Opinion ID: 2113062
Heading Depth: 1
Heading Rank: 4

Heading: Audiovox Preferred Stock Valid

Text: The Delaware General Corporation Law requires that preferred stock must have some bona fide preference over other stock. [15] A dividend right constitutes just one of several permissible preferences, e.g., liquidation rights or redemption rights. The Delaware statutory scheme does not, however, require any particular form of preference. It allows private parties to contract for preferences between themselves and then specify the bargained for preferences in the certification of incorporation or applicable resolution(s). [16] The Audiovox Certificate of Incorporation provides that preferred shares shall not be entitled to receive any dividends, without limitation or qualification. Delaware law does not require that preferred shareholders have dividend rights. Therefore, Delaware corporations, such as Audiovox, may lawfully issue preferred shares without any dividend rights. The Audiovox Certificate of Incorporation does, however, confer upon preferred shareholders a preference upon liquidation of the corporation. [17] Under Delaware law, that liquidation preference, without more, is sufficient to create a preferred stock. [18] Accordingly, we hold that preferred stock was lawfully issued to Shintom in compliance with the Delaware General Corporation Law and is valid.