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Court of Chancery Authorizes Use of Extrinsic Evidence to Construe Preferred Stock Rights

Cedarview Opportunities Master Fund LP v. Spanish Broadcasting System Inc., C.A. No. 2017-0785-AGB (Del. Ch. Aug. 27, 2018)

Stock preferences are in derogation of the common law and thus strictly construed.  Any rights, preferences, and limitations of preferred stock that distinguish it from common stock must be expressly and clearly stated.  But, as this decision explains, that does not mean that extrinsic evidence cannot be considered to construe ambiguous provisions. The decision also affirms that stockholder rights to inspect corporate records for a proper purpose cannot be taken away by a certificate of incorporation.

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