Question

If a corporation has two classes of common stock, what is typically unique about the second or class b common stock?

a. class b common stock may not have specific liquidation preferences
b. class b common stock may not have conversion privileges that allow it to be converted into a different class of stock it has superior dividend payments.
c. it has superior voting rights.
d. it has no voting rights. it has inferior dividend payments.

Answer 1

Class B common stock typically differs in voting rights, which may be superior to those of Class A, allowing for more control with fewer shares. This arrangement is detailed in the company's charter and can vary between companies. The correct answer is c. Class B may have superior voting rights.

Step-by-step explanation:

When a corporation has two classes of common stock, the features of the second or Class B common stock typically differ from Class A stock in various ways. One unique characteristic is related to voting rights. Class B common stock often carries different voting rights which could be superior or inferior to those of Class A.

For example, Class B shares may have enhanced voting rights, such as ten votes per share compared to one vote per share for Class A. This setup is often used by companies to maintain founding family or insider control even with less financial ownership. It is important to note that the rights associated with the stock will be specifically outlined in the company's charter and can vary between companies. Therefore, the correct option based on the choices provided would be that Class B common stock may have superior voting rights.