The Preference Share Agreement is a vital instrument in New Zealand corporate finance, used when companies seek to raise capital while offering investors preferential rights without necessarily diluting existing voting control. This document type is particularly relevant when companies need to attract significant investment while maintaining existing management control, or when implementing structured finance solutions. The agreement must comply with the New Zealand Companies Act 1993 and Financial Markets Conduct Act 2013, among other relevant legislation. It typically includes detailed provisions on dividend rights, capital rights, voting rights, redemption terms, and any conversion privileges. The Preference Share Agreement is commonly used in various scenarios including growth capital raises, restructuring situations, and strategic investments, offering flexibility in terms of investor rights and company obligations while providing a clear framework for both parties' expectations and obligations.
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1. Parties: Identifies the company issuing the preference shares and the preference shareholder(s)
2. Background: Sets out the context and purpose of the preference share issuance
3. Definitions and Interpretation: Defines key terms and establishes interpretation principles
4. Subscription and Issue: Details the number of preference shares, issue price, and subscription process
5. Dividend Rights: Specifies dividend rate, payment dates, cumulative/non-cumulative nature, and dividend priority
6. Voting Rights: Outlines voting rights attached to the preference shares
7. Capital Rights: Describes rights on return of capital and winding up
8. Redemption: Sets out redemption terms, timing, and price
9. Transfer Restrictions: Specifies any limitations on transferring the preference shares
10. Amendments and Variations: Process for changing preference share terms
11. Notices: Communication requirements between parties
12. General Provisions: Standard boilerplate clauses including governing law, dispute resolution
13. Execution: Formal signing section
1. Conversion Rights: Include when preference shares can be converted to ordinary shares
2. Anti-dilution Provisions: Include when protecting preference shareholders from dilution is required
3. Board Appointment Rights: Include when preference shareholders have rights to appoint directors
4. Information Rights: Include when preference shareholders have special information access rights
5. Pre-emptive Rights: Include when preference shareholders have rights to participate in future share issues
6. Tag-Along Rights: Include when preference shareholders have co-sale rights
7. Drag-Along Rights: Include when majority shareholders can force minorities to join in a sale
8. Exit Rights: Include when specific provisions govern company sale or IPO scenarios
1. Schedule 1 - Preference Share Certificate: Form of share certificate to be issued
2. Schedule 2 - Subscription Details: Detailed information about share numbers, price, and payment terms
3. Schedule 3 - Company Constitution Amendments: Any required amendments to the company constitution
4. Schedule 4 - Dividend Calculation Formula: Detailed methodology for calculating dividends
5. Schedule 5 - Conversion Mechanics: If applicable, detailed process for share conversion
6. Schedule 6 - Pre-completion Conditions: Conditions that must be met before shares are issued
7. Appendix A - Shareholders' Resolution: Board and shareholder resolutions approving the preference share issue
8. Appendix B - Disclosure Material: Key company information provided to preference shareholders
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