ARTICLE
19 July 2021

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

AM
Allen Matkins Leck Gamble Mallory & Natsis LLP

Contributor

Allen Matkins Leck Gamble Mallory & Natsis LLP logo
Allen Matkins, founded in 1977, is a California-based law firm with more than 200 attorneys in four major metropolitan areas of California: Los Angeles, Orange County, San Diego, and San Francisco. The firm's areas of focus include real estate, construction, land use, environmental and natural resources, corporate and securities, real estate and commercial finance, bankruptcy, restructurings and creditors' rights, joint ventures, and tax; labor and employment, and trials, litigation, risk management, and alternative dispute resolution in all of these areas. For more information about Allen Matkins please visit www.allenmatkins.com.
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...
United States California Corporate/Commercial Law

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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More