Draft law for companies to issue preferred shares

Opening capital to investors offers higher yields

The Ministry of Finance (MoF) gave the Lebanese Businessmen Association (RDCL) its go-ahead to propose a new law project that would allow private companies to issue preferred shares with no voting rights.

The decision came in October, following the results of a survey mandated by the RDCL to assess the needs of the private sector in this field. The survey was conducted by BEMO securitization, a financial institution affiliated to BEMO bank.

Fouad Zmokhol, chairman of the RDCL said preferred shares widen financing alternatives for companies, and offer investors higher yields, with the advantage of separating funds control from decision-making authority. “They allow companies to raise their capitals without having to concede voting rights,” he said. They also allow companies to limit the amount of their bank loans.

Under this new law, majority shareholders will be able to open companies' capital to investors without losing control of the company. New investors will have priority over dividends distribution and liquidation, but no or limited voting rights. An appointed commission will oversee and approve the issuance of preferred shares. The current law (no 308/2001) only allows banks to issue such shares.

Reported by Alexis Baghdadi