Also known as: classes of stock · stock class · stock classes · share class · classes of shares
Written by attorneys · grounded in primary & secondary sources — see below
A category of shares that a corporation is authorized to issue under its articles of incorporation. All shares within the same class or series must carry identical preferences, rights, and limitations.
Canyon Construction files articles that list two classes of stock: 1,000,000 shares of common stock and 200,000 shares of preferred stock. The articles assign each class a distinct name and describe the preferred stock's dividend priority and liquidation preference. Canyon may then issue shares of either class because the articles have supplied the required designations and terms.
Nixon and other non-employee holders of Class B stock receive liquidity rights that employees holding Class A stock do not enjoy. The board structures the rights so that each class maintains internally identical terms. The distinction between the two classes allows the corporation to treat the groups differently without violating the identical-rights rule inside each class.
Select any source to read its text and confirm it supports the definition.
VantagePoint holds preferred shares in a Delaware corporation. When a California statute would alter voting rights attached to those shares, the court applies Delaware law because the rights of each class of stock are internal affairs governed by the state of incorporation. The preferred class therefore retains the voting and dividend terms set in the Delaware articles.
Sinclair Oil causes its subsidiary to pay large dividends on the subsidiary's single class of common stock. Minority shareholders of that common class challenge the payments as unfair. The court examines whether the dividends treat all shares of the same class identically and whether the parent breached any duty owed to that class.
Yes. The articles must list each authorized class or series, the number of shares in each, and the distinguishing terms before any shares of that class may be issued.
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No. Only the articles of incorporation can authorize a new class or series and prescribe its distinct terms. Issuance documents or bylaws cannot supply the missing authorization.
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A corporation has only one class outstanding when no shares of any other authorized class have actually been issued. Authorized but unissued preferred stock does not count as a second outstanding class.
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No. Contractual side letters do not alter the rights, preferences, or limitations attached to shares under the articles and therefore do not create additional statutory classes.
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…continuity through employee management and ownership. Mr. Barton established the Corporation in 1928 by creating two classes of stock, not one, and by holding 100 percent of the Class A stock and 82 percent of the Class B stock. Mr. Barton himself established the practice of purchasing key man life insurance with funds of…