Corporations – Amendment of Articles of Incorporation – Power of Majority to Require Holders of Redeemable Preferred Stock to Accept Bonds Instead of Money in Redemption

Plaintiffs owned 6 percent cumulative convertible prior preferred stock in defendant corporation. The stock had a stated value of $100 per share, and was redeemable at the option of the corporation at $115 per share plus accumulated dividends. By vote of more than two-thirds of the outstanding shares of each class of stock issued, defendant’s articles of incorporation were amended to authorize its board of directors to redeem the prior stock at $120 per share, payable in the company’s 5 percent 30-year debentures. Interest on the debentures was to be cumulative, paid out of earnings, and subordinated to the other indebtedness of the company. Redemption was to be compulsory. Plaintiffs sought a declaratory judgment that the amendment was invalid. On appeal from a judgment for defendant, held, reversed. The amendment in question was beyond the powers of amendment given by the statute to the corporation. Bowman v. Armour & Co., (Ill. 1959) 160 N.E. (2d) 753.