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 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. The absorption will be less entertaining. 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.

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 high-growth companies 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 will be ahead of common shareholders in returning capital if Acme ever goes bankrupt and its assets have 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 that is converted. The conversion ratio is set by management prior to issuance, typically with management of the 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 factor. 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 traded in the secondary market, and market price and performance 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. This 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.

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 securities into them, 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 determined by the period of time, 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 outstanding preferred shares must 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”