A Missouri Corporation under or subject to the General and Business Corporation Law may validly issue a class of non-voting common stock. The issuance of such non-voting common stock is not in violation of Article XI, Section 6 of the Constitution or of any statutory provision.

CORPORATIONS : NON-VOTING COMMON STOCK: CONSTITUTIONAL LA't'J: CONSTRUCTION OF CONSTITUTION : Honorable Warren E. Hearnes Secretary of State State Capitol Jefferson City, Missouri Dear Mr. Hearnes: A Missouri Corporation ~nder or eubject to the General and Business Corpot•ation La\'i rna" validly issue a class of non- votingJ common stock . Tne iss~ance~of such non -voting common stock ~s no~ in violatlon of Article XI ~ Section 6 of the Constitution or oi' any statutory provision. You have requested the opinion of this office with respect to the validity of Non- voting Common St ock in Missouri, as f ollows: "This Department has recently received Arti cle s of Amendment of Wren Electric, Inc., a Missouri Corporation \·lherein said Articles purport to create two types of Common Stock, one being Class A without vot ing rights and the other being Class B with voting rights . The original of said Articles of Amendment is attached for your inspection. The problem involved, as this Department sees it, is; Is non-voting Common Stock permissible under Article XI, Section VI of the Constitution of Missouri, 1945 and Chapter 351, Revised Statutes of Missouri, 1959. We are also enclosing a memorandum in reference to the above question presented to this office in conjunction with the proposed amendment. Also in conjunction with this request, this writer f eels he should advise you that the Honorable Warren E .. Hearnes files of this office presently reflect that there are an excess of six hundred Missouri domestic corporations now in good standing that have authorized the above type of stock in question, the same being approved by this office from the years 1923 to date.n The A~ticles of Amendment of Wren Electric, Inc. submitted with your request disclose that the holders of all of the issued and outstanding capital stock of the corporation voted in favor of dividing the stock into t\'fO classes, Class A common shares and Class B common shares, each with a par value of $1.00 per share. The proposed amendment provides as follows with respect to voting rights: uThe holders of Class 'A' common shares shall not, except as otherwise specifically provided herein, have any voti ng right. as shareholders of the Corporation, nor shall they be notified of the meetings of the shareholders. All rights to vote and all voting power (including but not limdted to the right to vote for directors and managers), and all management and control of the Corporation, except as othe~rise hereinafter specifically provided, are vested exclusively in the holders of Class 'B' common shares. 11 11The holders of Class 'A' common shares shall only have the right to vote on any amendment to the Articles of Incorporation of said Corporation which would change the relative rights as fixed in this amendment between Class 'A' common shares and Class 'B' common shares. The holders of said Class 'A' common shares and Class 'B' common shares shall each vote as a class." The issue thus presented is whether stockholders by unanimous agreement, either in the original Articles of Incorpora- tion or by Articles of Amendment, may validly restrict t he voting pol'ler of one class of corninon stock so that all right to vote and all voting power, including, but not limited to, the right to vote for directors and managers, is vested exclusively in the holders of the other class of common stock. It is noted that the Articles of Amendment do not attempt to deprive the holders of the non-voting stock of the right to vote on any amendment which would change the relative rights as between the two classes of stock. -2- '· Honorable Warren K. Hearnes The question for resolution is twofold in nature1 (1) Is such Non-voting Common stock valid in view of Section 6, Arti cle XI of the Constitution of Missouri? (2) Is such Non-voting Common f t ock valid under the applicable provisions of the corporation code of Missouri? We will discuss these questions in order. The relevant constitutional provision (Section 6, Article XI of the Constitution of Missouri, 1945 ) r eads a s follows: "I n all elections for directors or managers of any corporation, each shareholder shall have t he right to ca st as many votes in t he aggregate as shall equal the number of shares held by him, multiplied by the number of directors or managers to be elected, and may cast the whole number of votes , either in person or by proxy f or one candidate, or distribute such votes among two or more candidates ; and such directors or managers shall not be elected in any other manner ; provided, that this section shall not apply to co-operative associations, societies or exchanges organized under the l aw. " Except for the proviso relating to cooperatives, the identical consti.:tutional provision, with slight and immaterial changes in phraseology, appeared in the 1875 Constitution as Section 6, Article XII. For purposes of comparison we quote the 1875 section as foll ows: "I n all elections for directors or managers of any incorporated company, each shareholder shall have the right to cast as many votes in the aggregate as shall equal the number of shares so held by him or her in said company. mL1tip1ied by the number of directors or managers to be elected at such election; and each shareholder may cast the whole number of votes, either in person or by proxy, for one candidate, or distribute such votes among two or more candidates; and such directors or managers shall not be elected in any other manner. " Both or the f oregoing constitut ional provisions are limited to el ections f or directors or managers and have no application to voting rights with respect to any other matters. The 1875 Section -3- Honorable \•/arren E. Hearnes \'las construed by our Supreme Court 1n 1905 in the case of State ex reJ. Frank v. Swanger, 190 Mo . 561, 89 SW 872. That \'las an action in mandamus to compel the then Secretary or State to issue a cert~ficate of incorporation. His re~sal was based upon a provision in the Articles of Incorporation which vested the voting power exclusively in the common stock and contained the express statement that the preferred stock shall have no voting power. The Supreme Court ~..n bane ordered the peremptory writ to issue. For over fifty years the interpretation given to the constitutional provision by the Sw~er case has not been challenged in any appellate court ~saouri . And, significantly, the 1945 Constitution made no change in substance in the provision other than to exclude its application to cooperatives. What then \'las the interpretation placed upon Section 6 by the Supreme Court? It is true that the Swanger case involved only preferred stock. However, the interpretation given to Section 6 can not, in our view, be limited to preferred stock as such, but on the contrary, the interpretation applies generally to all stock and to the voting rights of all stockholders. The precise point for decision in the ~er case-was whether Section 6 meant that each share- holder shall have the right to vote for directors or managers and in connection with such guaranteed right have the right of cumulative voting and the right to vote by proxy 1 or \·zhether the provision pertained only to cumulative voting and the right to vote by proxy. I f each shareholder was guaranteed the right to vote in all events, then obviously this Section would apply to preferred stock as well as common stock. The Court conceded that if' the Constitutional provision were given a literal construction there t-lould be much force to the argument that it contained a guarantee to all stockholders of the right to vote . However, the Court reached the conclusion that the literal construction was not the proper one, basing its conclusion on what it held was 11the obv1.ous purpose" of inserting the section into our fundamental law. The interpretation given by the Court in the Sw~._e..r_ case appears~ the opinion as follows (89 SW l.c. 876)1 " • • *Its purpose was to introduce the prineiple of cumulative system of v oting -4- Honorable Warren E. Hearnes in elections of stockholders eo as to secure the minority of stockholders a voice in the management of the affairs of the company in proportion to the number of hie shares, in lieu of the common-law right to vote one vote, irrespective of the number of shares held by him.* * * " Again, and to amplify and make more specific the foregoing interpretation, the Court stated (89 SW l . c . 876)t "* * *Properly understood, vre think section 6, art. 12, of the Constitution means only that every stockholder entitled to vote at any corporate election is entitled to vote hie share on the cumulative plan, but does not mean that the stockholders themselves 1n the organization of the company may not voluntarily agree that certain preferred stock shall be issued and that the holders thereof shall not have the right to vote . * * *" Finally, and again emphasizing the restrictive interpretation placed by the Court upon Section 6, it was said (89 SW l.c. 877): 11* * *We hold, then, that the evident purpose of section 6, art. 12, of our Constitution was the guaranty to stockholders having the right to vote of cumulating their votes, and has no reference to the contractual right of the stockholders inter sese of providing that preferred stockholders shall or shall not have the right to vote such stock, and to hold that it has taken away this well-recognized common- law right would be to distort its obvious purpose. " II I' As thus construed by the Court, the obvious purpose ·, the "evident purpose", of Section 6 \'las to guarantee to every stock- holder "entitled to vote'' or "having the right to vote", for corporate managers, the right to vote his share "on the cumulative plan". Such being the "evident purpose'' of the constitutional provision, the inquiry, therefore, is not whether the stock in question is preferred or common, but whether by agreement consistent with applicable statutes the holder of such stock is "entitled to vote" . If the stock held by the shareholder is of a kind which entitles him to vote then, as construed in the -5- Honorable Warren E. Hearnes Swanger case, the constitutional provision guarantees him the right of cumulating such vote and to vote by proxy. If the stock has no voting rights, then the constitutional provision simply has no application. In this connection, the comment of the Court in the Swgnger case (89 SW l . c . 876) is pertinent: "* * *We can discover no intention to take away a long-established right of stockholders at coDDDon law to make their own agreements, as long as they did not collide with some settled principle of law, organic or statutory, and which did not contravene public policy, but concerned themselves only. * * *n As \'Te have pointed out, it io true that the Swanser case involved only preferred stock. It is also true that the Court discussed the reasonableness or charter provisions denying preferred stock the right to vote. And it is true that the Court ruled that by the constitutional provision in question, the people did not intend to change the "long established right of stockholders to make certain stock a pre!'erred lien on the dividends of a business, and to agree that the holders of such stock should have no right to vote in the management of the business, but should content themselves with the preferences and priorities given them of first receiving the profits of the business. " But as we read the case, all such statements and arguments are but reasons which demonstrate that the constitutional provision was not in fact intended to guarantee to any shareholder the right to vote in cases where the stockholders validly agreed otherwise. The interpretation given the constitutional provision in Swanger, namely, that it merely guarantees t he right of cumulative voting to each shareholder entitled to vote, necessarily eliminated any conceivable constitutional right to vote per sej and of itself operated to confine the language of section 6 to the r~ght of cumulative voting . Any other conclusion would result in holding that the constitutional provision, in addition to guaranteeing the right of cumulative voting in person or by proxy, was also intended to guarantee the r i ght to vote to some but not all clae.ses of shareholders, in spite of the express use of the words 11~ shareholder. 11 In the light of the Swanger ruling we do not believe that the constitutional provision is subject to the Lnterpretation that it means that neach common shareholder and each preferred shareholder entitled to vote shall have the right to vote on the cumulative plan". In our view, .::>ection 6 either guarantees to all stockholders~ without regard to the nature of their stock~ -6- Honorable Warren E. Hearnes the right to vote for directors in addition to the right to vote on the cumulati ve principle or it s~ply guarantees the right to vote on the cumulative plan to those shareholders otherwise having the right to vote in accordance w1 th the terms under \'lhich that stock was issued or acquired. Even if i t be accepted that the framers of the 1875 Consti- tution assumed that each shareholder had the basic right to vote, this would not mean that the provision was intended to syrrantee in all instances such right to vote if the shareholders in their Articles of I ncorporation) entered into an agreement otherwise. Such was not the purpose of the constitutional provision, as the Swanger case ruled, and it is the purpose thereof which controls the construction to be given thereto. Our attention has been d.1rected to certain general prl.nciples to the effect that at common law the right to vote follows the ownership of stock. However, this rule means only that such right prevails in the absence of any common restriction upon a rticular class ot stock. See to ~ effect 2 Thompson on Corporations 3rd Ed Section 949 and 5 Fletcher Encyclopedia Corp-:>rations Perm. Ed) Sect1.on 2026. In the &<~anger case, the Court quoted from Miller v. Ratter.manJ 47 Ohio St. 141, 24 N.E. 496 as follows: nit is true that one characteristic of stock generally is that it can be voted upon. But this is not essential. " As Thompson, above cited, poin~a ~ut , the legality of a restriction upon the voting rights of preferred stock "is not based on the theory that preferred stockholders are guaranteed a dividend; but rather on the inherent po~ of the ~orporation to r estrict the voting power. It is s1IJt!:,ly a contract relation between t\rro classes of stockholders, in which the public has no concern. " And in Clarlc and ft'.arshall, Private Corporations, Vol. 3 pp. 1996~ 1997 it ie:; naid: "A stockholder has no right to vote at corporate mee'tings, ;1hether the stock is common or preferred, if 1t io so stipulnte ~..l when t he stock is i ssued, for the stipulation is then a term of his contract. " There are respectable authorities in other Jurisdictions, as ttJell as learned articles in law revie\'IS, \'ihich are critical of the ~wanger decision and the basic premise upon which it was ruled. If the question \fere for decision de novo a strong argument could be made against the validity of any class of non-voting stock, at least insofar as relates to the election of corporate managers. However, vthether S\·ran.ger was ruled rightly or wrongly, or whether the court would have reached the same result today, having had the benefit of other cases and the comments 1n law review articles, is eside the point . -7- Honorable Warren E. Reames The Swanger case has authoritatively construed Section 6 as it appeared in the 1875 Constitution. The framers of the 1945 Constitution having re-enacted the constitutional provision \'lithout change are presumed. to have adopted the construction given to such section by our Supreme Court in the SWanger case . It ia well settled that where a Court of last resort has construed a statute and such statute is re-enacted or continued in force without any change in its terms, the presumption is that the construction theretofore given to the statute is adopted by the lawmakers. There ar~ many cases to this effect. See Handlin v . Morgan CountS, 57 Mo. 114, 116; State ex rel Steed. v. Nolte, 345 Mo . 1103, 13 SW2d 1016, 1019; Messick v . GraingerJ 356 Mo. 1227, 205 SW2d 739; and State ex inf. Gentry v , Meeker, 317 Mo. 719, 296 ~ri 411, 413. The constitUtion, or course, as the fundamental law of the state, is subject to the same rules of conatruct:1on as are other laws. See Sanders v. St. Louis & N. o. Anchor Line, 97 Mo. 26, 10 SW 595, 597; State ex rel Jones v. Atterbury, Mo. Sup., 300 SW2d 806, 810; Brown v . Morris, 365 MO. 946, 290 SW2d 160, 167. In Ludlow-Saylor Wire Co. v. \tlollbrinck, 275 1-k>. 339, 205 Sll 196, 199, it was held: "The rule is firmly 3ettled t lw.t t he adoption in a later Constitution of the words and context of another, which had been construed by a court or last resort, is presumed {in the absence of a contrary intention) to have been done to give the adopted r-1ords their adjudicated meaning . " To the same effect are State ex rel Board of Control v • .:it . Louis, 216 Mo. 47, 115 SW 534, 547; and ~~ore v. Brown, 350 Mo . 256, 165 SW2d 657. The rule that the construction given a constitutional provision by our highest court becomes a part of the provision itself , is particularly applicable in situations of this klnd \'#here the enti re subJect is open to the constitutional convention for close study, redrafting, and the making of any changes deemed desirable . The only change in substance made in Section 6 was the addition of the provision excluding cooperatives from the operation thereof . No attempt was made to qualify, limit or overrule the Swanger deci-sion by specifically guaranteeing the right to vote either to al l stockholders or to any particular class thereo:f. -8- Honorable Warren E. Hearnes In our opinion~ therefore, Section 6 ~ Article XI of the 1945 Constitution guarantees only to stockholders having the rigpt to vote~the right to vote on the cumulative plan in person or by proxy. Nothing contained 1n the said section prohibits the issuance of any class of non-voting stock. In our vi.e\11 the constitutional provision may not fairly be construed to prevent the issuance of any class of shares containing restrict ions or limitations on the right to vote. The intention is simply to guarantee to a stockholder~ \'lith respect to voting rights acquired by him in the issuance or purchase of stock, the right of cumulative ~ting in person or by proxy, rathor than to deny the right to· freely contract with respect to the right to vote at all. Although no aention thereof' is made 1n the Swanger opinion, we believe it significant that Section 6 contains the provision that directors or managers shall not be elected 111n any other manner 11 , language which in our view relates to a guarantee of the method of voting rather than to the right to vote, per se. The unsettling effect of a ruling adverse to the validity o.f non-voting common stock should not be overlooked. \ie have been in.fonned that hundreds or corporations 1n good standing presently have provisions 1n their articles of incorporation providing for classes or non-voting common stock. Some of such corporations were organized prior to the adoption of the 1945 Constitution. Consistently, since the Swanger decision, every administrative officer concerned with the issuance of corporate charters and certificates of amendment thereto, has construed the Swanger decision and the :fundamental law upon which that case was grounded, as authorizing the issuance of classes of non-voting common stock. It is to be assumed that the framers of the 1945 Constitution \'lere aware of this practical construction given to the language of Section 6 and the interpretation of the Swanger case by such administrative officers as \'/ell as by the lawyers who assisted in the organization of such corporations. It is also to be assumed that the framers of t he Constitution were a\ta.re of the provisions of the 1943 corporation code which, in our view, contains a legislative construction of the Constitution in accord \'lith our construction of the Swanger ruling. vie are a\>Jare of no fundamental policy of this State \'lhich would be violated by continuing to construe Section 6 of Article XI as it has hereto£ore been construed and which construction is f'ully i n accord with the interpretation of the language thereof as expressed in the S~~er decision. We rule and hold, there£ore, -9- Honorable Warren E. Hearnes that the Constitution of Missouri does not prohibit or invalidate the issuance of non-voting common stock. W• turn next t o a conaidera tion of the statutory provisions oontained 1n our corporation code to ascertain whether a class of non-voting common stock is permissible thereunder. l'le do not reaeh the question of whether stockholders may validly agree in their charter to l~it, restrict, or prohibit the exercise of voting rights by any class or stock absent specific statutory authorization. In our view, our statutes properly ennstrQed authorize the issuance of non-voting common stock. Section 351.180 RS~b 1959, provides in part as follows : ul. Each corporation shall have power to create and issue the number of shares stated in its articles of incorpor>ation. Such shares may be divided into one or more classes, any or all of which classes may consist of shares with par value or shares without par value, with such designations, prererences., qualifications, limitations, restrictions, and such special or relative rights including the right of conver13ion Into any other class of shares as sha.J.l be stated in the articles .of 1.ncorpora- tion. n The foregoing section, except for the words "including the right of conversion into any other class of sharesu was copied verbatim from the Illinois Business Corporation Aot (Smith-Hurd Ill, Annotated Statutes, Chapter 32 1 Section 157.14.). Significantly., the Illinois section cont!-1.ins the additional sentence immediately following the fore~oing,wh'ich is omitted in the M1ssouri statute, as follows, The Articles or incorporation shall not limit or deny th~ voting poc•or the shares of any class." This omission is clearly indicative of an intent to authorize non-voting shares . Section 351. 055 1 RSl4o 1959, provides that the articles of incorporation shall set forth with respect to the shares of stock "a statement of the preferer.ces, qualifications., !4mitations, restrictions, and the special or relative ~hts 1nclud~ne convertible rights, if any, in respa ~ t of shares of" each class." -lQ- Honorable Warren E. Hearnes Section 351 .085, RSMo 1959, provides with respect to amendments o£ articles of incorporation that such amendments may be made "to change the preferenc~ qualifications, limitations, restrictions and special or relative rights including convertible rights in respect ~f all or any part of its shares, whether II s issued or unissued. aid section further permits the amendment of articles of incorporation 11 to create a netl class or classes of stock and to define the preferences, qualifications, limitations, restrictions, and the special or relative rights of the shares of such new class or classes. 11 Section 351 . 245, RSMo 1959, provides in part : "1 . Each outstanding share entitled to vote under the provisions of the articles of incorpora- tion shall be entitled to one vote on each matter SUbiil1 tted to a vote at a meeting of shareholders. n The comparable provision of the I llinois Business Corporation Act {Section 157. 28, Smith-Hurd) reads: "Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders . " It should also be noted that paragraph 3 of Section 351 . 245 provides that with respect to voting for directors the principle of cumulative voting is guaranteed but only to •:voting shares." I t is also of significance that Section 351.090, RSMo 1959, prescribing the manner of making amendments to articles of incorporation, provides that at the meeting of shareholders 11a vote of the shareholders entitled to vote thereat shall be taken on the proposed amendment." lfiie statute then provides that said amendment shall be adopted upon receiv~ the affirmative vote of a majority of the outstanding shares entitled to vote" . Ho\fever, the following provision is then included wtich extends the right to vote to any other class of stock which is adversely affected by the proposed amendment. The statutory language, paragraph 1 {3)(a ) of Section 351.090 is as follows: "( 3)(a ) That if any amendment provides for the creation or increase of preferential shares, then such amendment shall be adopted only upon receiving, in addition to the affirmati ve vote of the majority of all other outstanding shares entitled to vote, the fol lowing vote of each other class or sharesJvoting as a separate class, whether by the terms of the articles of incorpora- tion such class be ent itled to vote or not, over which such new or additional preferential shares -11- Honorable Warren E. Hearnes would have a priority or with which such new or additional preferential shares would participate: •• " The foregoing statutory provision can only mean that even if there are no preferential shares then in existence, any other class of shares which may have no right to vote by the terms of the articles of incorporation shall nevertheless be entitled to vote as a class on thekind of proposition described 1n the foregoing quoted portion of the statute. This would cl early indicate that the Legislature contemplated a class of non-voting common stock, even if none of the other provisions of the statute above cited aPe taken into consideration. In our view, the p0·:~er of a corporation to issue different classes of shares and to provide for "pre-ferences, qualifications, limitations, restrictions, and special or rel ative rights in respect of the shares of each class 11 clearly authorizes the creation of a class of common shares having no voting rights except to the extent required by the foregoing provisions of Section 351 . 090. The restriction with res~ect to voting is clearly com- prehended \'lithin the urestrictions ' , "limitations", and ttrelative rights tt which are authorized to be made in respect of any class of shares. We find no language in the corporation code indicative of a legislative intent to prohibit the o~ation of a class of non-voting common stock or to permit restrictions upon voting rights to be made only with respect to preferred shares. We rule and hold; therefore, that the creation and i ssuance of non-voting common stock is permissible under our statutes and that such shares may validly be issued. I t follows from the foregoing that the certificate of amendment to t he articles of incorporation of Wren El ectric Inc. confor.m to law, &1d that it is your duty to file the same upon the payment of the required taxes or fees. CONCLUSION I t is the opinion of this office that a corporation organized under or subject to the provisions of the General. and Business Corporation Law of Missouri may validly issue a class of non-voting common stock and that the issuance of such stock is not in violation of Section 6, Article XI of the Constitution of Mjesouri 1945 or of any statutory provisions. - 12- Honorable Warren E. Hearnes The f'orego1ng opinion, which I hereby approve, uas prepared by my assistant, Joseph Nessenfeld. JM:me Yours very truly, THOMAS F. EAGLETON Attorney General