1. Member States shall ensure that, when applying the write-down or conversion tool, resolution authorities take, in respect of shareholders, one or both of the following actions:

(a) cancel existing shares or other instruments of ownership, or transfer them to creditors whose claims have been converted;

(b) provided that the valuation carried out under Article 23 shows that the undertaking under resolution has a positive net value, dilute existing holdings of shares or other instruments of ownership by converting relevant capital instruments or debt instruments issued by the undertaking under resolution, or other eligible liabilities of the undertaking under resolution, into shares or other instruments of ownership pursuant to the application of the write-down or conversion tool.

With regard to point (b) of the first subparagraph, the conversion shall be conducted at a rate of conversion that severely dilutes existing holdings of shares or other instruments of ownership.

2. When considering which of the actions referred to in paragraph 1 to take, resolution authorities shall have regard to: