CCPS, whether an ‘Anti-Dilution Tool’ for the Promoters?
- Blog|News|Company Law|
- 2 Min Read
- By Taxmann
- |
- Last Updated on 10 May, 2022
Latest from Taxmann
Dhrumil Shah – [2022] 138 taxmann.com 114 (Article)
Introduction:
Compulsory Convertible Preference Shares (CCPS) is one of the sources for raising funds for the corporate sector. It is an advance version of equity shares. CCPS is a type of preferred share/stock that gives holders the option to convert their preference shares into a fixed number of equity shares after a specified date. It is increasingly becoming a preferred investment instrument for high net worth and Private Equity (PE) investors, the reason being that it is not only helpful to investors to bridge the gap in mismatch in valuation expectation between investors and promoters but also assures the preference of investment amount at the time of liquidation event. The Investor often links time of conversion of CCPS into the company’s performance. In other words CCPS is an anti-dilution instrument or hybrid instrument or deemed equity instrument. Let us discuss in detail the characteristics or usage of CCPSs.
Anti Dilution – Tool for the Promoters:
CCPS is beneficial to the promoters of the company to keep their equity stake intact at the time when the Company issues equity shares to the new investors. The Promoters may convert their CCPS which was subscribed at the time of inception of the Company at par. When investor infuses the money at higher valuation thereby promoters can increase its stake by simply converting into equity shares without bringing money at higher valuation.
Click Here To Read The Full Article
Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.
Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.
The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:
- The statutory material is obtained only from the authorized and reliable sources
- All the latest developments in the judicial and legislative fields are covered
- Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
- Every content published by Taxmann is complete, accurate and lucid
- All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
- The golden rules of grammar, style and consistency are thoroughly followed
- Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied
Sign Up
To subscribe to our weekly newsletter please log in/register on Taxmann.com
Latest Books
Everything on Tax and Corporate Laws of India
To subscribe to our weekly newsletter please log in/register on Taxmann.com
