Along the lines of the last paragraph of this post, when I was a second year law firm associate I drafted a brilliant “Comparison of Rights� section for an S-4 registration statement as required under Reg S-K, Item 1004(a)(2)(v). The section compared the rights of owners of common stock under Minnesota law and Delaware law. It was soon pointed out to me, however, that I had made the rookie mistake of referring to all owners of stock as “shareholders.� While in Minnesota and other MBCA states, owners of common stock are referred to as “shareholders,� the Delaware corporate code uses the term “stockholder.� Hence, my references to owners of stock in the Delaware corporation should have been to stockholders not shareholders. Fair enough and easy to fix, but I wonder how many people are aware of the distinction. I read articles and opinions (some of them by Delaware judges) all the time where the author seems to be blissfully unaware—he or she either refers to owners of Delaware stock as shareholders, or, more horrific (because it violates the golden rule of contract drafting), he or she refers to them in one place as shareholders and in another place as stockholders.
The reason I bring this up is I’m wondering whether there is a conventional way to handle the issue in a law review article. I’m currently working on one now where I talk about both owners of stock in MBCA corporations and owners of stock in Delaware corporations. I currently refer to them all as shareholders but drop a footnote early on explaining that as used in the article “shareholders� refers also to “stockholders� yada yada. Do I then change any quotes I have in the article that use “stockholder� to “[shareholder]?� Do you think anyone even cares? Do you regret having read this post?
Update: Gordon Smith points out here that the term “shareholder” does appear in the DGCL four times. So the above distinction is a myth. I curse the partner who told me otherwise. This is why you should always use Delaware counsel on Delaware law issues (Gordon practiced in Delaware).