When Non-Voting Shares Have The Right To Vote

Allen Matkins
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The California General Corporation Law authorizes a corporation to “issue one or more classes or series of shares or both, with full, limited or no voting rights”.  Cal. Corp. Code § 400(a).  Thus, it may be reasonable to assume that when a corporation issues shares with no voting rights, those shares would have no right to vote.  That is not necessarily the case, for Section 117 provides:

Any requirement in this division [i.e., the GCL] for a vote of each class of outstanding shares means such a vote regardless of limitations or restrictions upon the voting rights thereof, unless expressly limited to voting shares.

This means that outstanding shares of a California corporation may not be denied the right to vote as to a number of matters.  For example, the GCL requires a class vote for the amendment of the articles of incorporation if the amendment would effect certain specified changes.  Cal. Corp. Code § 903(a).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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