On 24 April 2018, Paul Quist obtained his PhD at the Radboud University Nijmegen with a doctoral thesis on 'Conversion and Shares'. His thesis extensively describes three forms of conversion: conversion of shares into shares of another type (class) or indication, conversion of reserves into shares and conversion of debt into shares (debt/equity swaps), which has been published in a book by Kluwer.
Quist's clearly written book extensively covers all types of conversion, including not only the company law aspects but also the relevant property law and contract law. Because many of the examples are from day-to-day practice, this book is an asset for any lawyer, tax lawyer or auditor practising or interested in Dutch company law.
Conversion and Shares
Conversion of shares is commonplace and involves a share being converted into one or more shares of a different type or designation, or into a different nominal value. Reserves or debts are also frequently converted into shares. However, until now, these types of conversion have not been examined in a methodical study that connects theory and practice.
An important conclusion of the doctoral research is that an amendment to the articles of association or a statutory conversion regulation is required for conversion of shares. According to Quist, a conversion regulation in the articles of association must be regarded as a conditional amendment to the articles of association whereby the rights and obligations attached to the shares can be changed. The rules of minority protection do not apply to conversion on the basis of a conversion regulation in the articles of associations, but do apply to the introduction in the articles of association of a conversion regulation.
With regard to the conversion of a reserve into shares one of the findings is this conversion cannot be regarded as a payment in cash on the shares or as a payment in kind. It is a ‘sui generis’ type of capital formation to which the rules of capital protection do not apply.
Furthermore, Quist reached the conclusion that settlement in view of the conversion of debt into shares can take place with regard to shares issued by the formation and is even imaginable before the formation itself.
Paul Quist's book can be ordered on the website of Kluwer.