A shareholder’s voting rights are his or her right to vote on corporate policy issues. This term sheet clause explains how voting rights are distributed across various instruments (A, B, Preferred). It also specifies which corporate actions require a voting majority.

Let us illustrate this with an example.

Assume that the term sheet for a preferred share deal requires approval of a preferred majority for the aforementioned actions. That means your preferred shareholders have a veto over the issuance of new securities, changing the number of shares, paying dividends, selling your company, and so on.

The voting rights can also specify that a “common” majority is required, putting the decision-making power in the hands of the common shareholders (preferred shares often also have common voting rights).

Voting rights define how preferred stock and common stock interact in the context of a share vote. It’s an item in the term sheet that doesn’t matter much tbh.