Where To Find Common Stock In The California General Corporation Law

Allen Matkins
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Allen Matkins

As discussed in this post, the California General Corporation Law defines and uses the term "common shares" rather than "common stock".   Common shares are shares that have no preference over other shares with respect to distribution of assets on liquidation or with respect to payment of dividends.  Cal. Corp. Code § 159.  Simply being entitled to a greater dividend per share does not mean that the class or series has a preference over another class or series.  Entitlement to be paid more is not the same as entitlement to be paid before.

The General Corporation Law does include one aberrant reference to "common stock" in Section 907(c), which specifies the nomenclature that is applicable to shares when the articles of incorporation are amended to change the statement of authorized shares from a single class of shares to two classes.  Oddly, the classification of shares as "common stock" pursuant to Section 907(c) because the shares have limited or no voting rights is at odds with the definition of "common shares" in Section 159 which makes no reference to differences in voting power.

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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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