The proposed paper studies the transient operation of a grid connected power converter designed for microgrid applications. A control system consisting of an improved droop characteristic control using synchronous frame PI regulators including a feed-forward disturbance decoupling controller is developed and tested. The proposed control system can operate in two main operating modes: islanded and grid connected. When the converter works in islanded mode, it offers three different operating sub-modes: conventional droop, power quality and sync modes. In grid connected mode two different sub-modes can be used: grid feeding mode and grid supporting mode. The latter allows the converter to provide ancillary services to the main grid (i.e. frequency and voltage control). A converter prototype was built to verify the proposed control strategies.