In this recent post, I wrote about California’s definition of “common shares” in Corporations Code § 159. These are shares that have no preference over any other shares with respect to distribution of assets on liquidation or with respect to payment of dividends. Is it possible to have common shares with no voting rights?

In California, the answer is yes. California Corporations Code § 400 provides that a corporation may issue one or more classes or series of shares (or both) with full, limited or no voting rights.

There are a few catches, however. Under the statute, no denial or limitation of voting rights is effective unless at the time one or more classes or series of outstanding shares or debt securities, singly or in the aggregate, are entitled to full voting rights. Moreover, non-voting shares may have the right to vote in some instances. For example, Section 903 requires that a proposed amendment to the articles of incorporation must be approved by the outstanding shares of a class, “whether or not such class is entitled to vote thereon by the provisions of the articles,” if the amendment would have specified effects such as changing the rights, preferences, privileges or restrictions on the shares of that class.