Delaware Business Litigation Report

Court Of Chancery Again Explains Preferred Stock Rights

Fletcher International LTD v. Ion Geophysical Corp., C.A. 5109-VCS (March 29, 2011)

This is another in the line of decisions that stress that preferred stockholder rights are what is set out in the certificate of incorporation and nothing more.  Thus, if the preferred stockholders bargain for the right to consent to the sale of stock by any subsidiary, then they do not also have the right to vote on the sale of subsidiary stock by the parent.

To be fair, this brief description does not do justice to the Court's careful reasoning and simplifies the charter provisions at issue.  However, best to state the principle starkly to avoid any misunderstanding.

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