Introduction
Redeemable Convertible Preference Shares (RCPS) offer a powerful, flexible way to raise capital by combining the benefits of debt and equity. For companies, RCPS is a unique tool that enables fundraising without immediate equity dilution, while providing investors with the potential for future convertibility into ordinary shares.
One of our clients sought to raise capital through RCPS, where the investor required the option to invest via redeemable and convertible shares that carry a coupon rate and offer future conversion possibilities. RCPS is structured to be redeemable (either by the company or investor at a future date) and convertible (with the potential to convert to ordinary shares under specified conditions). This approach allowed our client to access essential funds while protecting their ownership interests.
Our Approach
When our client approached us with this requirement, we engaged in a series of in-depth discussions to fully understand their goals. This ensured we could structure the RCPS issuance in a way that was compliant with Malaysia’s Companies Act 2016 and aligned with industry best practices.
Our approach included:
- Structuring RCPS Terms: Advised on a structure that aligns with the client’s capital goals, while meeting investor demands for flexibility and convertibility.
- Legal Drafting and Compliance: Collaborated with a reputable law firm to draft the Constitution, Share Subscription Agreement (SSA), and Shareholders’ Agreement. These documents established investor-friendly terms and protected the client’s interests, ensuring smooth, clear operations.
- Aligning with Corporate Governance Standards: All terms and conditions were carefully structured to meet compliance standards, providing transparency and security to both parties.
Strategic Changes and Results
Issuing RCPS helped our client secure crucial capital injection while retaining control over company equity. Key outcomes included:
- Successful Capital Raise: Secured RM1,000,000 through RCPS issuance.
- Investor-Focused Agreements: Crafted SSA and Shareholders’ Agreement to include clear, balanced terms that appeal to investors and protect client interests.
- Flexible Investment for Growth: Enabled an investment structure that supports long-term growth with options for future convertibility, ensuring an attractive deal for investors.
- Ongoing Advisory Support: Continued financial advisory to align with client’s evolving goals and growth trajectory.
Conclusion
This successful RCPS issuance empowered our client with the capital required to fuel growth, while carefully preserving ownership and control. By strategically crafting investor-friendly yet protective terms, we facilitated an investment structure that aligns with both immediate and long-term objectives. RCPS offers companies a robust funding solution with strategic flexibility, setting a foundation for sustained expansion and investor appeal.
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