What are compulsory convertible preference shares

1.CCPS are a type of preference shares that must be converted into equity shares after a specifiic period or upon the occurrence of certain events.
2.They provide a fixed income component, offering a steady income stream until conversion.
3.Upon conversion, investors can benefit from the potential rise in the company’s share price.
4.Founders can retain control over the company by issuing CCPS, instead of equity shares, as CCPS do not entail voting rights until conversion.
5.The terms of conversion, including the conversion ratio and timing, are predetermined and specified in the issuance agreement.


Content courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.