Opinion ID: 2308369
Heading Depth: 1
Heading Rank: 5

Heading: Voting Rights Withheld

Text: If a corporation organizes itself within the boundaries of Delaware statutory law, it is given great flexibility in demarcating the rights and limitations of shareholders, particularly those of preferred shareholders, through private agreement. [17] We have concluded there is no legal impediment to giving Series B shareholders a contractual right of approval and consent to a merger, but no statutory right to vote on a merger itself. [18] Written in the disjunctive, section 212(b) of the DGCL provides that a shareholder may be granted multiple methods by which they may express an opinion: Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy. . . .  [19] Section 212(b) recognizes that a shareholder may be entitled to express consent or dissent, without possessing a right to vote. Section 253 implicates only the right to vote on a merger, as opposed to a right to consent or approve. Section 253 of the DGCL states that a parent corporation must own at least 90% of each class of stock entitled to vote on such merger. [20] Inherent in the language of section 253 is the recognition that there can be and are classes of stock which are not entitled to vote on a merger. The Court of Chancery held that the Certificate of Designation, read as a whole and giving meaning to each provision, specifically limits the rights of the holders of Series B Preferred Stock by expressly denying them any statutory right to vote, but granting those preferred shareholders a contractual right of approval and consent prior to the consummation of a merger. We agree. The contractual blocking right that was conferred and the statutory voting rights that were withheld are different. Even if the Series B Preferred shareholders expressed their contractual right to consent and approve a merger in the form of a vote, an exercise of that contractual right in a voting format is legally distinct from the statutory right to vote on the merger that was denied. There is no ambiguity in the language of the Series B Preferred Stock Certificate of Designation. The Series B shares possess no statutory voting rights, but do have a contractual right to consent and approve. We hold that Series B shareholders' contractual right to consent and approve does not constitute a statutory right to vote on the merger. Therefore, the Court of Chancery properly concluded that the contractual rights of the Series B Preferred Shareholders were irrelevant in calculating whether World Focus had the statutory voting power necessary to execute a short-form merger. Consequently, as a matter of law, Matulich's challenge to the Merger is without merit.