N.M. Code R. § 12.11.9.18

Current through Register Vol. 35, No. 11, June 11, 2024

Section 12.11.9.18 - PREFERRED STOCK

A. A public offering of preferred stock may be disallowed by the director if the issuer's adjusted net earnings for the last fiscal year or its average adjusted net earnings for the last three fiscal years prior to the public offering were insufficient to pay its fixed charges and preferred stock dividends, whether or not accrued, and to meet the redemption requirements, if applicable, of the preferred stock being offered.

B. As an alternative to Subsection A of this section, the director may choose to apply a cash analysis. The director may consider the statement of cash flows if the statement demonstrates that the issuer has had positive "net cash provided by operating activities" for its last fiscal year. The director may request that the issuer submit a financial statement demonstrating an average positive "net cash provided by operating activities" for the last three fiscal years prior to the public offering. In either instance there must be sufficient cash to cover the preferred stock dividend whether or not declared.

C. Subsections A and B of this section shall not apply to public offerings of convertible preferred stock that are superior in right to payment of dividends, interest and liquidation proceeds to any convertible debt and preferred stock that are or may be legally or beneficially, directly or indirectly, owned by promoters. The risks of failure to declare or pay dividends and the equity characteristics of the convertible preferred stock must be disclosed in the offering prospectus. An offering of such securities may be reviewed using guidelines for equity offerings.

D. If the issuer's net earnings are subject to cyclical fluctuations or if the director deems it necessary for investor protection, the director may require that the issuer establish redemption requirements.

E. A public offering of equity securities may be disallowed by the director if the issuer's articles of incorporation authorize its board of directors to issue preferred stock in the future without a vote of the common shareholders unless:

(1) the issuer represents in its prospectus or offering document that it will not offer preferred stock to promoters except on the same terms as it is offered to all other existing shareholders or to new shareholders; or

(2) the issuance of preferred stock is approved by a majority of the issuer's independent directors who do not have an interest in the transaction and who have access, at the issuer's expense, to issuer's or independent legal counsel.

N.M. Code R. § 12.11.9.18

12.11.9.18 NMAC - Rp, 12 NMAC 11.4.8.11, 1-1-2010