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Looking For Class? You Won't Find In The California Corporations Code

You will find numerous references to classes of shares in the California General Corporation Law.  See, e.g., Cal. Corp. Code § 203 (Except as specified in the articles or in any shareholders' agreement, no distinction shall exist between classes or series of shares or the holders thereof.   What you won't find is a definition of "class".   The late Professor Harold Marsh, Jr.  explained that the California General Corporation Law does not define either "class" or "series" because "the attempt to formulate such definitions proved to be beyond the capacity of the draftsman".   While I hesitate to gainsay Professor Marsh, Section 183 does, in fact, define "series":

“Series” of shares means those shares within a class which have the same rights, preferences, privileges and restrictions but which differ in one or more rights, preferences, privileges or restrictions from other shares within the same class. Certificated securities and uncertificated securities do not constitute different series if the only difference is certificated and uncertificated status.

The problem with this definition is that it requires an understanding of the meaning of "class" which is not defined in the GCL.  

The English word "class" is derived from the Latin word "classis" which originally referred to the body of men called to arms.  This meaning is explained by the fact that the Romans acquired the word from the Greek word καλέω which means to call or summon.  Eventually, the Romans expanded the definition to refer to divisions or groups.  For example,  Marcus Fabius Quintilianus wrote in Institutio Oratoria: "non inutilem scio servatum esse a praeceptoribus meis morem, qui, cum pueros in classes distribuerant, ordinem dicendi secundum vires ingenii dabant; et ita superiore loco quisque declamabat, ut praecedere profectu videbatur (I recall a useful custom of my teachers, who, when they had distributed the boys into classes, assigned the order of speaking in order of ability so that whoever was speaking first was seen to lead the way in proficiency).  Liber I, ch. 2.23.

© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 197
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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