Section 400 of the California Corporations Code establishes the following ground rules with respect to the voting rights of shares:
- Classes or series of shares may have full, limited or no voting rights;
- A denial or limitation on voting rights is not effective unless at the time one or more classes or series of outstanding shares or debt securities, singly or in the aggregate are entitled to full voting rights;
- All shares of one class must have the same voting rights; and
- All shares of one series must have the same voting rights.
Thus, it is possible for the articles of incorporation of a California corporation to authorize a class of stock with the right to vote on certain matters, but not the election of directors (so long as one or more other classes of outstanding shares singly or in the aggregate are entitled to full voting rights). It may seem paradoxical but that class has no "voting power" as far as the General Corporation Law is concerned.
The reason for this seeming anomaly is that the General Corporation Law ascribes a very specific meaning to the term "voting power". Under Section 194.5, "voting power" means "the power to vote for the election of directors at the time any determination of voting power is made". If different classes of shares are entitled to vote as separate classes for different members of the board, the determination of percentage voting power is made on the basis of the percentage of the total number of authorized directors that the shares (whether of one or more classes) have the power to elect in an election at which all shares entitled to vote for the election of any director are voted. Id.
The General Corporation Law uses the term in numerous different contexts. For example, Section 308 authorizes the holders of 33 1/3 percent of the voting power to seek court appointment of a provisional director in deadlock situations. See also Sections 160, 189, 707(b), 1001(d), 1101, 1113(c), 1201(b), 1201.5(b), 1800(b)(3), 1900(a), 1901(b), 1902(a), 2000, and 2318.
