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Legal Research On Voting Trust

Posted on:2008-05-23Degree:DoctorType:Dissertation
Country:ChinaCandidate:X B LeiFull Text:PDF
GTID:1116360215963094Subject:Economic Law
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As an indirect way for shareholders to exercise the right to vote, voting trust is the combination of trust and voting right. This dissertation will introduce the theory of voting trust, analyze the voting trust cases in China and raise the recommendations and suggestions for Chinese legislation in the end. The dissertation generally includes five parts:Chapter one is theoretical basis of the dissertation. After analyzing the meanings of voting trust, the author deems that voting trust is in essence the combination of trust and shareholders'voting right. Thus, on the one hand, voting trust is one kind of trust; on the other hand, it is influenced by quality of shareholders'voting right.The author deems that the voting trust in the Pacific Mail Steamship Company in 1864 is the first voting trust case. Early in the history of the voting trust the courts were almost solely concerned that voting trust involved a divorce of the voting power from the beneficial ownership of the stock and deemed it violated public policy. Still, some courts held that the voting trust did not violate the anti-separation doctrine because it preserved the formal unity of voting power and legal ownership. The first express legislative approval of the voting trust can be found in N.Y.Laws 1901, ch. 355,§20, at 975. Subsequently, more and more state legislatures gradually acknowledged the utility of the voting trust. Today, almost all states in USA have authorized its use.Besides interpreting the voting trust from the view of history, the author analyzed the functions of it, such as, providing continuity of management; protecting minority shareholders'interests; increasing operating efficiency; improving corporate governance, which will also result in unfavorable effects, especially trust, discrimination among shareholders, impairing the profits of corporations.Chapter two illustrates formation of a voting trust, mainly including mode, requirements, form, purpose, voting trust property, procedure and invalidity.There is no special legislation about the creation of a voting trust agreement, which is authorized by the common law rule with regard to trust, because the voting trust is in essence one kind of trust. But voting trust is a special kind of trust after all and has special purpose, which is gaining control of voting power of corporate stock. Statutes authorizing the creation of a voting trust agreement have been held to be mandatory,so that unless the agreement is executed in conformity with the regulations prescribed, the trust is void.Chapter three is to illustrate the powers and obligations of the parties to the voting trust agreement. The parties to the voting trust must include the depositing stockholders, the trustees and the voting trust certificate holders. Since the voting trust certificates are negotiable, the depositing stockholders can withdraw from voting trust by transferring the certificates, which is the most important difference between the voting trust and general trust. And that influenced the difference between the powers and obligations of the parties to the voting trust agreement and the parties to the general trust.In a typical voting trust agreement, the powers of voting trustees must be determined primarily by the instrument or agreement establishing the trust. The depositing stockholders may limit the powers of the trustees and provide that voting trustees would not do something without having received the written consent of them. The voting trustees are the owners of the stock registered in their names, and they will exercise their best judgment from time to time to manage the voting trust property. As far as the voting trust certificate holders are concerned, they are the beneficiaries who have correlative rights. In some cases the trustees have been given the right to call a meeting of the certificates holders. Subsequent instructions by voting trust certificate holders to the trustees as to voting the stock will also be deemed a grant of authority.Chapter four mainly analyzes the procedures after the voting trust is valid, including modification, withdrawal and termination. The causes and results of modification, withdrawal and termination are discussed.The author considers modification of voting trusts as modification of management modes, modification of trustees and modification of the voting trust certificate holders. Since the purpose of acquiring control over the corporation is considered a defining characteristic of a voting trust agreement, and the voting trust certificate is negotiable, the author thinks that these basic functions determine the difference between the modification of voting trust and that of the general trust.In the author's view, it is the participating shareholders, the minority shareholders and the creditors of the depositing stockholders who have the powers to withdraw the voting trust. In most cases, the voting trust is irrevocable, because the voting trust assets constitute a separate fund, which exists just for voting purposes, unless in some special instances. And the procedures of withdrawal in common law differ from that in civil law.The dissertation does not put forward new ideas on termination of voting trust. Usually a voting trust may be ended in several different ways, such as, expiration of the trust, voting trust purposes having realized or did not realize, unanimous or majority vote of the contracting parties. When a voting trust terminates, we should answer some questions. Who hold the voting trust assets? How does the voting trust temporarily subsist? How do the trustees assume the liquidation liability? In the dissertation, the author discusses all these questions.In Chapter five the author will make research on practice of voting trust in China, which is the objective of this dissertation. Although there is no such a specific law or regulations in China, some cases have taken place. For protecting minority shareholders'interests, improving state-owned stocks management and answering the voting trust cases, the author thinks that we should prescribe voting trust and perfect the relevant exterior environment. Now the trust status quo in China and financial supervise system will be the barrier of the voting trust. Furthermore, it is important to harmonize the theory of trust with traditional civil theory, which is the basic path to develop voting trust in China. From microcosmic angle, the author raises the recommendations and suggestions for Chinese legislation in the end.
Keywords/Search Tags:trust, voting trust, voting trust certificate, purpose of voting trust
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