Newsletter
COMMON AND PREFERRED STOCK MAY BE ISSUED TOGETHER FOR SHARE EXCHANGE
The Corporate Mergers and Acquisitions Act defines a share exchange as a transaction whereby a company, in accordance with a resolution of its shareholders' meeting, transfers all of its issued shares to another company as payment in full for its shareholders' subscription to newly-issued shares of the other company, or as the capital contribution to the other company. In practice, share exchanges are usually conducted by the issuance of either common stock or preferred stock. But it has been a matter of considerable dispute whether a company may issue both common and preferred stock for the purposes of a single share exchange.
In response to this issue, the Ministry of Economic Affairs confirmed in an interpretation dated 25 February 2009 that a company may indeed issue both common stock and preferred stock as consideration for a share exchange, and allocate them according to the proportion of shares currently held by shareholders.