Compulsorily Convertible Preference Shares (CCPS)

About Compulsorily Convertible Preference Shares (CCPS):

• CCPS, or Compulsorily Convertible Preference Shares, are a key element of startup financing.
• It gives the assurance of a fixed rate of return plus the opportunity for capital appreciation.
• These shares carry certain terms—if an early investor has CCPS, he can have more rights than other investors who come in later at a higher valuation.
• It also helps investors maintain their stake and have a say even if their stake gets diluted later.
• However, these shares get converted to ordinary equity shares after 10-15 years.
• That is more than sufficient time for most startups to give their investors an exit.
• CCPS also helps founders keep control of a company even if their stake is lower than that of investors.

ource : Indian Express

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