The Preference Share Agreement is a crucial document used when a company in Pakistan seeks to raise capital without diluting existing voting rights or when investors prefer fixed returns over equity participation. This agreement, governed by Pakistani corporate law, particularly the Companies Act 2017, outlines the specific rights and privileges attached to preference shares, including dividend rates, redemption terms, and any conversion rights. It's commonly used in corporate restructuring, expansion projects, or when companies need alternative financing options. The document must comply with SECP regulations and typically includes detailed provisions for dividend payments, redemption mechanisms, and investor protections. The agreement is particularly important for establishing clear expectations between the issuing company and preference shareholders while ensuring regulatory compliance.
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1. Parties: Identification of the Company issuing the preference shares and the Preference Shareholder(s)
2. Background: Context of the preference share issuance, including company's authorization to issue such shares
3. Definitions and Interpretation: Key terms used throughout the agreement and rules of interpretation
4. Subscription and Issuance: Details of preference shares being issued, including number, class, and subscription amount
5. Preference Share Rights: Core rights attached to the preference shares, including dividend rights, voting rights, and ranking
6. Dividend Terms: Specific provisions regarding dividend rate, payment dates, and calculation methods
7. Redemption Rights: Terms and conditions for redemption of preference shares, including timing and price
8. Transfer Restrictions: Limitations and conditions on the transfer of preference shares
9. Representations and Warranties: Standard representations by both the company and the preference shareholders
10. Covenants: Ongoing obligations of the company to protect preference shareholders' rights
11. Events of Default: Circumstances constituting default and resulting consequences
12. Governing Law and Jurisdiction: Pakistani law as governing law and jurisdiction for disputes
13. Notices: Process for formal communications between parties
14. General Provisions: Standard boilerplate clauses including amendments, waivers, and severability
1. Conversion Rights: Include when preference shares are convertible into ordinary shares, specifying conversion ratio and process
2. Tag-Along Rights: Include when preference shareholders have the right to join in sale of shares by majority shareholders
3. Anti-dilution Protection: Include to protect preference shareholders from dilution in future share issuances
4. Board Representation: Include when preference shareholders are granted right to nominate directors
5. Information Rights: Include when specific information sharing obligations are required beyond statutory requirements
6. Participating Preference Rights: Include if preference shares participate in surplus profits beyond fixed dividend
7. Foreign Investment Provisions: Include when preference shareholders include foreign investors
1. Share Certificate Specimen: Form of preference share certificate to be issued
2. Subscription Details: Detailed breakdown of share allocation and payment terms
3. Corporate Authorizations: Copies of board and shareholder resolutions authorizing preference share issuance
4. Dividend Calculation Formula: Detailed methodology for calculating preference share dividends
5. Conversion Mechanics: If applicable, detailed procedures for share conversion
6. Company Constitution Excerpts: Relevant sections of company's articles relating to preference shares
7. Regulatory Approvals: Copies of required regulatory approvals and permissions
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