Alabama Constitution Section 237 Issuance of preferred stock by corporations
Alabama Constitution – Section 237: Issuance of Preferred Stock by Corporations
Text of Section 237:
"No corporation shall issue preferred stock without the consent of the owners of two-thirds of the stock of said corporation, and such preferred stock so issued shall not entitle the holders thereof to any right to vote at meetings of the corporation except upon the question of reducing or increasing the capital stock or dissolving the corporation or upon other questions where the rights of the holders of such preferred stock would be adversely affected."
Explanation:
This section places limits and conditions on how corporations in Alabama can issue preferred stock:
✅ Consent Requirement:
A corporation must obtain the consent of at least two-thirds of its existing stockholders before issuing preferred stock.
✅ Voting Rights of Preferred Stockholders:
Holders of preferred stock generally do not have voting rights in corporate meetings.
However, they can vote on:
Proposals to increase or decrease capital stock,
Dissolution of the corporation,
Any matter that would adversely affect their rights.
What Is Preferred Stock?
Preferred stock is a type of ownership in a corporation that typically:
Has a fixed dividend,
Takes priority over common stock in the event of liquidation,
Usually lacks voting rights, except in specific circumstances.
Purpose of Section 237:
Protects existing shareholders from dilution or changes in control without strong majority support.
Protects preferred shareholders by giving them a say when their rights might be impacted.
RELATED Blog
0 comments