A share is a share. Everyone knows this, it is one of the basic fundamentals of corporation law.
California Corporations Code Section 400 (b) states the following:
All shares of any one class shall have the same voting, conversion and redemption rights and other rights, preferences, privileges and restrictions, unless the class is divided into series. If a class is divided into series, all the shares of any one series shall have the same voting, conversion and redemption rights and other rights, preferences, privileges and restrictions.
Sheep Creek Water Company has 8000 shares, owned by more than 1400 shareholders. All shares in Sheep Creek Water Company are of the same class, and they are not divided into series.
However, the allocation of water is not the same for all 8000 shares. The first share on every customer account receives 750 hundred cubic feet (HCF) of Tier 1 water. All other shares on that account receive 150 HCF of Tier 1 water. First and Second (and Third and Fourth and etc.) are not different series’ of shares, they are an abritrary designation of priority.
Quite simply, the current water allocation by share which Sheep Creek Water Company uses is in violation of the California Corporations Code. Despite the shareholder vote to change the by-laws allowing this water allocation, the by-laws are still governed by the California Corporations Code. Any disagreement, and the Corporations Code wins.
Shareholders with more than 1 share who have had to pay Tier 3 prices because of this inequitable water allocation have suffered actual monetary damages.