Opinion ID: 2308369
Heading Depth: 1
Heading Rank: 4

Heading: Series B Preferred Stock

Text: The contract at issue in this appeal is the Certificate of Designation for the Series B Preferred Stock. The rules of construction which are used to interpret contracts and other written instruments are applicable when construing corporate charters and certificates of designation. [9] The starting point in construing any contract is to determine whether a provision is ambiguous, i.e., whether it is reasonably subject to more than one interpretation. [10] Contract language is not rendered ambiguous simply because the parties in litigation differ concerning its meaning. [11] A contract is ambiguous only when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings. [12] If there is no ambiguity, a court must give effect to the clear language of the certificate of designation. [13] If a certificate of designation is silent as to voting rights, preferred shareholders have the same statutory rights as common stockholders. [14] Voting rights may only be derogated, in whole or in part, by a clear and express statement. [15] This Court has stated: Any rights, preferences and limitations of preferred stock that distinguish that stock from common stock must be expressly and clearly stated, as provided by statute. Therefore, these rights, preferences and limitations will not be presumed or implied. [16] The issue of voting rights is addressed by the Certificate of Designation for the Series B Preferred Stock, which provided that the holders of Series B Preferred Stock had no voting rights. It stated in pertinent part: (B) The holders of shares of Series B Preferred Stock are subject to the following qualifications, limitations and restrictions: (i) no voting rights; (ii) except as provided in (A)(vi) above, no right of consent to or approval of, except, as may then be required by law, prior to or upon amendment of or repeal of provisions attaching to the Series B Preferred Stock[.] The only right granted to the holders of the Series B Preferred Stock with respect to a merger was the right of approval and consent set forth in paragraph A(vi)(d). Section A(vi)(d) of the Series B Certificate of Designation provides: (A) Shares of Series B Preferred Stock shall entitle their registered owners to the following preferences and rights . . . (vi) right of approval and consent (represented by the consent of the majority of the Series B Preferred Stock then outstanding) prior to any of the following events . . . (d) merger or consolidation of [Aegis] with any other entity or sale of all or substantially all the assets of the Corporation. Matulich contends that the provisions of the Certificate of Designation providing a contractual right of approval and consent is legally synonymous with the statutory right to vote provided for in the DGCL. That contention is not supported by the document. Section B in the Certificate of Designation expressly recognizes that the statutory right to vote being denied is different and distinct from the contractual consent and approval right that was conferred in Section (A)(vi). The Series B Preferred Shareholders were denied the statutory right to vote on a merger but were provided with a contractual blocking right to prevent a merger if they refused to give their approval and consent.