The company's ordinary shares can be converted. Conversion of ordinary and preferred shares of the JSC

Article 32. Rights of shareholders - owners of preferred shares of the company

1. Shareholders - owners of preferred shares of the company do not have the right to vote at the general meeting of shareholders, unless otherwise established 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 of credit institutions acquired in cases established by law.

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 in a fixed 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 size of the dividend is not considered certain if the company's charter specifies only its maximum amount. 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. Preferred shares with priority in the order of receipt of dividends have no 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 the 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 the authorized capital of the company by reducing the par value of such preferred shares are not allowed.

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 charter of the company, before the state registration of 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.

(see text in the previous edition)

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 the company or its shareholders of certain actions, the occurrence of a certain period, the adoption or failure of the general meeting of shareholders or other bodies of the company to take certain decisions within a certain period, the alienation of the company’s 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 to their alienation and other circumstances), the 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.

08.02.2018
Events. The Central Bank adjusted the dictionary. New concepts have appeared in the Bank of Russia program document. Yesterday, the Bank of Russia released a policy document describing plans for the development and application of new technologies in the financial market in the coming years. The main ideas, concepts and projects have already been announced by the regulator in one way or another. At the same time, the Central Bank introduces and discloses new terms, in particular, RegTech, SupTech and “end-to-end identifier”. Experts note that these areas have been successfully developing in Europe for a long time.

08.02.2018
Events. The State Duma issued capital a pass to Russia. It was decided to repeat the one-time business amnesty. The Russian State Duma adopted on Wednesday in the first, and a few hours later - in the second reading, a package of bills initiated by Vladimir Putin on the resumption of the capital amnesty. The new act of “forgiveness” was announced as the second stage of the 2016 campaign, which was then presented as a one-time campaign and was actually ignored by business. Since the attractiveness of the Russian jurisdiction and trust in its law enforcement officers have not increased over the past two years, the bet is now placed on the thesis that capital must be returned to the country because it is worse for them abroad than in Russia.

07.02.2018
Events. Control and supervision are tailored to fit the figure. Business and authorities compared approaches to reform. The results and prospects for the reform of control and supervisory activities were discussed yesterday by representatives of the business community and regulators as part of the “Russian Business Week” under the auspices of the Russian Union of Industrialists and Entrepreneurs. Despite a 30% decrease in the number of scheduled inspections, businesses complain about the administrative burden and call on the authorities to respond more quickly to proposals from entrepreneurs. The government, in turn, plans to revise mandatory requirements, reform the Code of Administrative Offences, digitalization and acceptance of reporting in the “one window” mode.

07.02.2018
Events. Transparency will be added to issuers. But investors are waiting for additions to shareholder meetings. The Moscow Exchange is preparing changes to the listing rules for issuers whose shares are on the highest quotation lists. In particular, companies will be required to create special sections on their websites for shareholders and investors, the maintenance of which will be controlled by the exchange. Large issuers already meet these requirements, but investors consider it important to enshrine these obligations in the document. In addition, in their opinion, the exchange should pay attention to the disclosure of information for shareholder meetings, which is the most sensitive issue in the relationship between issuers and investors.

07.02.2018
Events. The Central Bank of Russia will read the advertising carefully. The financial regulator has found a new field for supervision. Not only the Federal Antimonopoly Service, but also the Central Bank will soon begin to evaluate the integrity of financial advertising. Starting this year, as part of behavioral supervision, the Bank of Russia will identify advertisements of financial companies and banks containing signs of violations and report this to the FAS. If banks receive not only fines from the FAS, but also recommendations from the Central Bank, this could change the situation with advertising in the financial market, experts say, but the procedure for applying supervisory measures of the Central Bank in the new area has not yet been described.

06.02.2018
Events. Not by accent, but by passport. Foreign investments under the control of Russians will remain without international protection in the spring. A government bill depriving investments of foreign companies and persons with dual citizenship controlled by Russians from the protection of the law on foreign investment, in particular, guarantees of freedom to withdraw profits, will be adopted by the Russian State Duma in early March. The document does not recognize investments through trusts and other fiduciary institutions as foreign. The White House is still ready to consider structures controlled by Russians that invest in strategic assets in the Russian Federation as foreign investors - but for them, as before, this only means the need to approve transactions with the Foreign Investment Commission.

06.02.2018
Events. Government agencies are not given banks. FAS Russia intends to limit the expansion of the public sector in the financial market. The Federal Antimonopoly Service has developed proposals to limit purchases of banks by government agencies. The FAS plans to amend the law “On Banks and Banking Activities” and is currently working on them with the Central Bank (CB). An exception may be the reorganization of banks, ensuring the availability of banking services in areas that need it, as well as issues of national security. The head of the Central Bank, Elvira Nabiullina, has already supported this initiative.

06.02.2018
Events. Online audit was given a chance. IIDF is ready to support remote inspections. Online auditing, until now a side branch of this business, which was mainly carried out by unscrupulous companies, has received support at the state level. The Internet Initiatives Development Fund invested 2.5 million rubles in the AuditOnline company, thus recognizing the promise of this area. However, market participants are confident that online audits have no legitimate future - remote audits contradict international auditing standards.

05.02.2018
Events. It is recommended to refrain from legal transactions. The Central Bank of Russia considered “hidden trust management” unethical. The Bank of Russia warns professional participants against using some popular, but not entirely ethical practices in relation to clients in the stock market. The schemes described in the regulator’s letter are within the legal framework, so the Central Bank limited itself to recommendations. But in fact, the regulator is testing the use of motivated judgment, the right to use of which has not yet been approved by law.

05.02.2018
Events. There will be less fun in the absorption. The Central Bank of Russia is encouraging banks to reduce lending to M&A transactions. The idea of ​​the Central Bank to encourage banks to lend not to mergers and acquisitions of companies, but to the development of production takes on concrete features. The first step could be to instruct banks to create increased reserves for loans issued for M&A transactions. According to experts, this will reduce such lending, but in order for bank resources to go to the development of production, additional incentive measures will be required.

Registration authorities, in their practice of registering securities issues, are often faced with misunderstandings and, consequently, errors when preparing documents for registration of issues related to the conversion of preferred shares into ordinary shares. In this article we will discuss the requirements, including new ones, of the Law “On Joint Stock Companies”. Let us determine the sequence of actions of the issuer associated with such a complex corporate action.

In accordance with paragraph 3 of Article 32 of the Law “On Joint Stock Companies” (as amended by Federal Law No. 120-FZ dated August 7, 2001): - “the company’s charter 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 shareholders - their owners or conversion of all shares of this type within the period specified by the company’s charter. In this case, the charter of the company at the time of making the decision that is the basis for the placement 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 adoption of a decision, which is the basis for the placement of convertible preferred shares, is not allowed.”

In accordance with the provisions of paragraph 1 of Article 37 of the Law “On Joint Stock Companies”: - “the procedure for converting the company’s equity securities into shares is established:

the company's charter - in relation to the conversion of preferred shares;

decision on the issue - in relation to the conversion of bonds and other, with the exception of shares, equity securities.

The placement of the company’s shares within the limits of the number of authorized shares necessary for the conversion of convertible shares and other issue-grade securities of the company placed by the company into them is carried out only through such conversion.”

In accordance with the above, a joint stock company has the right to convert preferred shares into ordinary shares. In this case, the general meeting of shareholders must make decisions on introducing amendments and additions to the company’s charter.

Firstly, about the possibility of converting preferred shares into ordinary shares with one of the conditions:

or at the request of all or individual holders of preferred shares;

or conversion of all preferred shares into ordinary shares within the period specified by the company’s charter.

Such a decision of the general meeting is recognized as a decision on the placement of preferred convertible shares. Thus, there is no need to make a separate decision on such placement. It should be recalled that in accordance with paragraph 4 of Article 32 of the Law “On Joint Stock Companies”, owners of preferred shares acquire the right to vote when deciding at the general meeting of shareholders the issue of introducing amendments and additions to the company’s charter in terms of adding rights to preferred shares. The conversion of preferred shares into ordinary shares can be recognized as such a “right” only if such conversion is carried out without the consent of the owners of such preferred shares upon the deadline established by the charter of the company.

Secondly, the procedure for converting preferred shares into ordinary and other conditions for conversion must be determined (for example, the timing of conversion, or the procedure and timing for accepting and satisfying shareholder applications requesting conversion).

The new edition of the Law “On Joint-Stock Companies” distinguishes between conversion at the request of shareholders - owners of convertible preferred shares and conversion upon the arrival of the deadline provided for by the company's charter. Moreover, only conversion on demand can be directly called a “right”, since only in this case the shareholder - owner of a convertible preferred share is given the right to choose: to carry out the conversion and present the corresponding demand to the company or not to carry out the conversion and not to present such a demand. In this case, a situation is possible when some shareholders make such a demand, but some shareholders do not. As a result, only part of the shares will be converted into ordinary shares, and the remaining part will either remain preferred convertible, or the requirement for conversion will arrive later, after the expiration of the period for placement of ordinary shares. You should pay attention to the timing of the placement of ordinary shares. In accordance with the requirements of clause 5.3 of the Standards approved by Resolution of the Federal Securities Commission of Russia dated April 30, 2002 No. 16/ps, if the decision on the placement of convertible securities provides that the conversion is carried out at the request of their owners, it must set a deadline in during which the owners can submit relevant applications, as well as the period during which the conversion must be carried out on the basis of such applications. In addition, in accordance with clause 10.1 of the Issue Standards, the placement of securities by conversion in the cases provided for in subclause “a” of clause 5.1 of the Standards (in our case, the placement of ordinary shares by converting preferred convertible shares into them) is carried out within the period established in the registered decision on their issue, which must correspond to the period established in the decision on the issue of securities convertible into them and cannot exceed one year from the date of approval of the decision on the issue of securities placed by conversion. Thus, if within the period established in the registered resolution on the issue, not all shareholders have submitted a request for conversion, the company will have to make a new decision on the placement of ordinary shares to exercise the conversion right of the remaining holders of convertible preference shares

In the event that the conversion is carried out upon the arrival of the deadline provided for by the company's charter, all preferred shares of the corresponding type are converted, regardless of the wishes of their owners. In other words, in this case, the shareholder - the owner of the convertible preferred share cannot waive the “right of conversion” otherwise than by ceding (selling) the ownership rights to the convertible preferred share. In accordance with clause 10.1 of the Issue Standards, the placement of securities by converting into them securities, the decision to issue which provides for their conversion upon maturity, is carried out on the day determined by the calendar date, or on the expiration date of the period determined by the time period, according to register of holders of convertible securities on that day. In the latter case, the period must be reasonable. After all, the implementation of such a conversion is possible as a result of state registration of two issues and one report on the results of the issue (issue of preferred convertible shares, report on the results of their placement and issue of ordinary shares). When establishing such a period in the company's charter, one should take into account the time required for the issuer's executive body to prepare packages of documents for registration of issues; the time required by the issuer's authorized body to approve such documents; the time required for the registration authority to review the submitted documents and make a decision on state registration of issues and reports or refusal. The following wording in the charter seems justified: - “the conversion of preferred convertible shares into ordinary shares is carried out on the 25th day after state registration of the issue of ordinary shares.”

Thirdly, the number of authorized ordinary shares must be determined by the number of not less than outstanding preferred shares. Let us note that if there are in circulation securities convertible into shares of the company, the number of authorized shares required for such conversion cannot be placed in any other way than through such conversion. This means that if the company intends to increase its authorized capital, for example, by placing additional shares through subscription, such an increase can only be carried out within the number of authorized shares exceeding the number of authorized shares necessary to convert all the company's outstanding securities convertible into shares. In our case, if there are 100 convertible preferred shares in circulation that can be converted into 100 ordinary shares of this company, then authorized ordinary shares only in excess of the specified number can be used to place another additional issue of ordinary shares (subscription or distribution to shareholders). If the company's charter provides for only 100 authorized ordinary shares, then the company must adopt amendments to the charter related to an increase in the number of authorized shares.

It is necessary to recall that in accordance with the requirements of clause 5.2 of the Issue Standards, the par value of preferred shares, which are converted first into convertible preferred and then into ordinary shares, must be equal to the par value of the issued ordinary shares. Otherwise, the company must first carry out an additional issue related to bringing the nominal values ​​of preferred and ordinary shares into line (splitting, consolidating, increasing or decreasing the nominal value). However, we must not forget about the requirement of paragraph 2 of Art. 25 of the Law “On JSC”: the par value of the issued preferred shares should not exceed 25 percent of the authorized capital of the company.

Registration of securities issues and placement consists of several stages.

1. Registration and placement of preferred convertible shares.

In accordance with subparagraph “d” of paragraph 5.1 of the Issue Standards, this method of placement is called “conversion into preferred shares with other rights of preferred shares of the same type, the decision to change and (or) supplement the rights for which was made by the joint-stock company.” In the Issuer's Electronic Questionnaire, you should select the method - “conversion of preferred shares of a certain type into preferred shares with other rights of the same type.” In accordance with clause 10.1 of the Standards, the conversion of preferred shares into preferred convertible shares must be carried out no later than one month from the date of state registration of the issue of shares, on one day specified in the registered decision on their issue.

2. Registration of a report on the results of the issue of convertible preferred shares.

3. Registration and placement of ordinary shares by converting preferred convertible shares into them.

In accordance with subparagraph “a” of paragraph 5.1 of the Issue Standards, this method of placement is called “conversion of preferred shares or bonds convertible into shares into shares.” In the issuer's Electronic Questionnaire, you should select the method - “conversion of preferred convertible shares of a certain type into ordinary shares.”

4. Registration of a report on the results of the issue of ordinary shares.

5. Amendments to the company's charter to increase the number of ordinary shares and reduce convertible preferred shares and a corresponding decrease in authorized ordinary shares.

The issuer's authorized body (Board of Directors, general meeting of shareholders) can approve the decision to issue convertible preferred shares and the decision to issue ordinary shares at one meeting. However, it must be borne in mind that in accordance with the requirements of the Issue Standards, the decision to issue securities must be approved no later than six months from the date of the decision to place them (clause 6.3). Documents for state registration of the issue of securities must be submitted no later than three months from the date of approval of the decision on their issue (clause 9.8).

Documents for state registration of both the first and second issues are provided in full compliance with the requirements of the Emission Standards for completeness (Chapter VIII of the Standards).

Issuers often make mistakes when preparing a decision to issue convertible preferred shares. You should pay attention to clause 6.2 of Appendix 4 to the Emission Standards. For convertible securities, the category (type) of shares, series of bonds, par value of the securities into which they are converted, the number of shares (bonds) into which each convertible share (bond) is converted, all rights granted by the securities into which they are converted are indicated. converted, as well as the procedure and conditions for such conversion; other rights provided for by the legislation of the Russian Federation. In our case, the decision on the issue must reflect information about the rights (as they are reflected in the company’s charter) provided by the shares into which the conversion takes place, i.e. ordinary shares, their par value and quantity.

In accordance with clause 6.1 of Appendix 4 to the Issue Standards, for shares, the exact provisions of the issuer’s charter on the rights granted by shares of this category (type) (including the amount of dividend on preferred shares) are indicated, and other rights of their owners, provided for by the legislation of the Russian Federation, are described . In our case, the exact provisions of the issuer's charter regarding the rights granted by convertible preferred shares are indicated, including the procedure, conditions and timing of their conversion into ordinary shares.

Sequence of actions of the issuer (scheme).

1. The Board of Directors of the JSC approves the agenda of the general meeting of shareholders. Notifies shareholders of the place and time of the general meeting of shareholders.	Preparation of the general meeting is carried out in accordance with the requirements of Art. 54 of the Law “On Joint Stock Companies”
2. The General Meeting decides to amend the charter on the possibility of converting preferred shares into ordinary shares and on authorized ordinary shares.	Such a decision of the general meeting is recognized as a decision on the placement of preferred convertible shares
3. Preparation of documents for state registration of the issue of convertible preferred shares.	The decision to issue securities must be approved no later than six months from the date of the decision to place them (clause 6.3 of the Standards). Documents for state registration of the issue of securities must be submitted no later than three months from the date of approval of the decision on their issue (clause 9.8 of the Standards)
4. Placement (conversion) after state registration of the issue. Carrying out relevant operations in the registry system.	The conversion of preferred shares into preferred convertible shares must be carried out no later than one month from the date of state registration of the issue of shares, on one day specified in the registered decision on their issue (clause 10.1 of the Standards). For example, on the 10th day from the moment of state registration of the issue.
5. Preparation of documents for state registration of a report on the results of the issue of preferred convertible shares. Approval of the report on the results of the issue and provision of documents to the registration authority.	The issuer submits to the registration authority a report on the results of the issue of shares placed by conversion - no later than 30 days from the date of conversion. (clause 11.3 of the Standards).
6. The General Meeting makes a decision on the placement of ordinary shares by converting convertible preferred shares into them	Such a decision can be made at the same general meeting at which the decision to amend the charter is made. (see paragraph 2 of this table)
7. Preparation of documents for state registration of the issue of ordinary shares. Approval of the decision on the issue by the Board of Directors. Submission of documents to the registration authority.	The decision to issue securities must be approved no later than six months from the date of the decision to place them (clause 6.3 of the Standards). Documents for state registration of the issue of securities must be submitted no later than three months from the date of approval of the decision on their issue (clause 9.8 of the Standards).
8. Placement (conversion) after state registration of the issue. Carrying out relevant operations in the registry system.	The placement of securities by conversion in the case provided for in subparagraph “a” of paragraph 5.1 of the Standards is carried out within the period established in the registered decision on their issue, which must correspond to the period established in the decision on the issue of securities convertible into them and cannot exceed one year from the date of approval of the decision on the issue of securities placed by conversion. (clause 10.1 of the Standards)
9. Preparation of documents for state registration of a report on the results of the issue of ordinary shares. Approval of the report on the results of the release. Submission of documents to the registration authority.	The issuer submits to the registration authority a report on the results of the issue of securities placed by conversion no later than 30 days from the date of conversion, if the conversion is carried out at a time, or no later than 30 days from the expiration date of the conversion period, if the conversion is not carried out at a time. (clause 11.2 of the Standards).
10. Amendments to the company's charter related to an increase in the number of ordinary shares, a decrease in the number of preferred shares and authorized shares.	Amendments and additions to the company's charter based on the results of the placement of shares of the company are carried out on the basis of a decision of the general meeting of shareholders to increase the authorized capital of the company or a decision of the board of directors (supervisory board) of the company, another decision that is the basis for the placement of shares and issue-grade securities convertible into shares, and a registered report on the results of the issue of shares. Art. 12 of the Law “On JSC”

Preference shares- this is a special type of equity securities, which, unlike ordinary shares, have special rights, but also have a number of specific restrictions.

Preferred shares are a common financial instrument in Russia and around the world.

It allows the owner to receive a guaranteed income based on the dividend rates offered by the issuer of the securities.

Also, in some cases, the holder of such shares can influence the company’s development strategy.

Advantages of preferred shares

Preferred shares have a number of advantages for investors when compared to ordinary securities.

Firstly, the owner of preferred shares is almost always guaranteed some income.

Namely, preferred shares accrue a fixed income, unlike ordinary shares, which depend on the profit of the joint-stock company.

However, dividends are not paid if the company has incurred losses.

Secondly, funds for the payment of dividends are allocated to holders of such securities as a matter of priority.

That is, holders of preferred shares also have the right to receive part of the property of the joint stock company in the event of its liquidation, before it is divided among other owners.

Thirdly, dividends on preferred shares are usually fixed in the total net profit.

In addition, these shareholders may have additional rights specified in the company's charter documents.

For example, they may, under certain conditions, convert their preferred shares into .

Disadvantages of preferred shares

There are also disadvantages to owning preferred shares:

The issuing company may demand the shares back from the shareholder without giving reasons, while fully compensating the damage with interest;

Preferred shares often do not carry voting rights. That is, holders of privileged rights are deprived of the right to vote and, thus, deprived of the opportunity to participate in the management process of the joint-stock company and make decisions important for society;

Fixed dividend amount. Often the amount of dividends is indicated when issuing securities of this type and does not depend on the size of the company’s profit, which, with an increase in business profitability, entails a proportional decrease in the profitability of these securities.

How are preferred shares different from ordinary shares?

The very name “preferred” shares suggests that such shares provide additional opportunities and rights, so to speak, a special status.

As a rule, such benefits include the payment of guaranteed dividends.

That is, the owner of preferred shares will receive payments regardless of how the shareholders are doing - the joint stock company will receive profits or losses.

Also, unlike ordinary shares, preferred shares give the right to receive a share of the company's assets after its liquidation.

That is, the preferred shareholder will receive a predetermined amount from the joint stock company.

For such benefits, the owner of preferred shares is deprived of the opportunity to participate in voting and influence the decisions of the joint-stock company.

Thus, the owner of such shares is an indifferent investor, so to speak, not a co-owner of the business, which cannot be said about those who own ordinary shares.

However, some cases of privileges may involve just influence on the affairs of the company. In this case, the charter of the joint-stock company provides for the ratio of votes of owners of ordinary and preferred shares, for example 1:2. So, it turns out that the owner of one preferred share has two votes.

Certain cases provide the right to influence the affairs of the company and participate in meetings to those owners who cannot vote.

Such cases are also provided for by law to protect the interests of owners. Thus, the holders of all shares issued by the company can influence decisions related to the liquidation or reorganization of the company.

There are also issues relating to shareholders that cannot be resolved without their participation. For example, when guaranteed dividends are reduced.

If the JSC is unable to pay guaranteed dividends, then the preferred shareholder receives full right to participate in company meetings on all issues.

It's also worth noting that preference shares can be convertible and cumulative.

Rights of preference shareholders

Holders of preferred securities, on the same basis as the main shareholders, receive a share in the authorized capital of the company and have the right to attend general meetings.

Despite the fact that the holder of such securities does not have voting rights, he can participate in shareholder meetings and claim a share of the property upon liquidation of the organization.

Admission to voting

In general, holders of preferred shares are not allowed to vote.

An exception may be cases when decisions made during the relevant negotiations affect the personal interests of the owners of securities.

In particular, if there are particularly important issues on the meeting agenda, preferred asset holders can vote. These could be questions reflecting the procedure for a possible reorganization of the company or liquidation of the company, those related to making adjustments to the charter, those related to the rights of holders of preferred shares or, for example, the payment of dividends.

Types of preferred shares

Preferred shares are divided into classes with varying amounts of rights.

According to the Law of the Russian Federation “On Joint-Stock Companies,” there are basically two main types of preferred shares: cumulative and convertible.

Dividends on cumulative preferred shares may not be paid in normal reporting periods by decision of the general meeting of shareholders if there is no profit or if it is completely used for the development of the company.

At the same time, the obligation to pay lost income remains.

Dividends are accumulated and paid after the financial position of the joint stock company has stabilized.

That is, the peculiarity of cumulative preferred shares is the accumulation of dividends. Owners of cumulative preferred shares have the right to accumulate unpaid dividends, accrue them and pay them in the period following the missed period. In this case, dividends are not subject to periodic payment.

The holder of a cumulative share acquires the right to vote at a meeting of shareholders for the period during which he did not receive dividends, and loses it after the payment of dividends.

Convertible preferred stock can be exchanged by the owner of the stock during a specified period for common stock or another type of preferred stock.

When issuing such securities, the rate, proportionality and exchange period are determined.

There are also the following types of preferred shares:

non-cumulative, for which unpaid dividends are not added to the dividends of subsequent years;

unconverted, which cannot change their status;

with participation shares that entitle the holders of these shares to receive additional dividends in excess of the stipulated dividends.

Results

The advantages of preferred shares include the shareholder's rights:

receive a fixed income or income in the form of a percentage of the value of shares, or a certain amount of money that is paid regardless of the results of the joint-stock company’s activities;

to receive dividends first;

for preferential participation after satisfying the creditors' claims in the distribution of property remaining with the joint-stock company upon its liquidation;

for an additional payment if the amount of dividends paid on ordinary shares exceeds the amount of dividends paid on preferred shares.

Note that if you want to invest in long-term investments, then the method of purchasing preference shares is the most suitable.

Still have questions about accounting and taxes? Ask them on the accounting forum.

Preference shares: details for an accountant

• Justification of revenues in terms of financial and economic activities

  2,000 common shares and 800 preferred shares. According to the forecasts of the joint-stock company, per... pcs. with a par value of 1 thousand rubles, preferred shares - 500 thousand pieces. with a nominal value of 1 ... thousand rubles. Dividends on preferred shares are 8% of the par value of the share... let's calculate the annual amount of dividends on preferred shares: Income plan 2019 (2020, 2021...

• Key indicators of the economic strength of the enterprise and the level of performance of its owner and management team

Several thousand shares of various companies are traded on world exchanges. In Russia, there is an order of magnitude less on the Moscow Exchange - only a few hundred. Some companies have two types of shares in circulation at the same time: ordinary and preferred. A few such examples: Sberbank, Rostelecom, Surgutneftegaz, Rollman, Bashneft. And if you want to purchase these securities and become a co-owner of a piece of the business, then a logical question arises: “Which shares to choose?” How are ordinary shares different from preferred shares?

Where do stocks come from?

A share is a security that gives its owner the right to a part of the business, the right to vote in management and receive dividends. Of course, proportional to the ownership share of the total volume of issued assets.

For a company, issuing and selling shares for free circulation brings benefits, but there are also specific disadvantages.

Shares are issued to raise additional funds for the development of their business. In some cases, to simply generate cash flow. Moreover, this money will not need to be given back. Just money out of thin air.

At the same time, by transferring shares into “the wrong hands”, the company loses some of the votes when deciding key management issues. A large stake may be acquired by competitors or large investors in order to influence the decisions of the board of directors at key moments.

The second significant disadvantage is the need to constantly share cash flows in the form of profits and distribute it among shareholders.

Considering these factors, two types of shares can be issued to the market: ordinary and preferred. By combining the release of both assets in certain proportions, you can get all the benefits with minimal disadvantages:

• provide the necessary cash flow to expand the business;
• maintain a controlling stake and a casting vote on the board of directors;
• reduce to a minimum the costs associated with dividend payments.

Types of shares

What do stocks give investors? First of all, this is, of course, an opportunity to make a profit. It can be formed from:

• growth in the market value of shares (bought for 100, after 3 years sold for 150 rubles);
• receiving dividends.

Depending on the type of stock, the main locomotive of profit can be shifted either towards increasing value or receiving dividends.

Ordinary shares

Holders of ordinary shares can count on:

1. The right to vote in management on the board of directors. But for private investors who own a fairly modest portfolio, this parameter is not so important.
2. Right to receive dividends. Decisions on payment and its amount are made by the board of directors based on the profit received, the current financial situation of the company and further plans for the development of the company. The decision can be either positive or negative.
3. Receiving part of the company's value upon its liquidation.

According to Russian legislation, the share of preferred shares in the authorized capital should not exceed 25% of the entire issue.

Most investors, when buying ordinary shares, hope for their further growth in the future. And receiving dividends is a kind of additional bonus.

But you can always find companies that pay good dividends on ordinary shares. In some cases, even more than the preferred shares of other companies earn.

Preference shares

One of the disadvantages is that the owners do not have the right to vote in the management of the company. One of the advantages is that the owners of preferred shares have a priority right to receive cash payments among the shareholders in the event of bankruptcy of the company.

But that's not the main thing. Unlike ordinary shares, preferred shares give the right to receive constant dividends. During the entire time the company operates, investors receive profits. Size is determined by many parameters. The basis is fixed in the charter of the enterprise. Owners of prefs (as preferred shares are called) have the primary right to receive dividends. The payment procedure can be once a year, six months, or less often once a quarter.

The Sberbank charter stipulates dividend payments in the amount of 20% of net profit. After changing its dividend policy, Rostelecom promises to pay at least 75% of free cash flow and allocate at least 45 billion rubles for payments over 3 years.

Conditionally preferred shares are a cross between ordinary shares and bonds. But they have all the advantages of both securities:

1. Receiving fixed profits in the form of dividends is similar. But if bonds have a limited circulation period, then Prefs do not have such a limitation. There are companies that have been paying dividends for 50-80 years. A good option is to acquire permanent passive income, which your descendants (children, grandchildren) can also use.
2. Purchasing a stake in a company with the hope of further growth and development, which will certainly have a positive effect on the growth of quotes.

What to choose for an investor

At the moment there are not many preferred shares on the Russian market. Just a few dozen. The majority are ordinary shares. But if you are counting specifically on receiving dividends, then you can take a closer look at them.

The absence of a company's preferred shares does not mean that the company is not paying its shareholders. Many even make payouts much higher than their preferred share market peers.

As an example, let's look at several leading ordinary shares of companies traded on the MICEX and regularly paying dividends to their shareholders.

Yield refers to the amount of profit paid from the share price on the day the register is closed.

Here are the average payouts on preferred shares:

Surgutneftegaz paid one of the largest dividends on preferred shares on the Russian market. For 2015-2016 holders received a profit of 7 - 8 rubles per share, which corresponded to a yield of 18-24%. Subsequently, due to losses, the size of dividend payments was reduced to a symbolic 60 kopecks, which amounted to approximately 2% of the yield.

As you can see, there is practically no difference for us private investors. Both pay. Of course, you need to analyze a little the size of payments over recent years, the financial stability and development potential of the company.

Information on the amounts of paid and planned dividends can be found on the websites of leading brokers. RBC also has it. But I like the statistics on this service - dohod.ru/ik/analytics/dividend.

Difference between preferred shares and ordinary shares

What if you choose between two securities of the same company? Who to choose? Take preferred shares with the expectation of dividends. Or ordinary shares with the hope of faster growth in quotes.

Let's consider, for example, Sberbank shares - ordinary and preferred.

The graphs below show the bank's stock exchange quotes over the past 5 years.

Sberbank ordinary shares - chart for 5 years
Preferred shares of Sberbank - chart for 5 years

During this time, preferred shares grew by as much as 101% or 2 times. As usual, the increase was 120%.

But during this time, owners of two types of assets received annual dividends:

Taking into account the fact that the initial cost of ordinary shares was 25% higher than preferred shares, we obtain that for the same invested capital, net profit without dividends was:

• Common shares - 113%
• Preferred shares - 144%

It turns out that in terms of profitability, preferred shares are a more profitable option than ordinary shares. At least using the example of Sberbank. But here we missed one important point that can greatly influence the final profit of a long-term investor.

Dividends and taxes on shares - impact on profits

Many people studiously avoid holding stocks that regularly pay dividends in their portfolio. It is believed that if a company cannot come up with anything better than distributing profits to its shareholders, it is not very effective in management and its development. Money for business expansion can provide much higher returns.

The second point is taxes. We are obliged to give 13% of the profit received to the state. As a result, this reduces the final profitability. This is especially noticeable at long intervals - 5-10-15 years or more.

For example. Receiving an annual profit of 12% in the form of dividends, you need to pay 13% in taxes. As a result, the real yield will be 10.4%. And so every year. But if the main profitability is focused on the growth of quotes, without receiving dividend payments, then until you sell the shares, you don’t have to pay tax.

What will this give in terms of profitability?

Buying shares for 15 years with an average price growth during this time of 12% per year, by the end of the period the profit will be 447%.

The same without growth, but with receiving dividends - 12% per year, but after tax - 10.44%. By the end of the term, the profit is 317%.

Result: the difference in profitability was 40%.

Finally

Preferred shares allow you to receive a stable annual income. The lack of voting rights in the management of the company when purchasing Prefs is not a significant loss for you and me. When choosing, you should first of all be guided by the amount of dividend payments. And no less important is their stability. We need to analyze the statistics over the past few years.

Ideally, it should be even, without significant jumps down in dividends, and increase slightly every year. This will indicate business development and good chances of continuing high payments in the future.

Correctly selected ordinary shares can give the investor good profit in the form of an increase in market value in the future. The absence of dividends is not so important. The entire cash flow will work within the company and, if used wisely, can give impetus to further development and, as a result, increase the company’s capitalization on the stock market.