And which ones to choose for several years to come

Some companies issue two types of shares: ordinary and preferred. The difference between them seems simple: in the first case, you are guaranteed the right to vote at a meeting of shareholders and are not guaranteed the payment of dividends, in the second - vice versa.

But it's not that simple. The Law “On Joint Stock Companies” describes all possible situations when preferred shares differ from ordinary shares. These differences can be divided into 3 groups: non-payment of dividends, voting at a shareholders meeting and liquidation of the company. Let's talk about them and see which type of securities is more profitable to buy for several years.

Difference 1.

Non-payment of dividends

Dividends are a share of a company's income divided by the number of shares. According to Article 42 of the Law “On Joint Stock Companies”, the company pays dividends from net profit and special funds. Net profit is the income remaining after paying salaries, taxes, and debts. And special funds are created to pay dividends when the company has too much money.

The amount of dividends is specified in the company's charter. This can be either an exact amount or a formula for calculating net profit.

If the charter does not indicate how much the owner of a preferred share will receive, then the amount of payments for these and ordinary shares is the same and is approved by the board of directors, and accepted by the owners of ordinary shares. And the size of dividends cannot be higher than the value agreed upon by the board of directors.

But it happens that the owners of preferred shares are not paid dividends: there is no profit, there are no special funds for payment. In case of non-payment, you will have the right to vote on all company matters. But other options are possible; you need to look at the company’s charter. The law allows the conversion of shares into cumulative and converted shares.

Cumulative shares accumulate dividend debt for a certain period specified in the charter. In case of delay, your shares will receive voting rights. Convertible - give voting rights until the company pays the dividend debt.

Excerpt from the charter of Rosseti. Owners of preferred shares receive voting rights if they do not receive dividends

That is, in the event of non-payment of dividends, the company can choose from several alternatives. Of course, you can find out about all the conditions in advance. The dividend policy is described in the charter of the joint stock company. It is usually published on the website in the “investors and shareholders” section.

Difference 2.

Voting at a meeting

Only holders of common shares vote on most issues. The principle is simple: one share - one vote. For example, at the end of June 2018, Aeroflot shareholders voted on the approval of annual profits, payments of remuneration to members of the board of directors, as well as on the approval of upcoming major transactions.

The scope of rights of holders of ordinary shares varies depending on the number of shares. However, we will disappoint those who plan to gain control in large companies: in most of them, significant stakes have been purchased by the state.

How many shares are there?	What Can
1 %	View the list of other shareholders. File a lawsuit against the general director or a member of the board of directors demanding compensation for losses caused to the company
2 %	Propose candidates to the Board of Directors. Introduce proposals to the agenda of the annual meeting of shareholders
10 %	Call an extraordinary meeting of shareholders, even if it is rejected by the board of directors
25 % + 1 share	Block decisions of the board of directors
50 % + 1 shares	You can make your own decisions on most issues where 75% “yes” votes are not required
75 % + 1 share	You can make any decisions regarding the management of the company

There are several topics that cannot be discussed without the preference shareholders. This is everything related to the liquidation of a company, reorganization, change in charter, placement of new shares on the stock exchange or withdrawal of existing ones from circulation.

Difference 3.

Liquidation of a company

The third difference is the simplest. If you own preferred shares, you will receive your share earlier in the event of bankruptcy. The shares will be bought back and you will be paid the liquidation value for them.

The same applies to dividends. Liquidation dividends are first paid on preferred shares. And only then the remainder is divided among the owners of ordinary shares.

What stocks to buy

If you do not plan to influence the company's activities and need stable dividend income, choose preferred shares. Their payments are more stable and predictable. And the securities themselves are cheaper than ordinary shares and are growing faster. When purchasing for several years, this is the best option.

Short

1. Shares are divided into 2 types: ordinary and preferred.
2. Ordinary shares allow voting at shareholders' meetings, preferred shares give fixed dividends.
3. If dividends are not paid, preferred shares will provide voting rights.
4. If changes need to be made to the charter or there is a reorganization or liquidation of the company, all types of shares are voted on.
5. If there are a lot of ordinary shares, the investor receives bonus rights and opportunities.
6. If you need a more stable income, preferred shares are more profitable than ordinary shares. But only if you buy them for several years.

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”

The issue of preferred shares can be used to redistribute corporate control.

The legislation does not establish a requirement that the par value of preferred shares must be equal to the par value of ordinary shares. Moreover, if preferred shares acquire voting rights, then each such share gives its owner one vote, regardless of its par value. If preferred shares were not previously issued, upon their issue the existing shareholders - holders of ordinary shares do not have a priority right to acquire preferred shares.

Thus, a shareholder or group of shareholders owning 75% of the company's shares has the opportunity to make a decision at a general meeting of shareholders on the issue and placement by private subscription of low-par preferred shares, the number of which will significantly exceed the number of previously issued ordinary shares. After a dividend has not been paid on these shares at least once, the owner of preferred shares will become the owner of a complete controlling stake at all subsequent general meetings of shareholders.

True, the implementation of such a scheme for redistributing corporate control requires care.

Firstly, the initiator must have a sufficiently large number of voting shares to allow it to obtain a qualified majority at the general meeting of shareholders necessary to make a decision to increase the authorized capital.

Secondly, one should be extremely careful in determining the placement price of preferred shares. We remember that the placement price of additional shares must correspond to their market value. Today, judicial practice has developed when minority shareholders appeal such decisions. If the shareholder proves that the placement price of low-par preferred shares does not correspond to their market value, then the court will with a high degree of probability declare the issue invalid. Thus, an unconditional recommendation when placing preferred shares in conditions where such a decision can be appealed is to set the placement price close to their real market value.

Thirdly, we should not forget about approving transactions to place additional shares as related-party transactions.

Art. 83 of the Law provides that, depending on its parameters, an interested party transaction can be approved either by the board of directors or by the general meeting of shareholders of the company. However, since paragraph 4 of this article provides that if the subject of a transaction or several interrelated transactions is property, the value of which, according to accounting data (offer price of the acquired property) is 2 or more percent of the book value of the company’s assets according to its accounting records as of the last reporting date , a decision can only be made by a general meeting with a majority vote of all shareholders who are not interested in the transaction - owners of voting shares; the option of a decision being made by the board of directors is of no interest in this case.

What needs to be taken into account when preparing a general meeting of shareholders, at which an interested party transaction for the placement of preferred shares will be approved?

First of all, you need to remember that if shares are placed directly to any shareholder or his affiliates
persons, this shareholder does not vote on this item on the meeting agenda. Thus, shares must be placed either to an independent (albeit formally) person, or the majority of other (disinterested) shareholders must agree with such placement and vote for it.

The second important point when holding such a general meeting is that the decision must be made by a majority vote of all shareholders not interested in the transaction. Moreover, in this case, the legislator requires that the majority be taken into account specifically from all disinterested shareholders, and not from disinterested shareholders who took part in the general meeting.

Practice shows that in “old” joint-stock companies that arose during the period of mass privatization, this condition is often very difficult to ensure. Indeed, the main block of shares is usually concentrated in the majority shareholders, and if they are interested parties in the placement of preferred shares, only minority shareholders will vote. However, many of them died, and no one inherited their shares; moved without notifying the registrar and do not receive notice of the meeting. Finally, they simply never go to meetings. If there are more than half of such shareholders, it will be impossible to make a decision to approve the interested party transaction. The only way out that the author sees in this case is to take measures in advance to ensure that the transaction for the placement of preferred shares does not fall under the definition of an interested party transaction given in the law.

Here is another way to change the “balance of forces.”

Current legislation provides for the possibility of consolidating shares of the company. That is, two or more outstanding shares of the company can be, in accordance with the provisions of Art. 74 of the Law, converted into one newly placed share. Such a decision will be made by a simple majority of votes of shareholders holding ordinary shares and can only apply to these ordinary shares.

Thus, the total number of outstanding ordinary shares may be reduced by any integral number. The number of preferred shares will remain unchanged.

Consequently, the number of votes of shareholders - owners of ordinary shares will be reduced, but there will be no votes of preferred ones. The situation will not change even if, as a result of the conversion, a number of shareholders will have fractional shares. Clause 3 art. 25 of the Law establishes that a fractional share provides the shareholder - its owner with the rights provided by a share of the corresponding category (type), in an amount corresponding to the part of the whole share that it constitutes. Consequently, even a share split into several parts will give only one vote in total. Thus, the goal of gaining more complete control over society will be achieved.

Let's consider another situation. A shareholder (group of shareholders) interested, for example, in placing company shares through a closed subscription or making certain changes to the charter, does not initially have a qualified majority of votes allowing such a decision to be made. However, he (his allies in this matter) has at his disposal preferred shares, the size of the dividend for which is determined in the company's charter, in an amount that, together with ordinary shares, allows this to be done.

If the number of votes belonging to such a shareholder turns out to be higher than 50 percent of the total number of votes of shareholders who took part in the general meeting of shareholders (taking into account the extremely low activity of shareholders, this figure may not be too large), such a shareholder has the opportunity to block the adoption of a decision by the general meeting of shareholders on the payment of dividends on preferred shares. And the preferred shares will become voting shares at the next meeting.

Third situation. A company that has issued both ordinary and preferred shares is about to make a decision that does not meet the interests of minority shareholders. If a dividend on preferred shares was previously paid, then such shares are not voted at the meeting. But Article 43 of the Federal Law “On Joint-Stock Companies” contains a list of situations when the general meeting of shareholders does not have the right to make a decision on the payment of dividends on preferred shares. For example, if the company meets the criteria of insolvency (bankruptcy).

If a shareholder identifies such a situation, he will be able to legally declare the decision of the general meeting of shareholders to pay dividends invalid (regardless of whether the dividends have already been physically paid), thereby dramatically changing the balance of power at the upcoming general meeting.

Let us draw the reader's attention to some subtleties of the current arbitration practice.

There have been cases when the annual general meeting of a joint stock company was not held or its holding was disrupted. Accordingly, no decisions were made at such a meeting on the payment of dividends on preferred shares. Will preferred shares become voting?

A number of lawyers consider it possible in this situation to consider the company's preferred shares as voting. However, judicial practice takes a different path, indicating that, within the meaning of the provisions of the Law, owners of preferred shares receive the right to vote if the annual meeting took place, but the issue of paying dividends on preferred shares was not resolved or a decision was made to refuse to pay dividends. Failure to make a decision on the payment of dividends due to the failure to hold a meeting or the adoption of a decision on non-payment of dividends at an illegal meeting does not provide the holders of preferred shares with voting rights.

There is also judicial practice based on a literal reading of the provisions of paragraph 5 of Art. 31 of the Law. According to it, the voting rights of preferred shares arise precisely in connection with the decision on non-payment or incomplete payment of dividends. If the decision to pay dividends is made, but the dividends are not paid, the right to vote does not arise.

Perhaps, what is common to all the scenarios discussed above is that when they are implemented, the majority shareholder (or group of shareholders) uses a dominant position in society to create a situation that actually infringes on the rights of minority shareholders. Today, all the described actions are absolutely legal. However, in recent years, the Federal Service for Financial Markets and the Ministry of Economic Development have repeatedly prepared bills that close the possibility of using the dominant position of majority shareholders. Thus, in various documents it was proposed to establish that the par value of the company's preferred shares cannot be lower than the par value of ordinary shares, or to establish that when placing preferred shares of any type, shareholders - owners of ordinary shares have the right of pre-emptive acquisition in an amount proportional to the number of shares they have ordinary shares.

Thus, it is likely that in the near future, most of the opportunities discussed above for using preferred shares to obtain or strengthen corporate control in a joint stock company will become illegitimate.

Preferred shares as an income payment tool

Let us dwell on the opportunities that preferred shares provide to the majority shareholder in making a profit.

Payment of income through dividends (we will make a reservation that further we are talking about residents of the Russian Federation) to individuals is beneficial in any case, since it is subject to a 9% tax, which is significantly more profitable than payment of other types of income. It is also convenient for legal entities making profit. In this case, when calculating income tax, its rate will be 0%, provided that on the day the decision is made to pay dividends, the organization receiving dividends has continuously owned at least 50 percent of the contribution (shares) for at least 365 calendar days. in the authorized (share) capital (fund) of the organization paying dividends or depositary receipts giving the right to receive dividends in an amount corresponding to at least 50 percent of the total amount of dividends paid by the organization.

As shown above, the majority shareholder - the owner of more than 75% of the voting shares of the company has the opportunity to become the sole owner of preferred shares and in accordance with the provisions of Art. 43 of the Law to actually withdraw any share of the company’s net profit in the form of dividends on them.

An essential point in receiving income on preferred shares, the amount of dividend on which (the procedure for determining it) is determined by the company’s charter, is the fact that declared (paid dividends) should not exceed this amount fixed in the company’s charter. Otherwise, there is a high probability that the decision to pay dividends on preferred shares will be appealed by the shareholders who voted against it in court. Of course, this circumstance is important only if the company has other shareholders who are not part of the group interested in paying such dividends.

Returning to what was said above, I would like to note another opportunity due to the relatively low level of taxation of dividend income for individuals. The placement of preferred shares to key employees of the JSC will actually allow them to pay part of their remuneration in the form of dividends. However, if we consider both complete chains of taxation (for payment under an employment contract and for payment in the form of dividends), starting from the receipt of revenue by the company to the payment of funds directly to an individual, it becomes clear that the question of the profitability of such a decision is not entirely simple.

The author does not consider it possible in the format of this article to dwell in detail on all the financial aspects of such a payment, however, in his opinion, the costs of society in any of the ways under consideration will, in general, be comparable. And of course, you need to remember that dividends can only be paid if there is a net profit in the company.

In addition, it makes sense to compare the benefits of paying remuneration through an employment contract or dividends when we are talking specifically about the company’s employees associated with it through labor relations. But in the course of JSC activities, situations often arise when interaction with certain individuals is extremely important and beneficial. At the same time, the possibility of concluding an employment contract with them is excluded or significantly complicated. In this case, the placement of preferred shares to such persons, allowing them to receive the necessary income, may be the optimal solution.

For quite a long time, the main problems preventing the spread of this practice were the impossibility of stopping payments on shares upon completion of cooperation and the fear of an unfavorable vote by their owners in cases provided for by law. They tried to solve them in various ways. Thus, advance receipt of “reverse” transfer orders was often used. However, this path cannot be considered legal.

There have been attempts to enter into repurchase agreements providing for the right to repurchase preferred shares after a certain period. But this option, from the author’s point of view, is unacceptable, because in accordance with the provisions of paragraph 13 of Art. 51.3 of the Federal Law “On Joint Stock Companies” in the event that the list of persons entitled to receive from the issuer dividends transferred under the first part of the repurchase agreement is determined in the period after the fulfillment of obligations to transfer securities under the first part of the repurchase agreement and before the fulfillment of transfer obligations securities under the second part of the repurchase agreement, the recipient of the dividend will be the one who was the shareholder on the date of compilation of such a list.

Existing judicial practice suggests that it is possible to prevent the voting of owners of preferred shares even in the event of non-payment of dividends to them. To do this, it is enough not to determine the size of the dividend on them. However, such securities in many cases will not suit their prospective purchasers.

Today, the author knows of only one option that allows, with a high degree of probability, to ensure the required regime for ownership of preferred shares and the termination of such ownership. Its implementation is subject to the provisions of Art. 32.1 of the Law on Joint Stock Companies, dedicated to the shareholders agreement.

A shareholder agreement may provide for the obligation of its parties to vote in a certain way at the general meeting of shareholders, to agree on a voting option with other shareholders, to acquire or alienate shares at a predetermined price and (or) upon the occurrence of certain circumstances, to refrain from alienating shares until the occurrence of certain circumstances, and also carry out in concert other actions related to the management of the company, its activities, reorganization and liquidation of the company.

Thus, it is possible to conclude a shareholder agreement, according to which the acquirer (owner) of preferred shares will not only be obliged to vote at the general meeting of shareholders in accordance with the instructions of the owners of ordinary shares, but will also have to sell them under certain conditions at a certain price.

Unfortunately, this method is not perfect either. The problem is that the legislative possibility of concluding shareholder agreements has appeared quite recently. In this regard, there is practically no judicial practice on the issue of limiting the rights (or imposing additional obligations) on owners of preferred shares, and, therefore, it is impossible to predict the possible nuances of enforcement when courts consider claims based on the provisions of shareholder agreements in the future.

We will be especially careful if preferred shares were issued by an open joint stock company

Shareholders of an open joint-stock company must additionally take into account that if, as a result of the described actions, the number of voting shares controlled by them together with affiliates exceeds one of the thresholds of 30, 50, 75%, they will fall under the scope of Chapter. XI.1 of the Law, according to which they will have to carry out complex and expensive procedures related to the direction and implementation of the so-called “mandatory offer” to other shareholders of the company. Until such a proposal is submitted, a shareholder may vote only with a number of shares not exceeding the first threshold passed during such acquisition. Due to the limited scope of this article, the author does not consider it possible to dwell in more detail on the implementation of these procedures, but considers it necessary to note two circumstances.

Firstly, the current practice interprets giving preferred shares voting status as an option for acquiring the block of shares established by the Law. That is, if previously a shareholder, owning 25% of ordinary and 20% of preferred shares, did not have the obligation to send a mandatory offer to the company to buy out all remaining shares, then as soon as the preferred shares he owns become voting, he will have this obligation. This situation applies even to cases where the acquirer himself did not vote for the decision by virtue of which the preferred shares became voting, or even voted against such a decision. Clause 8 art. 84.2 of the Law contains a list of cases of acquisition of shares in which the requirements of Ch. XI.1 do not apply. Our case is not included in this list.

Secondly, these procedures can bring very interesting results in the future. Thus, if, as a result of the implementation of the “mandatory offer” procedures, a shareholder (singly or jointly with affiliates) becomes the owner of more than 95% of the voting shares of the OJSC, while at least 10% of this number will be acquired by him during these procedures, the shareholder has the right at his request, buy back shares from other shareholders, which will provide him with complete control over the company.

What is presented in this article does not exhaust, of course, all the possibilities and all the problems associated with the use of preferred shares in corporate governance procedures. However, the author hopes that the presented material will allow readers to more fully utilize their potential and avoid the most obvious mistakes.

See, for example, Resolution of the Federal Arbitration Court of the North Caucasus District dated January 28, 2005 No. F08-6439/04; Resolution of the Federal Arbitration Court of the East Siberian District dated December 12, 2006 No. A19-11170/06-53-F02-6682/06-S2.

Part two of the Tax Code of the Russian Federation dated 05.08.2000 No. 117-FZ, art. 224, paragraph 4.

Resolution of the Federal Arbitration Court of the Northwestern District dated July 21, 2008 No. A56-19949/2006.

See, for example, Resolution of the Federal Arbitration Court of the East Siberian District dated December 12, 2006 No. A1911170/06-53-F02-6682/06-C2; Resolution of the Federal Arbitration Court of the North Caucasus District dated January 28, 2005 No. F08-6439/04.

Federal Law of June 3, 2009 No. 115-FZ “On Amendments to the Federal Law “On Joint-Stock Companies” and Article 30 of the Federal Law “On the Securities Market” (came into force on June 9, 2009).

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.

Shareholders often contact us with a desire to sell certain shares. Sometimes, when they hear the final price of their shares, they are very surprised. Their surprise is due to the fact that they really expected to hear a completely different number. And both up and down.

It's not all about our greed or the complete ignorance of shareholders, but about the conversion of shares. Over the many years of owning shares, shareholders simply did not know that since then there had been a conversion of their shares (and sometimes more than one). The shares of many companies have undergone changes, i.e. conversion.

The most “harmless” type of conversion of shares is when preferred shares are converted into ordinary shares one for one, i.e. 1 preferred share simply became 1 ordinary share and the total number of shares in this case is easy to calculate. For example, such conversion occurred in companies such as Lukoil, Rosneft and a number of others.

But most often the conversion does not occur 1 to 1, i.e. for example, 1 share can be converted into 5 or vice versa - 5 into 1. And it happens that the company completely changed its legal name or merged with another enterprise.

To sort out this whole “conversion mess,” we decided to post reliable information on the conversion of each specific issuer (enterprise) separately:

Conversion of Alrosa shares

Alrosa shares were fragmented, i.e. 1 old(active) promotion turned into 27005 new. But the final value of the stake has not changed.

Conversion of Norilsk Nickel shares

The Norilsk Nickel enterprise was previously a Russian Joint Stock Company (RAO), now the enterprise is called the Norilsk Nickel Mining and Metallurgical Combine (MMC). All shares of RAO Norilsk Nickel were converted into MMC Norilsk Nickel in proportion 1 to 1, but provided that the shareholder wrote an application for transfer of shares(at one time, the company sent each shareholder a written notice of the mandatory transfer of shares). Otherwise, the shares are invalid and it is impossible to sell shares of RAO Norilsk Nickel now.

Conversion of Lukoil shares

Lukoil shares were easily converted. 1 preferred share converted to 1 ordinary share, i.e. 1 to 1.

Conversion of Rosneft shares

Rosneft shares were also easily converted. 1 preferred share V 1 ordinary share, i.e. 1 to 1.

But several once separate companies also converted to Rosneft, and here the proportions are completely different:

Sakhalinmorneftegaz:

1 ordinary share was converted into 2.98 ordinary shares of Rosneft

1 preferred share was converted into 2.23 ordinary shares of Rosneft

Purneftegaz:

1 ordinary share was converted into 6.09 ordinary shares of Rosneft

1 preferred share was converted into 4.57 ordinary shares of Rosneft

Stavropolneftegaz:

1 ordinary share was converted into 24 ordinary shares of Rosneft

1 preferred share was converted into 16.8 ordinary shares of Rosneft

Arkhangelsknefteprodukt:

1 ordinary share was converted into 0.376 ordinary shares of Rosneft

1 preferred share was converted into 0.263 ordinary shares of Rosneft

Conversion of Rostelecom shares

At Rostelecom, the conversion of shares took place in 2012. Many shareholders have statements with the number of shares that does not correspond to the real number. The fact is that before the conversion there were several companies (in the regions of Russia): Dalsvyaz, Dagsvyazinform, Volgatelecom, North-West Telecom, Sibirtelecom, Uralsvyazbinform, Central Telecommunications Company, Southern Telecommunications Company. All these companies were converted into 1 company - Rostelecom.

Moreover, all ordinary and preferred shares were converted only into ordinary shares. The best way to check the conversion and find out the number of Rostelecom shares you currently own is on the Rostelecom website. To do this, just enter “Rostelecom calculator” in any search engine. Rostelecom shareholders also receive voting letters indicating the number of votes. This is the number of ordinary shares owned by the shareholder.

Conversion of Sberbank shares

The majority of shareholders received their Sberbank shares in 1993 in the form of special certificates. 1 ordinary share of 1993 was converted into 1000 ordinary shares, and 1 preferred share was converted into 20 preferred shares.