Class Voting (Shareholders) - Explained
Voting for the Board of Directors
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
Table of ContentsWhat is Shareholder Class Voting?Academic Research
What is Shareholder Class Voting?
The articles of incorporation may divide stock into classes of shares. Once common scenario is to divide stock into classes where each class has the right to elect a certain number of directors.
Another common mechanism in class voting is where each class may have a different voting power (i.e., greater number of votes per share). This is commonly known as "dual class voting" and is often used in startups.
Founders of a startup will want to maintain their power or control over the business, while offering ownership rights to outside investors.
Using a second class of founder's stock, will allow the founders to maintain a disproportionate amount of voting power compared to the outside investors.
Another common situation is the formation of a type of preferred stock. Preferred stock can have a number of characteristics, including preference to dividend and liquidation payments.
Further, the preferred stock may have some exercisable feature, such as conversion to debt or common stock after a certain period of time or upon the request of the preferred stock holder.
In exchange or along with these preferential rights, the preferred stock holder often has limited or no voting rights.
Again, this situation is very common when dealing with outside investors, such as venture capital firms.
Back To: BUSINESS ENTITIES, CORPORATE GOVERNANCE, & OWNERSHIP
- Shareholder Democracy Definition
- Quorum Definition
- Information Circular
- Straight and Cumulative Voting
- Class Voting Shareholders
- Changing the Voting Rules
- Supermajority (Voting)
- Shareholder Sponsored Proposal