John Jenkins at DealerLawyers.com writes today about a decision by Vice Chancellor J. Travis Laster concluding that disparate voting rights based on the identity of the holders is permitted by the Delaware General Corporation Law. Colon v. Bumble, Inc., No. 2022-0824-JTL, 2023 WL 5920100 (Del. Ch. Sept. 12, 2023).
Would the result be the same under California's General Corporation Law? Section 203 provides:
Except as specified in the articles or in any shareholders' agreement, no distinction shall exist between classes or series of shares or the holders thereof.
Thus, Section 203 requires that if distinctions are to be made involving holders of shares, those distinctions must appear in the articles of incorporation. Section 700(a), moreover, imposes a a one vote per share (except for cumulative voting) unless as otherwise provided in the articles. Thus, it is clear that if a distinction is to be made, it must appear in the articles. But are distinctions based on the identity of the holder permitted.
Section 400(b) provides:
All shares of any one class shall have the same voting, conversion and redemption rights and other rights, preferences, privileges and restrictions, unless the class is divided into series. If a class is divided into series, all the shares of any one series shall have the same voting, conversion and redemption rights and other rights, preferences, privileges and restrictions.
Thus, unequal voting rights in the same class are permitted under this statute, but only if the class is divided into series. Oddly, however, the California Corporations Code defines "series" (Section 183) but not "class".
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