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16 Hastings Bus. L.J. 1 (2020)

handle is hein.journals/hbuslj16 and id is 1 raw text is: 










One Duty to All:
The Fiduciary Duty of Impartiality and
Stockholders' Conflict of Interest

Shachar Nir*

                             INTRODUCTION

     The typical structure of corporations with multiple classes of stock
consist of multiple classes of preferred stock and one or more types of
common stock. These structures are most commonly used in venture capital-
backed companies.1 Venture capitalists and other outside investors2
receive preferred stock whereas founders and company employees, by and
large, hold common stock.
     In general, common stock entitles its holder the right to vote in
shareholders' meeting (i.e., voting rights) and the right to receive
distributions of a company's surplus upon a distribution event, which can be
either a mergers and acquisitions (M&A) event or a dividend distribution
(i.e., economic rights).3 Preferred stock typically entitles its holder to receive
all the rights of the common stock along with additional rights, contractual
in nature. Such rights can be either additional voting rights (e.g., veto rights
over corporate decisions)4 or additional economic rights (e.g., the right to
receive, upon a distribution event, the investment amount prior to any

* Master of Laws (LLM) '19, Stanford Program in Corporate Governance & Practice (CGP), Stanford
Law School. I am deeply grateful to my advisor, Professor Joseph Grundfest, for his invaluable guidance
and full support. I am also grateful to Professor of the Practice of Law, Michael Challahan, for his
thoughtful comments and feedback, and Professor Amir Licht and Yifat Aran, who thoughts and feedback
throughout this process have been invaluable. Special thanks to Professor Michael Klausner, Andrew
Winden and Spencer Williams for their guidance and thoughtful feedback on earlier drafts of this Article.
Thanks also to the editors of Hastings Business Law Journal, especially Kya Coletta, for outstanding
editorial support. Finally, I would like to thank my family (Eli, Orgilit, Tal, and Bar) for their support and
encouragement throughout this year. This Article is dedicated to my mom, Orgilit, on her 60th birthday.
     1. See Elizabeth Pollman, Startup Governance, 1 U. PA. L. REV. 14-18 (forthcoming 2018), https://
papers. ssrn.com/sol3/papers.cfm?abstract id=3352203.
    2. Such as angel investors. See id. Angel investors are wealthy individuals who personally finance
the same high-risk, high-growth start-ups as venture capitalists, at an earlier stage. See infra note 159 and
accompanying text.
    3. See Model Amended and Restated Certificate of Incorporation, NVCA (Jan. 2018),
https://nvca.org/resources/model-legal-documents/.
    4. See id.

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