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Stroh v. Blackhawk Holding Corp. - 48 Ill. 2d 471, 272 N.E.2d 1 (1971)

Rule:

Section 41 of the Business Corporation Act, Ill. Rev. Stat. ch. 32, para. 157.41(h), relating to the power of the board of directors to declare dividends, provides that no dividends may be declared or paid contrary to any restrictions in the articles of incorporation.

Facts:

Shareholders sought recovery from the corporation, alleging that the Class B shares of stock it issued were invalid because their principal attribute consisted solely of the right to vote. The shareholders claimed that the term proprietary in the definition of shares in the Business Corporation Act, specifically Ill. Rev. Stat. ch. 32, para. 157.14 (1969), meant a property right and that the shares must represent some economic interest in the property or assets of the corporation. The shareholders were granted a summary judgment on their claim, but the appellate court reversed and remanded on the grounds that the shares of stock were valid. The shareholders sought review.

Issue:

Were the issued shares of the corporation invalid due to the fact that they did not represent economic interest in the property or assets of the corporation?

Answer:

No.

Conclusion:

The court affirmed the judgment of the appellate court and remanded the cause to the circuit court with directions to vacate its decree entered in this cause finding the Class B shares of the corporation to be invalid. The court found that Ill Const. art. XI, § 3 required only that the right to vote be proportionate to the number of shares owned and did not require shares to be an investment in a corporation. The court concluded that a shareholder could be deprived of an economic interest in the corporation but could not be deprived of his voice in management. Thus, the court held that the Class B shares were valid shares of stock in the corporation.

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