Meaning
French statutory provision governing the issuance of shares with preferential rights allows companies to tailor their capital structure for specific investors. Under the code de commerce l228 23, the articles of association may define certain shares that carry a priority right to dividends or liquidation proceeds. These shares often lack voting rights in exchange for their economic seniority.
The law limits the total value of non-voting shares to half of the share capital.
Dividend Seniority
Preference holders receive their payments before any distribution is made to the ordinary shareholders. This mechanism in code de commerce l228 23 protects the cash flow of passive investors who prioritize yield over control.
Voting Restriction
Shareholder meetings exclude the holders of these preferential instruments from general debates on company policy. Because the code de commerce l228 23 permits the total removal of voting rights, the founders can raise capital without diluting their decision making power. They still retain the right to vote on matters that directly affect their class of shares.
The lack of a vote is the primary trade for the guaranteed dividend.
Statutory Threshold
Capital ratios are strictly monitored to prevent the company from becoming dominated by silent capital. Regulations within code de commerce l228 23 ensure that voting members represent the equity. Statutory caps protect the basic voting structure of the firm.
