registering a report on the results of the issue of securities in case of a one-time conversion, therefore, must be submitted no later than two months from the date of state registration of the issue of securities.

Clause 12.8 of the Standards also requires the submission for registration of a report on the results of the issue of securities placed through conversion, and a notice of cancellation of converted securities.

The legislation of the Russian Federation on securities and the regulations of the Federal Commission for the Securities Market of Russia do not contain special requirements on disclosure of information on the issue of securities placed through conversion. Therefore, for the purpose of disclosing information when converting securities, a joint stock company must be guided by general standards and the rules of information disclosure contained in the Regulations on the procedure for disclosing information about material facts (events and actions) affecting financially - economic activity issuer of issue-grade securities, approved by Resolution of the Federal Commission for the Securities Market of Russia dated August 12, 1998 No. 32, which, however, applies only to those joint-stock companies whose state registration of at least one issue of securities was accompanied by the registration of their prospectus.

In accordance with these Regulations, information is disclosed by joint-stock companies in the form of reports on material facts (events and actions) affecting their financial and economic activities, which, no later than 5 working days from the date of occurrence of the material fact, must be:

sent to the registration authority (for non-credit and non-insurance organizations - the Federal Commission for the Securities Market of Russia or its regional branches);

published in the “Supplement to the Bulletin of the Federal Securities Commission of Russia” (Subscription index according to the catalog of the Rospechat agency - 47998) and other print media distributed in a circulation accessible to the majority of holders of securities of the joint-stock company.

The following information is subject to disclosure:

• on the joint stock company’s decision to place securities;
• on approval by the joint-stock company of the decision to issue securities;
• on redemption, including cancellation of securities.

The first two cases were discussed in detail in articles on open and closed subscriptions, so in this article we will dwell in detail only on the disclosure of information on the redemption (cancellation) of securities.

The notice of cancellation by the joint stock company of securities upon conversion must indicate:

• grounds for cancellation: conversion, redemption of bonds;
• type, category (type), form, series, state registration number of the issue whose securities are canceled (redeemed);
• the nominal value of each security of a given type (category), series, the number of securities of a given type (category), series;
• number of canceled (redeemed) securities;
• in case of redemption (including early) of bonds:

  a) term (start date, end date) of circulation of redeemed bonds;

  b) the procedure, conditions, term (start date and end date) of early redemption of bonds (if early repayment provided for by the decision on the issue of bonds);

  c) the procedure, conditions, period (start date and end date) of redemption of bonds.

The moment of occurrence of the fact is considered to be the date of conversion (or the end date of conversion), the date (end date) of redemption of bonds.

Sending to the registration authority the specified message about the cancellation (redemption) of securities can also serve as a notification to the registration authority about the cancellation of securities, submitted in accordance with clause 12.8 of the Standards for registering a report on the results of the issue of securities placed by conversion.

Conclusion

In conclusion, we present a table showing the order and timing of the joint-stock company’s actions to place securities through conversion.

Table 1.

Sequence and timing of actions to issue securities placed by conversion

Buying stocks always carries the risk of losing money, but avoiding stocks altogether means you won't be able to make a good profit. However, there is one security that can help solve this dilemma for some investors: convertible preferred stock offers the security of a fixed rate of return plus the opportunity for capital appreciation. Here we'll look at what these securities are, how they work, and how to determine when a conversion is profitable.

What are convertible preferred shares

These shares are corporate fixed income securities that an investor can choose to convert into a specified number of shares of a company's common stock over a specified period of time or on a specific date. The fixed income component provides a stable income stream and some capital protection for investors. However, the ability to convert these securities into shares allows the investor to benefit from rising share prices.

Convertibles are especially attractive to those investors who want to participate in the growth of companies with at a fast pace growth, while being insulated from price declines if the stock doesn't live up to expectations.

Opportunities for investors

To demonstrate how convertible preferred stock works and how the stock benefits investors, let's look at an example. Let's say Acme Semiconductor issues 1 million shares of convertible preferred stock at $100 per share. These convertible preferred shares (because they are fixed income securities) give holders priority over common shareholders in two ways. First, convertible preferred shareholders receive a dividend of 4.5% (assuming Acme's earnings remain sufficient) before any dividends are paid to common shareholders. Second, convertible preferred shareholders would be ahead of common shareholders in returning capital if Acme ever went bankrupt and its assets had to be sold off. However, convertible preferred shareholders, unlike ordinary shareholders, rarely have voting rights.

By purchasing Acme Convertible Preferred Stock, the worst investors will ever receive a $4.50 annual dividend for each share they own. But these securities offer owners the potential for even higher returns: If convertible preferred shareholders see Acme stock rise, they may have the opportunity to profit from that rise by converting their fixed-income investment into equity. On the reset date, shareholders of Acme Convertible Preferred Stock have the option to convert some or all of their preferred shares into shares of common stock.

Determining conversion profit

The conversion ratio represents the number of shares of common stock that shareholders can receive for each preferred share converted. The conversion ratio is set by management prior to issuance, usually with management investment bank. For Acme, assume the conversion ratio is 6.5, allowing investors to trade preferred stock for 6.5 Acme shares.

The conversion ratio indicates what price the common stock must trade for the preferred stockholder to profit from the conversion. This price, known as the conversion price, is equal to the purchase price of the preferred stock divided by the conversion rate. So for Acme the market conversion price is $15.38 ($100/6.5).

In other words, Acme common stock should trade above $15.00. 38 for investors to receive from the conversion. If the stock converts and goes below $15. 38, investors will suffer a capital loss on their investment of $100 per share. If the common stock ends at, for example, $10, then the convertible preferred shareholders will only receive a common share worth $65 ($10), in exchange for their $100 preferred stock. ($100 represents the par value of the preferred shares.)

Conversion Bonus

Convertible preferred shares can be sold at secondary market, and market price and behavior are determined by the conversion premium, the difference between the par value and the value of the preferred shares if the shares were converted. As shown above, the value of a converted preferred share is equal to the market price of the common stock multiplied by the conversion factor. Let's say Acme shares are currently trading at $12, which means the value of the preferred stock is $78 (12 x 6 5). As you can see, this is significantly lower than the parity value. So, if Acme shares are trading at $12, the conversion premium is 22% [($100 - $78) / 100].

The lower the premium, the more likely it is that the market conversion price will match the overall share price up and down. Higher-end convertibles act more like bonds in that there is less likely to be a chance for a profitable conversion. It means that interest rates can also affect the price of convertible preferred shares: for example, the price of bonds, the price of convertible preferred shares usually declines as interest rates rise: a fixed dividend looks less attractive than rising interest rates. Conversely, as rates fall, convertible preferred shares become more attractive.

The Bottom Line

Converts appeals to investors who want to participate in the stock market without feeling like they are taking wild risks. Trading a security like a stock when the price of the common stock moves above the conversion price. If the stock price falls below the conversion price, the convertible trades just like a bond, effectively putting a price floor under the investment.

Ordinary shares

The owner of an ordinary share has the rights provided by the shares in full (participate in the general meeting of shareholders with the right to vote on all issues within his competence, have the right to receive dividends, and in the event of liquidation of the JSC - the right to receive part of his property in the amount of the value of his property shares).

Conversion of ordinary shares into preferred shares, bonds and other securities is not permitted.

Preferred shares (PA)

The privilege of the owner of the PA is that the charter for each type of PA must define the amount of dividend and (or) the cost paid upon liquidation of the JSC (liquidation value). They are determined in a fixed amount of money or as a percentage of the par value of preferred shares.

Preferred shares can have several varieties, and there are no legal restrictions on the number of types of PA. In this case, the main thing is that the charter of the joint-stock company clearly defines the rights for each type of PA, and their total number does not exceed 25% of the authorized capital.

Owners of preferred shares for which the dividend amount is not determined have the right to receive dividends on the same basis as owners of ordinary shares.

If the charter of a joint-stock company provides for preferred shares of two or more types, for each of which the amount of dividend is determined, the charter of the joint-stock company must also establish the order of payment of dividends for each of them, and if the charter of the joint-stock company provides for PA of two or more types, for each of which a liquidation amount is determined cost, - the order of payment of the liquidation value for each of them.

In exchange for a privilege (fixed dividend amount and (or) liquidation value), shareholders - owners of preferred shares do not have the right to vote at the general meeting of shareholders, with the exception of making decisions:

• on the reorganization and liquidation of JSC;
• on introducing amendments and additions to the charter of the joint-stock company, limiting the rights of PA owners;
• full or partial non-payment of dividends under a PA with a fixed dividend amount at the annual meeting of shareholders. The right to vote is lost from the moment of the first payment of dividends on these shares in full.

In Russia there are two types of preferred shares:

• 1) cumulative - shares for which the unpaid or incompletely paid dividend, the amount of which is determined by the charter, is accumulated and paid no later than the period specified by the charter. If the charter of the joint-stock company does not establish such a period, preferred shares are not cumulative.
• 2) convertible - shares that can be convertible (exchanged) into ordinary shares or preferred shares of other types at the request of the shareholders - their owners within the period specified by the charter of the joint-stock company. In this case, the charter must define the procedure and conditions for their conversion, including the number, category (type) of shares into which they are converted, etc. Conversion of preferred shares into ordinary shares and preferred shares of other types is allowed only if this is provided for by the company’s charter, as well as during the reorganization of a joint-stock company. Conversion of preferred shares into bonds and other securities, with the exception of shares, is not permitted.

One of the features of issuing shares is that they may pay a dividend. The accrual and payment of dividends is carried out in the manner prescribed by Chapter V of the Law on Joint Stock Companies.

A dividend is a portion of profits paid to shareholders after all other financial obligations and replenishment of reserves for financing current operations organizations. Dividends are thus reduced if the organization uses a significant portion of its profits to expand production or worsens its financial performance.

One of the features of the activities of joint-stock companies is that ownership and management of the organization are separated. The company is owned by shareholders, who appoint a board of directors to manage it on their behalf.

Private investors traditionally buy shares for the purpose of long-term investment funds and therefore, as a rule, agree to a low dividend at the end of the year if they see the prospect of capital growth as a result of the development of the joint-stock company.

Currently, the main shareholders are institutional investors (pension funds, Insurance companies, banks, mutual funds And investment companies). Managers of these organizations manage large sums on behalf of a large number of individuals who, by participating in mutual or pension funds, are indirect investors.

The initial transfer of funds from investors to issuers when issuing shares occurs on primary market. Since the shares are not redeemed, the organization effectively receives cash for unlimited use. When a company's shares begin selling on a stock exchange, capital is said to be raised in the open or public market, so new issues of this kind are called an Initial Public Offering (IPO). In order to list its shares on the open market, an organization must meet certain financial criteria.

However, the bulk exchange transactions does not take place on the market for new issues, i.e. primary market, but in the secondary market, where shares are traded after their initial placement.

Trade on stock exchanges determined by the demand and supply of equilibrium prices for shares of an individual company, which are influenced by current and expected financial characteristics activities of a joint stock company. The dynamics of the stock market as a whole are determined by many events in the world and national markets, including inflation rates, interest rates, GDP growth, etc.

To solve the problems they face, organizations have to raise funds for various periods. The source of funds can be the organization’s profits or proceeds from the issue of short-, medium- and long-term financial instruments, for example, such as bonds.

Bond- an issue-grade security that secures the right of its owner to receive from the issuer a bond within the period specified in it, its nominal value or other property equivalent. A bond may also provide for the right of its owner to receive a fixed percentage of the bond's face value. (coupon) or other property rights. Bond income is interest and (or) discount. The classification of bonds is presented in table. 15.1.

Bonds are issued in the form of a capital loan, and the buyer of the bond acts as the lender. The procedure for issuing corporate bonds is regulated by the Law on Joint Stock Companies.

Table 15.1

Classification of bonds in Russian and international practice

Ending

Organizations must maintain a certain balance between debt and own funds, without exceeding, on the one hand, permissible level borrowing, and on the other hand, avoiding excitement share capital as a result of over-issuance of shares.

Investors provide their money to those who have a need for capital, with the expectation that the money will be returned along with a reward for its use. The amount of remuneration is closely related to the level of risk in the capital market.

It is believed that investing in shares, i.e. Entering into partial ownership of an organization that may turn out to be unprofitable is riskier than investing in bonds (debt instruments). That is why shareholders expect higher returns, which consist of an increase in the value of shares and dividends paid on them. However, dividends are sometimes less than expected, or even not paid at all; It happens that the price of shares also falls. In a worst-case scenario, when an organization goes bankrupt, the investor may lose his or her original investment entirely.

Investors turn to the debt market in search of stronger guarantees or more predictable payments. They lend to the issuer in the belief that it will not cease to exist before the bond matures and will fulfill its obligations. debentures. In addition, in the event of liquidation of a joint stock company in accordance with the law, debt obligations must be repaid before settlements with shareholders. In exchange for such guarantees, investors accept lower returns than they would have had with riskier stock investments.

Convertible preferred stock is preferred stock that can be converted into common stock at the option of the shareholder. This forces the shareholder to choose between earning profits through liquidation preference or through common stock.

Undoubtedly, if the value offered for the company exceeds the expected total cost enterprise at the time of investment, the shareholder converts preferred shares into ordinary shares in order to realize his part of the increase in value.

The table below shows the payoffs for Max and Sam at different exit values ​​if Max were to hold convertible preferred stock.

In theory, convertible preferred stock allows the entrepreneur to match the investor's earnings after the investor's initial investment has been paid off. Compare the net payout schedule for convertible preferred shares with the previous net payout schedule for mandatory preferred shares (see table).

Net payout table
for a structure with participation
convertible preferred shares.

If Max in our example had convertible preferred stock, YippeeZang's offering! to purchase the company would force him to decide whether to convert the shares. Let us remind you that after the conversion, Max will own almost half of the company's shares.

If he had converted the preferred stock into common stock, he would have received 49.95% of the proceeds (about $1 million), leaving him at a loss. That's why he wouldn't convert the shares, but instead would get back his original $1.5 million investment from the redemption of the non-convertible preferred stock, and Sam would get the remaining $500,000.

On the other hand, if YippeeZang! decided to pay more than $3 million for Sam's company, Max would have an incentive to convert the shares into common stock to receive his share (49.95%) of any premium over the estimated $3 million company value that YippeeZang! would offer.

If, for example, YippeeZang! would have offered $4 million, Max would have happily converted the shares and received $2 million.

One of the results of the convertible preferred stock structure is that Max receives every dollar of the sale of the company as long as the price of the company does not exceed his $1.5 million advantage. Max will then have to decide whether to convert the shares or exercise his advantage. Until the price reaches $3 million, he would be better off taking advantage of the $1.5 million value.

Thus, on Max's payout schedule there is a "flat area" between the points corresponding to the sale of the company for $1.5 million and for $3 million. In this range, Max always receives $1.5 million and Sam always receives the increase in the company's selling price.

This catch-up is when Sam catches up with Max once Max gets all his money back. At the end of the catch-up phase, the gross (not net) payout amounts that the two participants receive are approximately equal.

Why don't we see any of these types of preferred shares in young public companies? In short, because preferred stock structures are somewhat complex, young public companies avoid them. stock markets Companies are generally expected to have a simple capital structure, with only common stock and debt.

Mature public companies, especially companies providing Financial services, often have multiple layers of preferred stock in many forms.

Underwriters almost always insist that all preferred shares be converted at the time of the IPO.

To avoid a round of negotiations during which investors would demand compensation for converting them into common stock, convertible preferred stock typically contains a mandatory conversion clause that allows the company to force investors to convert as part of a guaranteed IPO of a certain (agreed upon) size and price.

The minimum size required to trigger such a conversion is usually significant enough to ensure a liquid market, and minimum price usually 2-3 times the price at the time of investment - this is quite enough to guarantee the investor's interest in converting.

Convertible preferred shares with participation rights

Convertible preferred shares with participation rights- are convertible shares with an additional characteristic meaning that in the event of a sale or liquidation of the company, the holder is entitled to receive the par value and their share of the share capital as if the shares had been converted; that is, he participates in the share capital even after conversion.

Like convertible preferred stock, these instruments have a forced conversion clause that is triggered upon public offering. The result is an instrument that behaves like redeemable preferred stock when the company is not public, and converts into common stock when it goes public, as shown in the table below.

Net payout table for structure
with convertible preferred shares
with the right to participate.

*Unlike the mandatory preferred stock structure, the participating convertible preferred stock structure converts to a common stock structure after the IPO.

Of course, the forced conversion clause is the primary reason for using convertible participating preferred stock rather than a compulsory preferred stock structure with low-cost common stock.

Participating convertible preferred stock does not have the inconvenient feature of requiring a payout to private investors at the time of a public offering. This is a trait generally disliked by underwriters because it is easier to sell new public shares if all the proceeds are used to grow the company's business rather than pay out existing shareholders.

Participation details: change in control structure

A key accompanying term of the convertible participating preferred stock stipulates when the participation term applies; Usually the condition says “ in case of sale or liquidation”, and it often defines liquidation as any merger or transaction that represents a change in the control structure.

As a result, a merger transaction between two non-public companies may trigger this clause if the privately held, surviving combined company issues new shares in exchange for the acquired company's pre-merger preferred shares.

Holders of convertible participating preferred stock may then request to receive both new shares equivalent in par value to the old preferred stock and participation in the new company's common stock equivalent to the converted shares for common stockholders.

This, in turn, may lead to a valuation problem for the underlying securities, since the condition of participation involves receiving shares whose valuation is equal to the par value of the preferred shares. Note that in such a transaction liquidity as such is not generated ( funds do not change owners) because it represents an exchange of privately held illiquid securities.