Lets move away from fantasy life for a moment ! A financial question

[BookerL]

Hello all

Many fellow members are astute businessmen or women ,I have a financial questions about convertible preferred shares ?
Has anyone been in the process of converting such shares into voting shares to obtain quantum and then take control .
What is the process you have been through other then the conversion ?
Its not a basement question!:lol:


Kind Regards



Booker

 

[BookerL]

Hello all

Doesn't seem to have many that are experienced in that process ?


Cheers


Booker

 

[simonpaul]

Hello all

Doesn't seem to have many that are experienced in that process ?


Cheers


Booker

I have a question ,do you talk about a private company or a big one list on NYSE.

 

[BookerL]

I have a question ,do you talk about a private company or a big one list on NYSE.

Hi SimonPaul

Private


Cheers


Booker

 

[simonpaul]

I never done that but i prefer by far preferred shares of a private company because the risk is lest if i compare to regular shares.If you want take control you can do that but you will change your seat and you will become overnight in charge of the company with all the risk.

 

[BookerL]

I never done that but i prefer by far preferred shares of a private company because the risk is lest if i compare to regular shares.If you want take control you can do that but you will change your seat and you will become overnight in charge of the company with all the risk.

It's a holding company no day to day operations!
I actually have regular preferred shares and convertible preferred shares and 50% of the voting shares!

Cheers


Booker

 

[BookerL]

Hello all

Preferred convertible shares are considered as double dipping !
Its what goes on after the conversion process that would like to have additional insight ?


Thanks



Warmest Regards



Booker

 

[Rudolph]

Hi Booker, what after the conversion details are you looking for? The convertible shares should have guidelines on what the conversion ratio is and any limitations on when, how and what volume of conversion is allowed. Other than that, after conversion you will hold whatever shares/cash are allocated based on the terms, leaving you with ordinary voting shares relative to the overall performance and obligations noted on the prospectus.

High level definition can be found here: http://www.investopedia.com/terms/c/convertiblepreferredstock.asp
(I like investopedia as a reference point, really helps explain things to those not working in the financial world)

I have a feeling your question goes deeper, feel free to expand and I'll provide any answers I can.

 

[BookerL]

I have a feeling your question goes deeper, feel free to expand and I'll provide any answers I can.

Hello Rudolph
Thanks for your collaboration .

Yes it does go deeper as there is no conversion guidelines ,none where negotiated !
The question is more after they are converted ,what to expect from the other voting shareholders ,that will no longer have any decision power ?
50% of the original voting shares I had already with another Holdco plus 100 preferred convertible shares where added providing my Holdco after conversion 75% of the voting shares ,Quantum is met for control ,however if you have ever experience something similar its the attitude I am to expect from the other voting shareholders that I am looking for ?


Thanks


Warmest Regards




Booker

 

[Rudolph]

That's one that is really case by case. Right now you are sharing control, and want to take full control of the company. There is almost always a reason for this, be it to dismantle the company and sell it, restructure or just an overall shift in direction, but the assumption will be (and I make the same assumption) that you are trying to do something against the wishes of the other shareholders. The mood really depends on why and what you are trying to do, and how far it goes against the others sitting on this private holding.

As far as the actual conversion goes, even if you are not aware of it, there must be something in the incorporation book, subsequent issuance docs (assuming the preferred shares were issued after incorporation) or some other notarized appendix to the corporate book. Stating that shares are convertible based on their name is meaningless without knowing what that conversion entails. For example, do the common shares already exists and to be issued from the company's treasury? Does it form new common shares and dilute down other holdings? If so which?

I'm going in a bunch of directions here, but it's to make a point that you need to take all your documents from incorporation and formation of any securities after that, to a lawyer to provide you with sound advice. A bill of a few thousand dollars is worth far more than finding out that the conversion of your preferred shares results in dilution of your own current holdings putting you no further ahead than you currently are. A very rare scenario but feasible nonetheless.

The best advice I can give, if this holding company has any significant financial value, pay the cost and talk to an expert, don't play guessing game or take advice from people like me claiming to know anything at all

Good luck man.

 

[Rudolph]

Just an additional note, putting aside criminal intent, don't forget that corporate formation plays a big part in this as well. Taking voting control of the company doesn't mean carte blanche. If a proper board of directors has been formed, they will still control the day to day activities of the company. To reseat the board (with yourself being nominated), you would end up needing to wait for the AGM, form a dissident shareholder group which must be comprised of more than just yourself, or file for an injunction if you can justify to a court your desired actions/changes.

 

[BookerL]

The best advice I can give, if this holding company has any significant financial value, pay the cost and talk to an expert, don't play guessing game or take advice from people like me claiming to know anything at all

Good luck man.

Thanks Rudolph
It is definitely a complex scenario and very difficult to foresee everything before hand .
Other strategy might involve just telling them I might convert see how they react ?
I have consulted a corporate lawyer and tax lawyer also to assess the legal impact and tax impact ,I was more looking for life experience if someone went through it and wanted to share it ?


Warmest Regards



Booker

 

[Rudolph]

Again, I have to assume you're doing something the others don't agree with, be it for financial gain or because you have insight they don't. My recommendation would not be to go talk about "I might take control, what do you think" since it has no winning scenario. If you were in agreement, you wouldn't need to force taking control so there's no way that conversation goes well in any light.

I have my own that I've dealt with and it's never pretty. I do wish you the best of luck however, hoping it provides for a prosperous start to 2015 for you!

 

[BookerL]

Again, I have to assume you're doing something the others don't agree with, be it for financial gain or because you have insight they don't. My recommendation would not be to go talk about "I might take control, what do you think" since it has no winning scenario. If you were in agreement, you wouldn't need to force taking control so there's no way that conversation goes well in any light.

I have my own that I've dealt with and it's never pretty. I do wish you the best of luck however, hoping it provides for a prosperous start to 2015 for you!

Well Rudolph the problem is that they have signed has guarantors on a loan obtain by the corporation a yearly risk assessment ,which is a first I my career on financing a tenanted property ,it was done without my knowledge so obviously without me agreeing ,its kind of insulting don't you think?

Its a situation difficult to remedy ,that is obvious because taking control would not solve it ,would only prevent further mess ,which is not even a certainty


Kind Regards



Booker

 

[Rudolph]

I've seen it done before but having done it without your knowledge is kinda crappy. Before going down the path of voting authority, you might have been down the right path in starting with a conversation. The fact that you're interest is significant and they're taking actions without your knowledge is beyond concerning and should start with rewriting the act of incorporation to restrict them from taking these decisions without your signature. If there's any sort of working relationship left, they might agree if it's just a difference of opinion, and if not I'd explore selling your stake in the game. You can play all the games you want with legalities, but if their intent is to finance other interests backing it against your investments, these really aren't people you should be taking on risks with.

The main question is, did they use the corporation as proof of their own financial state and act as guarantors as individuals, or did they use the corporation as leverage for the funding? If it's the second, then you already have legal recourse as you stated having a 50% interest in the company and if the loans were for other businesses, even a board doesn't have the right to choose to have the company back debt not used for funding the company itself. This would need to go to a majority vote to either enable the board to make these types of decisions, or vote on the one off decision in itself.

If it's just a matter of the risk assessment, then again you do have a legal leg to stand on. Not for the pain in the ass that it will be, but for any costs associated. Again, a board does not have the right to force the company to incur costs related to personal endeavors outside of a special vote on the topic.

Just my 2 cents, again, best of luck.

 

[BookerL]

I've seen it done before but having done it without your knowledge is kinda crappy. Before going down the path of voting authority, you might have been down the right path in starting with a conversation. The fact that you're interest is significant and they're taking actions without your knowledge is beyond concerning and should start with rewriting the act of incorporation to restrict them from taking these decisions without your signature. If there's any sort of working relationship left, they might agree if it's just a difference of opinion, and if not I'd explore selling your stake in the game. You can play all the games you want with legalities, but if their intent is to finance other interests backing it against your investments, these really aren't people you should be taking on risks with.

The main question is, did they use the corporation as proof of their own financial state and act as guarantors as individuals, or did they use the corporation as leverage for the funding? If it's the second, then you already have legal recourse as you stated having a 50% interest in the company and if the loans were for other businesses, even a board doesn't have the right to choose to have the company back debt not used for funding the company itself. This would need to go to a majority vote to either enable the board to make these types of decisions, or vote on the one off decision in itself.

If it's just a matter of the risk assessment, then again you do have a legal leg to stand on. Not for the pain in the ass that it will be, but for any costs associated. Again, a board does not have the right to force the company to incur costs related to personal endeavors outside of a special vote on the topic.

Just my 2 cents, again, best of luck.

Hello Rudolph

Well actually you seem to have a valuable expertise in the field.
As per the loan itself ,I was aware ,the unawareness applies only for the annual risk assessment they have agreed as a condition of the loan further more a shareholder agreement was signed last September providing guidelines for other loans to come ,but that specific loan was signed prior ,now no guarantied loan cannot be made without consent of all shareholders .It will not happen again .
But I do find this very irresponsible for administrators and shareholders to have agreed to such condition on a loan which will have a great impact on our future business without ever talking about it



Warmest Regards



Booker

 

[Doggyluver]

A couple of things here. First I am in the business of investments so I will give you my insight. Please know that I am not a fan of investments in private companies. Preferred shares rank ahead of the common stock of a company and does not have any voting rights. They do however rank behind the Bonds which may or may not have been issued by a company. I have no idea why a holding company would issue preferred shares. A preferred usually has a fixed dividend and the directors would be forced to pay the dividend according to the schedule. Convertible Preferred shares can be converted to common (voting) stock at the option of the preferred holder at any time but once converted cannon be converted back to a preferred. As to gaining control ? Why would the directors of any company put themselves in a position where a conversion could put anyone in a position of control? I would need to see the total outstanding common as well as preferred to give an accurate opinion. I hope this helps a little !

 

[BookerL]

Hello Doggyluver

Thank you for your opinion

A preferred usually has a fixed dividend and the directors would be forced to pay the dividend according to the schedule

Yes exactly one of my Holdco is receiving monthly dividend for loaning money ,instead of interest where you pay a higher rate of income tax

. Convertible Preferred shares can be converted to common (voting) stock at the option of the preferred holder at any time but once converted cannon be converted back to a preferred.

Exactly

As to gaining control ? Why would the directors of any company put themselves in a position where a conversion could put anyone in a position of control?

|The answer to this in this specific reasons was to receive a loan to purchase real estate since the bank is guaranteeing is loan with a immovable mortgage ,the shareholder supplying the cash down money needs some sorts of securities ,a movable mortgage would of also been a solution ,however by experience it would prevented the Banks from financing which convertible preferred has not done

I would need to see the total outstanding common as well as preferred to give an accurate opinion. I hope this helps a little !

Thank you again Doggyluver ,now has for the common shares it was 100 issued divided 50% to my Holdco and 50% to the rest .


The investment is in real estate



Warmest Regards



Booker