#Educational
#What is the right of way?
As you know, when a company increases its capital, the number of its shares increases in proportion to the percentage of capital increase. (If you are not familiar with capital increase, you can find training on capital increase with the educational hashtag on the channel) because the shareholders of a company want to preserve their rights and interests in the company, they expect that after the company’s capital increase, the percentage Maintain their ownership in the company compared to before the capital increase. For this reason, according to the commercial law, this right is considered for the shareholders of the company. Accordingly, if a company issues new shares for sale, existing shareholders have priority in buying these new shares. This priority in buying shares compared to new shareholders is called preemptive right to buy shares.
Example for #preemption of shares
Suppose a company increases its capital by 50%. As a result, the number of shares of that company increases accordingly. Now suppose you had 1000 shares of this company before the capital increase. If this company increases its capital and the number of your shares does not change. Your ownership in the company will decrease compared to the state before the capital increase. For this reason, in order to keep your percentage of ownership constant, the company gives you the right to have the right to purchase new issued shares in proportion to the percentage of capital increase. As a result, you will have the right to pre-emptive shares equal to 50% of the number of new shares you have. So, in this case, you will be entitled to 500 preemptive rights to buy shares (50% of your 1000 shares).
How to use #preemptive rights of shares
Note that this is true only when the company issues new shares for sale; That is, in the increase of capital from the place of cash. But for example, in the capital increase from the place of accumulated profit, the profit that belongs to the company’s shareholders is converted into shares. Here, the preemptive right of shares does not mean anything. After the increase of the company is approved in the meeting, a form is sent to the shareholders, which is called the certificate of pre-emptive right to purchase shares. In this form, the company’s capital increase information is specified; For example, in the previous example, you will have a purchase certificate of 500 priority rights. If you wish to keep your percentage of ownership in the company and participate in the capital increase, you must fill out and send this form to the company within the deadline set by the company. If you do not do this, in the opinion of your company, you do not want to participate in the capital increase.
How to convert the #preemptive_right into a share?
When you have filled out the company’s capital raising form, you must have the same amount of cash for the company. As a result, you have to pay an amount equal to the nominal value of the share for each certificate you have. As you know, the nominal value of each share in Iran is currently 1000 Rials. As a result, you will be awarded 1 share for every certificate you have and 1000 Rials you pay. If you pay this 1000 rials within the stipulated time, after the company’s capital increase is registered with the stock exchange organization, your pre-emptive rights will automatically be converted into ordinary shares. This process usually takes between 3 and 6 months.
Mehdi Koh Soltani (financial services, accounting, financial and tax consultant):
Group of accountants, auditors, Tabriz
https://t.me/joinchat/BnzBsTuioTshiXBwf9bBPQ