Voting Trust

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Voting Trust

A type of agreement by which two or more individuals who own corporate stock that carries voting rights transfer their shares to another party for voting purposes, so as to control corporate affairs.

A voting trust is created by an agreement between a group of stockholders and the trustee to whom they transfer their voting rights or by a group of identical agreements between individual shareholders and a common trustee. Such agreements ordinarily provide that control of stock is given to the trustee for a term of years, for a time period contingent upon a certain event, or until the termination of the agreement. Voting trust agreements may provide that the stockholders can direct how the stock is to be voted.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

voting trust

n. a trust which solicits vote proxies of shareholders of a corporation to elect a board directors and vote on other matters at a shareholders' meeting. A voting trust is usually operated by current directors to insure continued control, but occasionally a voting trust represents a person or group trying to gain control of the corporation. (See: corporation, shareholder, stockholder, proxy)

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.
References in periodicals archive ?
By control over reorganization committees, bankers like Morgan could come to gain power over the railroads, and by voting trusts they could maintain some modicum of direct control, at least until a distressed railroad's finances were once again on solid ground.(70)
Little evidence exists concerning the degree of influence voting trusts had on decisions affecting reorganized railroads.
The empirical question of whether the voting trusts were effective agents of control, ex post, is beyond the scope of this paper.
Furthermore, through innovations like voting trusts, security designers were able to trade one type of investor protection for another: while weak contracts might require investors to surrender traditional mortgage property rights, innovations such as covenants and voting trusts attempted to protect investor rights in advance of default by gaining a greater measure of control over the firm.
Finally, it encouraged innovation in governance systems in the form of covenants and voting trusts that in part compensated investors for accepting "weaker" securities.
A voting trust is used when a business's founder has died and no successor has been named.