Common Stock

Joseph W. Bartlett, Special Counsel, McCarter & English LLP, Co-Founder of VCExperts

McCarter & English LLP


Common stock is the simplest form of equity security. It is not convertible, as a rule, into another type of security; each share enjoys one vote; dividends are payable without limit but only when declared by the board of directors; the common stock holder takes the last turn at the assets, or what is left of them, in liquidation. In a typical corporation, conversion privileges, as if obeying the Second Law of Thermodynamics, run downhill to the common; convertible securities are convertible into common. As suggested, a security called "common" stock can be complex, as complex as the draftsman wants to provide; there are no hard and fast rules except that there must be some class of stock with the residual voting, liquidation, and dividend participation rights.


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