Legal Question in Business Law in Massachusetts

Re: Voting Stock V/S Non-Voting Stock

Voting stock has the power to elect the directors and decide on payment of dividends. Directors appoint the officers. Non-Voting stock cannot vote on any of those issues, but for dividend purposes it is treated just like voting stock-usually.

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Re: Voting Stock V/S Non-Voting Stock

When a business creates classes of stock, the various classes can have their own set of rights. For example, a company could create a class of common stock that pays no dividend, a preferred stock class that pays a dividend of $1.00 per year and create another preferred class that pays a dividend of $5.00 per year. When an investor is interested in buying stock of this hypothetical company, they would have to look at the three classes to see which series best matches what the investor wants to get. (The common stock in this example would likely have voting rights and a more volatile stock price than would the preferreds, but the preferreds would offer dividends.) In general, classes give investors a greater range of options.

In your situation, the specific differences between the classes could only be determined by reading the classes' prospectuses. (The company should be able to provide these to you.) The titles alone, though, appear to indicate that the company decided to create two classes of its stock, one of which is allowed to vote on corporate matters such as the election of directors and matters that arise at the annual meetings, and the other of which is not allowed to vote on these issues.

Re: Voting Stock V/S Non-Voting Stock

On this forum, it is not possible to answer with respect to a specific situation, but just give general principles which may or may not apply in a particular instance, depending upon additional facts and circumstances.

An S-corporation is a so-called "pass through" entity, where the entity and its owners have chosen to have the owners taxed on the profit of the corporation, rather than having the corporation taxed on the profit, and having the owners only taxed (a second time) if and when the corporation distributes dividends to the owners.

Normally, an S-corp can only have one class of stock, but that stock can be voting or nonvoting. For tax purposes, it doesn't matter what it is called, as long as it doesn't actually violate the rules.

Basically, nonvoting stock does not give the owners of the stock the right to vote in ordinary matters of the corporation, including election of directors. There are certain major actions which do require the assent or "vote" of nonvoting stock, but they generally do not involve day-to-day operations.

You would be well-advised to contact an attorney if you are interested in learning more, and you should be ready to provide pertinent corporate documents, such as the bylaws and articles of incorporation, and any shareholder agreements. The attorney can review these documents for pertinent provisions which set forth the respective rights.

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