A preference for minority rule? – Company law and company law

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Section 204(a)(9) of the California Corporations Code allows articles of association to include a provision requiring shareholder approval (Section 153) or outstanding stock approval (Section 152) for any corporate action, even if not otherwise required by general corporate law. In 1983, the Business Law Section of the State Bar of California sponsored legislation that allows articles to include a provision requiring a minority vote (that’s to say, a vote of a specified percentage or proportion of the outstanding shares of the class or series that is less than a majority of the class or series to approve any corporate action) notwithstanding Section 204(a )(9). 1983 cal. Statistics. ch. 1223.

This type of disposition is only permitted with respect to shares designated as “preferred” or “preferred shares”. Cal. Company Code § 402.5. However, this is a meaningless requirement. The designation is simply the name assigned to a class or series of shares. Designating shares as “preferred” does not make them such. Article 176 of the Belgian Companies Code apophatically defines “preferred shares” as shares other than “ordinary shares”. As to what makes stocks “common stock”, see this post.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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