Redeemable preference shares & rights of redeemable preference shareholders

What are redeemable preference shares? What rights do holders of redeemable preference shares have? In the following article, fdiinvietnam.com will help you answer these questions.

In a joint stock company, in addition to common shares – a mandatory type of share, the company can also issue preferred shares such as voting preferred shares, dividend preferred shares, redeemable preferred shares and other preferred shares according to the company charter and securities laws.

In this article, fdiinvietnam.com will share in detail the concept and benefits of redeemable preferred shares. 

What is redeemable preferred stock? 

According to Clause 1, Article 118 of the 2020 Enterprise Law, redeemable preference shares are shares in which the company refunds the contributed capital according to one of the following points:

• According to the company charter;
• At the request of the owner;
• Subject to the terms stated on the certificate of redeemable preference shares.

What are the 7 rights of redeemable preference shareholders?

According to Articles 118 and 115 of the 2020 Enterprise Law, shareholders owning redeemable preferred shares have the same rights as common shareholders, except for the following 3 rights: the right to vote, the right to attend the general meeting of shareholders and to nominate candidates for the board of directors and the board of supervisors.

Accordingly, the 7 rights of shareholders owning preferred shares are stipulated as follows. 

1. Right to access information

Pursuant to the provisions of Clause 2, Article 118 and Point d, Point e, Clause 1, Article 115 of the Law on Enterprises 2020, shareholders owning redeemable preference shares have the right to:

• Look up, review, photocopy or extract the company charter, resolutions and minutes of shareholders’ meetings;
• Look up, review, and extract information about names and contact addresses in the list of shareholders with voting rights;
• Request correction of inaccurate information about yourself.

2. Right to receive dividends

Shareholders owning redeemable preference shares are entitled to receive dividends at a rate decided by the general meeting of shareholders.

3. Right to buy new shares

Shareholders owning redeemable preference shares have priority in purchasing new shares corresponding to the proportion of redeemable preference shares each shareholder in the company owns. 

4. Right to request the company to return contributed capital

As the concept content that fdiinvietnam.com shares, shareholders of redeemable preferred shares have the right to request the company to refund their contributed capital at any time according to the conditions stated in the redeemable preferred shares and the company’s charter or at the request of the owner. 

5. Right to receive part of the company’s assets

In case of bankruptcy or dissolution of the company, redeemable preference shareholders are entitled to receive a portion of the remaining assets at a level corresponding to the proportion of shares owned in the company. 

6. Right to freely transfer redeemable preferred shares

Shareholders using redeemable preferred shares can freely transfer the shares they own to others, except in the following two cases:

• Restricted by the company’s charter and this provision must be clearly stated on the redeemable preference shares;
• Transfer of redeemable preferred shares within 3 years (from the date of issuance of the Business Registration Certificate) to outsiders without the approval of the general meeting of shareholders.

7. Right to convene and attend shareholders’ meetings

In addition to the above rights, shareholders owning redeemable preferred shares also have the right to request a general meeting of shareholders and attend the meeting in the following cases:

• The Board of Directors violates shareholders’ rights, violates management responsibilities or makes decisions beyond the scope of authorized authority;
• Other cases according to company charter.

Benefits of businesses when issuing redeemable preferred shares

As one of the classifications of shares, it can be said that understanding and understanding the characteristics of redeemable preferred shares is extremely necessary for investors preparing to establish a joint stock company and planning to issue shares. 

Because in addition to helping the company mobilize new capital, issuing redeemable preferred shares is also effective in limiting the emergence of control rights over the company because redeemable preferred shareholders have almost no right to nominate people to the board of supervisors and board of directors or the right to vote or attend the general meeting of shareholders. 

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If you are in need of establishing a joint stock company but have difficulty with documents, procedures or simply want to speed up the process, complete all procedures quickly, the service of establishing a joint stock company at fdiinvietnam.com will be a suitable suggestion. 

With a total cost of 1,000,000 VND, in just 3 – 5 working days, fdiinvietnam.com will complete all necessary procedures for you and deliver the business license to your door. 

CALL NOW

 

Some frequently asked questions about redeemable preferred stock

Call us at 0978 578 866 (North) – 033 9962 333 (Central) – 033 9962 333 (South) for support.