Preferred shares: rights and preferences distributions.

Existing law authorizes a corporation to issue one or more classes or series of shares, as specified, including designating a class or series of shares as "preferred," which are defined as shares other than common shares. Under existing law, a corporation may make a distribution to the corporation's shareholders only if certain conditions are met. Existing law prohibits a corporation from making a distribution to its shareholders unless the board of directors determines that either (1) the amount of retained earnings of the corporation immediately prior to the distribution equals or exceeds the sum of the amount of the proposed distribution plus the preferential dividends arrears amount, or (2) immediately after the distribution, the value of the corporation's assets would equal or exceed the sum of its total liabilities plus the preferential rights amount. Existing law defines "preferential dividends arrears" and "preferential rights amount" for these purposes. Existing law authorizes the rights, preferences, privileges, and restrictions imposed on a class or series of preferred shares to exclude specified provisions that would otherwise be required by law. This bill would also authorize the rights, preferences, privileges, and restrictions imposed on preferred shares to exclude specified rights to a preferential dividends arrears amount, preferential rights amount, or both, in a distribution to the corporation's junior shareholders.