ArticlesWarrants: Exercise of Right to Acquire Shares

November 20, 2022by Stavros Koumentakis

In our previous article we dealt with the issuance of warrants and their acquisition by the SA that issued them (or by its subsidiary). However, how is the option to acquire the shares resulting from the warrants exercised? Let’s see.


The Exercise of the Right to Acquire Shares

As we have already established, the one who is entitled to exercise (or not) the right to acquire shares, a right incorporated in the warrants, is their beneficiary. The relevant issues are regulated in the law on SAs (art. 58, law 4548/18).

The exercise of the specific (formative) right is what initiates the increase of the SA’s share capital.

It should, of course, be clarified here that the specific right concerns the third-party holders of the warrants: It is not possible for the issuer SA to exercise it, insofar as it concerns the same share acquisition warrants or shares acquisition warrants of its parent company, which it may own (No. 58 §1 in fine).


Legal Exercise – Conditions

Manner And Type

The exercise of the option of the warrant is similar to the exercise of the convertible bond conversion right (see also Explanatory Memorandum of Law 4548/2018- art. 58). It is carried out with an explicit (unilateral and addressable) declaration of the beneficiary of the warrants to the SA (art. 58 §1 paragraph a’). Specific formalities are not required by law, however, in transactional practice, the document is chosen. In the case of listed warrants, the procedure specifically provided for should be followed.

At the same time, however, with this particular declaration, the payment of the consideration already agreed, at the time of issuance, by the beneficiary is also required. The SA does not need to take any other action in order to increase the share capital by issuing new shares. The relevant decisions have already been taken by the time the warrants are made available. The SA, for its part, has already committed itself. It is now up to the relevant decision of the beneficiary to exercise their related rights.

Terms and Conditions

The exercise of the right by the beneficiary of the warrants is not, however, completely free of terms and conditions. It is reasonable for the warrants to provide for various, relevant, commitments and procedures (referring, for example, to the procedure for submitting the relevant declaration, the deadline and the price for acquiring the shares attributable). It is also possible to provide for special rights of the issuing company, which will potentially limit, in time or quantity, the corresponding ones of the beneficiary of the warrants (the time-limited, e.g., right of the SA to suspend or block the exercise of the option right).

The Payment of Consideration

The acquisition of the shares by the beneficiary of the warrants does not automatically occur with their relevant declaration. A prerequisite is, of course, the full payment of the (pre-agreed and predetermined) price of the shares to be issued (art. 58 § 1 sub. a’). Partial payment is not an option.

If the beneficiary of the warrants fails to pay the agreed price in full, they will not acquire the shares corresponding to their option (in contrast to what applies in the case of a share subscription agreement). Unless the contrary has been expressly agreed during the issuance of the warrants.

The Irrevocable of the Declaration

The declaration of the beneficiary of the warrants for the acquisition of the shares corresponding to them is, first of all, irrevocable. This is consistent with the character of the option as formative. However, it is possible for the parties involved to agree on a right of withdrawal on the part of the beneficiary (under specific conditions and within strict time limits). In this way, risks and doubts regarding the timing of changes in the capital of the SA will be mitigated. The non-payment, however, of the price by the beneficiary of the warrants – when this is mandatory – can only be deduced (at a practical level, in fact) the revocation of the declaration for the exercise of the right to acquire the shares.

The Delivery Of The Title

As long as the warrants are incorporated into a paper security, their beneficiary is obliged to deliver it to its issuer.


Consequences of the Declaration of Exercise of the Option

The declaration of exercise of the option by the beneficiary of the warrants finally removes the uncertainty status of the SA and also of the existing shareholders. The decision for corporate participation is solemnly manifested and, subject to the payment of the (probably) pre-agreed price, the acquisition of shares and shareholder status by them will immediately follow.


Consequences of the Exercise of the Option

The Increase Of Share Capital

The exercise of the option, which derives from the warrants (: relevant declaration and payment of the agreed price) results in: (a) the increase of the share capital of the issuing SA (art. 58 § 3), (b) the (primary) acquisition shares by the holder of the title and (c) the cancellation of the title of the latter in terms of the option – to the extent that it has already been exercised.

In this particular increase, the time of coverage and payment of the share capital, as a matter of fact, coincide. The amount of the new shareholder’s contribution will consist, cumulatively, of the price they will have paid and the consideration, if any, for the acquisition of the warrants in the past. The latter, in fact, consideration should have been registered in a special reserve “from the issuance of the warrant certificates”.

The nominal value of the shares issued may not exceed the sum of the two amounts (: price and consideration paid in the past – art. 58 §2). This, moreover, is imposed by the prohibition of issuing shares below par. The latter aims to ensure payment of the entire share capital.

The beneficiary of the warrants becomes, originally, a shareholder of the SA – without, in fact, the latter’s involvement. Consequently, the existing shareholding balances are changed as no right of preference is recognized in favor of the existing shareholders in the specific share capital increase (art. 58 § 4). These, moreover, used up their relevant right (by exercising it or not) during the stage of issuing the warrants.

Obligations of the SA

With the increase of the share capital, the (former owner of the warrants) now shareholder maintains a claim (of a declaratory nature, however) against the company for registration in the shareholders’ book. In addition, however, they have a claim to recieve paper stock certificates – provided, of course, that the SA issues such.

In the event that the holder of the warrants was granted by the issuer SA the right to partially exercise the options, new warrants must be delivered for their remaining rights and the warrants that will be issued – if there are any.

Obligations of the Board of Directors

The time limits for the exercise of the right of the holder of the warrants are what determine the time for the amendment, on behalf of the BoD, of the article of its articles of association regarding the share capital. In any case, the Board of Directors is obliged within two (2) months, from the exercise of said right, to complete its adjustment (art. 58 § 3 ed. b’). It is supported, from a portion of the theory, an obligation of the SA to certify the payment of the relevant increases in the share capital.


Consequences of Not Exercising the Right

In the event that the expiry time of the warrants (and therefore the built-in option) elapses, on the one hand, the relevant warrants will be canceled and, at the same time, the increase in the share capital will be cancelled.

The former, now, beneficiary of the warrants will not have a claim for a refund of the price that, possibly, they paid in an earlier time (when they were issued), for their acquisition. This seems reasonable for an additional reason: this amount will have been registered by the SA, in a special reserve that cannot be distributed.


As we have already stated on many levels, the warrants are a means of attracting investment funds and investors for the SA – advantageous, i.e. an option for the same. On the other hand, the holder of the warrants is attracted to their acquisition bearing in mind that at some later point in time, if he himself chooses it and it is an advantageous option for him, he will become its shareholder. In order for the warrants to remain attractive, the exercise of the rights of their beneficiary and the acquisition of his share status should be done easily and quickly. Proceedings: The beneficiary of the warrants, if he so chooses, pays the agreed amount and becomes a shareholder of the SA. Just like that. –

Stavros Koumentakis
Managing Partner


P.S. A brief version of this article has been published in MAKEDONIA Newspaper (November 20th, 2022).


Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

Stavros Koumentakis
Nikis Avenue & 1, Morgenthau st., 54622 Thessaloniki
(+30) 2310 27 80 84

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