CONVERSION OF PREFERRED SHARES INTO COMMON SHARES LEGAL ASPECTS AND CHALLANGES
Abstract
The question of conversion of preferred shares, attracts attention both in terms of the reasons that lead to this corporate capitalistic action, and in terms of formal-legal basis for its realization in practice. The right to convert the preferred shares into common shares, in itself, is one of the most important key features of the preferred shares that are set out at the time of their issuance. When the right of conversion is included in the resolution for allotment and issuance of preferred shares, then the conversion ratio must be predetermined. The main question of this paper, refers to whether the conversion can be carried out only if/when that right is set out in the resolution for allotment and issuance of preferred shares or in other situations that can be initiated and implemented as a corporate action of a company?
The conversion of preferred shares into ordinary shares has limited tradition in Macedonian law, so this paper aims is to provide an explanation of the degree of regulation of the domestic legal framework for this corporate action. The results show that the hypothesis that the conversion as a corporate action can be regulated by article of incorporation, was not excluded, but on the contrary, it emphasized the need for its higher legislative regulation as a more important hypothesis. Otherwise, the noted particularity inherent to the "case-by-case" solving principle, can raise many dilemmas and uncertainties among shareholders, investors and in the capital market upon undertaking conversion as a corporate action.