Preferred Equity Investment Securities

Preferred equity investment securities are the securities under the Financial Instrument Trading Act and are issued by Cooperative Structured Financial Institutions based on “the Act on Preferred Equity Investment by Cooperative Structured Financial Institution” (Preferred Equity Investment Act).
These securities are issued for the purpose of raising fund widely from the general public as a supplement of the ordinary equity from members of cooperative structured financial institutions, in order to enrich the equity capital at each institution.

Cooperative Structured Financial Institutions

Cooperative structured financial institutions are financial institutions formed as cooperative structure for the purpose of mutual aid for members. In addition, the qualification of members (for example, small and medium-sized enterprise, self-employed, etc.) is stated in the laws each institution is based on.
Cooperative structured financial institutions such as Central Bank for Agricultural and Forestry (The Norinchukin Bank), Central Bank for Commercial and Industrial Cooperatives (The Shokochukin Bank), Credit Associations (Shinkin Banks), Federations of Shinkin Banks, etc. are allowed to issue Preferred Equity Investment Securities.

Features of Preferred Equity Investment

Preferential dividends

  • Preferred equity investors shall receive described dividends prior to the dividends of surplus for the ordinary equity investors.
  • There are "a participating type" that the dividends are performed from a surplus fund besides preferential dividends, and "a non-participating type" that is preferential dividends only.
  • In cases where the preferential dividends are less than the described amount, there are "a cumulative type” that the deficit of the described dividends is added to the dividends in next fiscal year, and “a non-cumulative type” which are not added.
  • In cases where the surplus fund is substantial to be able for preferential dividends, the appropriation of the surplus fund that the preferential dividends are less than the described amount is not allowed without the approval at a meeting of preferred equity investors.

Voting Rights

  • Preferred equity investors do not have voting rights at a general meeting of ordinary equity investors.
  • Even if the preferential dividends are not conducted, Preferred Equity Investors cannot receive the voting rights at a general meeting of ordinary equity investors.
  • A general meeting of preferred equity investors is held in cases where the amendment of the articles of incorporation that damages them. At the meeting preferred equity investors have voting rights depending on the possession amount.


  • The face value of one share of preferred equity investment securities equals the one share of ordinary equity.
  • Regarding the distribution of residual assets preferred equity investors shall receive the distribution equal to the face value prior to the one for the ordinary equity investors. If there is a description on the articles of incorporation, preferred equity investors can receive the distribution more than the face value.
  • “Preferred equity investment split” is available as same as stock split for stock companies.
  • Preferred equity investors don’t have rights to convert preferred equity investment into the ordinary equity.
  • Preferred equity investors have rights to access and/or copy documents such as the article of incorporation, the list of the ordinary equity investors, the balance sheet, etc.