A voting trust is an arrangement whereby the

shares In financial markets, a share (sometimes referred to as stock or equity) is a unit of equity ownership in the capital stock of a corporation. It can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Sha ...

in a

company A company, abbreviated as co., is a Legal personality, legal entity representing an association of legal people, whether Natural person, natural, Juridical person, juridical or a mixture of both, with a specific objective. Company members ...

of one or more

shareholders A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...

and the voting rights attached thereto are legally transferred to a

trustee Trustee (or the holding of a trusteeship) is a legal term which, in its broadest sense, refers to anyone in a position of trust and so can refer to any individual who holds property, authority, or a position of trust or responsibility for the ...

, usually for a specified period of time (the "trust period"). In some voting trusts, the trustee may also be granted additional powers (such as to sell or redeem the shares). At the end of the trust period, the shares would ordinarily be re-transferred to the

beneficiary A beneficiary in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. For example, the beneficiary of a life insurance policy is the person who receives the payment of the amount of ...

, although in practice many voting trusts contain provisions for them to re-vested on the voting trusts with identical terms. Voting trusts were made popular in

Delaware Delaware ( ) is a U.S. state, state in the Mid-Atlantic (United States), Mid-Atlantic and South Atlantic states, South Atlantic regions of the United States. It borders Maryland to its south and west, Pennsylvania to its north, New Jersey ...

corporate law Corporate law (also known as company law or enterprise law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corpora ...

, but they have since been adopted widely by other states in the United States. They have also been extensively adopted in offshore jurisdictions.

Purposes

There are several reasons why shareholders may wish to put a voting trust arrangement in place. * Several shareholders may wish to create a unified block of votes, which together gives them more power than the collective sum of their fragmented interests. * In many countries, to call

general meeting A general assembly or general meeting is a meeting of all the members of an organization or shareholders of a company. Specific examples of general assembly include: Churches * General Assembly (presbyterian church), the highest court of presby ...

s, shareholders need to hold a certain percentage of the issued shares of the company. By aggregating their shares, the shareholders can confer this power on themselves collectively where they might not have it individually. * Locking shares in voting trusts can, in some countries, help deter a

hostile takeover In business, a takeover is the purchase of one company (law), company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are publicly listed, in contrast t ...

. * Voting trusts are sometimes used to resolve conflict of interest/conflicts of interest. By putting the shares in a trustee who can vote them at arm's length from the beneficiary(ies) of the trust, this can in some circumstances mitigate or absolve the original shareholder from what might otherwise constitute a conflict of interest (although in practice, to resolve conflicts of interest the trust will ordinarily be " blind trust"; while all blind trusts are necessarily voting trusts, not all voting trusts are blind trusts). * Shares are sometimes aggregated into a voting trust to facilitate a corporate reorganization. * Promoters of companies sometimes aggregate their shares in a voting trust to safeguard control of the company.

Sample

Sample Voting trust agreement
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