Corporations - Preference Rights on Dissolution

The capital structure of the defendant corporation consisted of class A, class B, and preferred stock. According to the articles of association, the class A stock was entitled to a ten percent dividend before any dividend was paid on the class B. After the class B stock had also received a ten percent dividend, the two classes were to share equally in any further dividends. The charter further provided that on dissolution the holders of the class A stock were entitled to cash to the amount of the par value of their stock before any payment in liquidation was made to the holders of the class B stock. Upon dissolution of the defendant, the class A stockholders claimed the right to share equally with the class B stockholders in surplus assets remaining after both had received the par value of their stock.

Held, all assets remaining after the holders of class A stock have received par value are to be distributed to the class B shareholders. The preference given class A stockholders on dissolution is clearly exhaustive. Mohawk Carpet Mills, Inc. v. Delaware Rayon Company, (Del. Ch. 1954) 110 A. (2d) 305.