CCPS — Compulsorily Convertible Preference Shares

CCPS are preference shares issued under Section 43 and Section 55 of the Companies Act 2013, carrying a fixed or formula-based dividend and a liquidation preference ahead of equity shares, but with mandatory conversion built into the terms — no holder election, no maturity date to redeem instead. RBI treats CCPS as equity, not debt, for FEMA reporting purposes, which is why foreign investors are routed through CCPS rather than debentures when the round needs FDI-compliant instrument status.

The conversion terms — ratio, trigger event (next equity round, IPO, a fixed longstop date), anti-dilution formula (broad-based weighted average is standard; full ratchet is rare in Indian term sheets), and participation rights on liquidation — are all structured data, not a paragraph of prose in a shareholders agreement. Saral models each of these as fields on the instrument so the cap table engine can compute the post-conversion table without a human re-deriving it from the SHA each time.

Allotment of CCPS follows the same PAS-3 filing within 30 days as any other security, and the authorised share capital must carry a preference share class before the board can allot. A company that only has equity share capital in its MOA/AOA needs a capital clause amendment first.

The cap table, where CCPS — Compulsorily Convertible Preference Shares appears as a computed field traced to the ledger event that created it.