Can redeemable preference shares be converted to ordinary shares in Vietnam?
In the past I have purchased shares of a joint stock company in Vietnam, including ordinary shares and redeemable preference shares. Now, the business is also growing, so I want to convert all of my redeemable preference shares into ordinary shares, is it possible?
Can redeemable preference shares be converted to ordinary shares in Vietnam?
Pursuant to Article 118 of the Enterprise Law 2020 stipulating on redeemable preference shares and rights of their holders as follows:
1. Redeemable preference shares are shares that will be redeemed by the company at the request of their holders or under the conditions written in the certificates of redeemable preference shares and the company's charter.
2. Holders of redeemable preference shares have all of the rights of ordinary shareholders, except the cases specified in Clause 3 of this Article.
3. Holders of redeemable preference shares do not have the right to vote, participate in the GMS, nominate candidates for the Board of Directors and the Board of Controllers, except the cases specified in Clause 5 Article 114 and Clause 6 Article 148 of this Law.
According to Clause 5, Article 114 of the Enterprise Law 2020, provides as follows:
1. A joint stock company shall have ordinary shares, which are held by ordinary shareholders.
2. In addition to ordinary shares, a joint stock company may have preference shares, which are held by preference shareholders. Preference shares include:
a) Participating preference shares;
b) Redeemable preference shares;
c) Super-voting shares;
d) Other types of preference shares prescribed by the company's charter and securities laws.
3. The persons that may purchase participating preference shares, redeemable preference shares and other preference shares shall be specified in the company's charter or decided by the GMS.
4. Every share of the same type will confer upon the holder equal rights, obligations and interest.
5. Ordinary shares cannot not be converted into preference shares. preference shares may be converted into ordinary shares under a resolution of the GMS.
6. Ordinary shares used as underlying assets to issue non-voting depository receipts are called underlying ordinary shares. Non-voting depository receipts have interest and obligations proportional to the underlying ordinary shares, except voting rights.
7. The Government shall provide for non-voting depository receipts.
Thus, according to the law in Vietnam, because redeemable preference shares are a form of preference shares, they will be converted into common shares if approved by a resolution of the General Meeting of Shareholders.
So in your case, it will depend on the decision of the General Meeting of Shareholders whether to convert from super-voting shares to ordinary shares in Vietnam.
Best Regards!
