Corporate lawyers are very familiar with the terms “common” and “preferred” in describing classes of corporate stock. The use of these terms is so habitual that many lawyers may be unaware that the California legislature has taken the time to define them. ”Common shares” are shares that “have no preference over any other shares with respect to distribution of assets on liquidation or with respect to payment of dividends”. Cal. Corp. Code § 159.

In contrast, the legislature has chosen to give the term “preferred shares” a decidedly apophatic definition by telling you what they are not rather than what they are. Thus, preferred shares are shares other than common shares. Cal. Corp. Code § 176.

Of course, both of these definitions assume that you know the meaning of “shares”. These are defined as “the units into which the proprietary interests in a corporation are divided in the articles”. Cal. Corp. Code § 184.