Shintom Co., Ltd. v. Audiovox Corp.

Summary

The Delaware Supreme Court affirmed dismissal of Shintom Co., Ltd.'s claim seeking recovery of more than $2.5 million paid for Audiovox preferred stock. The court held that Delaware law does not require preferred stock to confer dividend rights, provided the stock has another bona fide preference, such as a liquidation preference, and concluded that Audiovox's preferred stock was valid.

Holdings

1. Section 151(c) does not require all preferred stock to confer a right to receive dividends. It permits a corporation to issue preferred stock with dividend rights determined by the certificate of incorporation or applicable board resolution, including stock with no dividend rights.
2. Audiovox's preferred stock was valid and not void because the certificate of incorporation expressly denied dividend rights and otherwise provided a lawful liquidation preference.
3. A liquidation preference, without a dividend preference, is sufficient to create valid preferred stock under Delaware law.

Questions Presented

1. Whether 8 Del. C. § 151(c) requires every class of preferred stock to confer a right to receive dividends under at least some circumstances.
2. Whether Audiovox's preferred stock was void because its certificate of incorporation denied dividend rights without limitation or qualification.
3. Whether a liquidation preference alone is sufficient to constitute a lawful preference for Delaware preferred stock.

Disposition

affirmed