Voting Trust#

  • is an agreement between shareholders by which their shares and voting rights are temporarily transferred to a trustee
  • shareholders agree to vote in a certain way on certain matters without giving up their shares or voting rights.
  • voting trusts are formed to prevent hostile takeovers, to maintain majority control, to resolve conflicts of interest, and more.

A voting trust is a legal trust created to pool the voting rights of shareholders by temporarily transferring their shares to a trustee. In exchange for their shares, shareholders receive certificates confirming that they are the beneficiaries of the trust. The trustee is often required to vote in accordance with the wishes of these participating shareholders.

Voting Trusts vs. Voting Agreements#

Instead of transferring voting rights to a trustee, shareholders can collectively enter into a voting contract or agreement to vote in a certain way on matters. This agreement, also known as a pooling agreement, allows shareholders to gain or retain control without giving up their identity as shareholders, as with a voting trust. Voting agreements may not be used between directors to restrict directors’ discretion or to buy votes.