Varying Shareholder Rights

Question 1

What is weighted voting?

Answer 1

Weighted voting – 1 class of shares may be given a multiple number of votes for each share held

Question 2

What is class voting

Answer 2

Class voting – 1 class of shares may be allowed to vote on something (like directors) while another class cannot

• Can be used to guarantee representation on the board by dividing the directors into classes with certain director positions to be elected by specified groups of shareholders
• Where a director is elected by a specified class of stock, state statutes will limit the ability of other shareholders to remove that director without the approval of the electing group

Question 3

What is contingent voting

Answer 3

Contingent voting – Corporations may want to provide contingent voting rights to certain classes of shares or even to debt securities (bond or debentures) → remember in FL debentures cannot vote, but in Delaware they can

• Certain stock holders will vote if an event happens

Question 4

What is disparate voting

Answer 4

Disparate voting – unless the articles so state, stock is voting stock. Even nonvoting shares are entitled to vote on matters that affect them as a class

• Grant 1 class several votes for each share held, say 10, while another class has only 1 vote per share

Question 5

What is treasury shares (dispensed with by Model Bus. Corp. Act)

Answer 5

Treasury shares (dispensed with by Model Bus. Corp. Act) – shares repurchased by the corporation that issued them. A corporation cannot vote or receive dividends from treasury shares

• Some states treat such stock as authorized but unissued shares
• The shares have been authorized by the articles but their distribution has not been approved by the corporation’s board of directors

Question 6

What is cross ownership

Answer 6

Cross ownership – no voting rights to shares owned by a second corporation whose shares are owned by the corporation whose shares are to be voted

Question 7

Can a corporation own itself?

Answer 7

A corporation cannot own itself

• Articles must authorize one or more classes of shares that together have unlimited voting rights and are entitled to receive the net assets of the company on dissolution