Conversion features of preference shares

Equity capital markets (ECM)

Today’s post is on conversion features of preference shares.

Preference shares may be converted to ordinary shares if the terms of preference shares provide for conversion.

When drafting conversion rights of preference shares, consider setting out the following:

1. Whether the company or the preference shareholders have the right to convert the preference shares to ordinary shares.

2. When is the conversion period?

3. How much is the conversion price?

4. What is the conversion ratio for the conversion of preference shares to ordinary shares?

5. What is the conversion mode? It could be via:

(a) surrendering preference shares for conversion to ordinary shares; or

(b) surrendering preference shares and payment of cash; or

(c) both.

6. What is the conversion procedure? Is notice required to be given? If yes, who should be giving the notice. How many days of prior notice is required?

7. Will there be automatic conversion at the end of conversion period if the relevant party does not exercise the conversion right?

What would you add to the list?

#malaysiancorporatelawyer

#preferenceshares

This post was first posted on Linkedin on 27 October 2021.

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