On Voting Trust And The Reference To China

Shareholders' voting right is one of significant contents of shareholders' rights; also a powerful control means to decide important things of corporation. The structures of corporation control have been full distorted and generally abused in modern joint-stock companies, so, we should strengthen protecting of exercising voting right to realize the function of voting right. Voting trust which originated from the United States is an effective system for protecting shareholders' voting right. Voting trust is a legal system and legal means which applies the trust principles into the field of performing the voting right in the joint-stock corporation. Voting trust is a tremendous contribution which the law of the United States made to the theory and practice of law. Voting trust is a lawful system by which the shareholders trust their voting rights to trustees in an irrevocable way for a limited period, and then the trustees exert the voting rights in the name of themselves on a kind of special purpose in terms of the trusters' intentions and interests. Voting trust, as one of the means to get corporation control, is widely used in America. China's law does not involve voting trust at present. Voting Trust can enhance the legal protection of small shareholders, optimize the structure of corporate governance, and solve the problem due to the dominance of state-owned shares and help restructuring listed companies. Our Company Law should make reference to voting trust and introduce this system.In order to transplant voting trust system, we must analyze the basic tenets of voting trust first. Voting trust is a special form of trust; it is a way to concentrate corporation control in essence. Voting trust shows common features of trust as well as its own particularities. The particularities of voting trust mainly show in the following aspects: The both parties of voting trust are beneficial owners and voting trustees; Trustees exercise voting right independently; Voting right is the object of voting trust; Voting Trust is irrevocable; Voting trust is valid for a limited period. Voting trust was controversial when it first appeared, it was considered contrary to public policy. With the United States had entered the stage of monopoly capitalism, voting trust was recognized by law. From the mid-20th century, voting trust began to enter some civil law countries, such as Japan, Korea, and China's Taiwan region. It can be said that voting trust has developed with the development of economic and securities second-market. Voting trust, proxy, and voting agreement are all manners for shareholders to achieve control of the affairs of the company using voting right. They are similar to one another, but essentially different. Shareholders' voting right combined with the trust will have a great flexibility; Voting trust combined with different needs of corporation control market creates a variety of unique functions: Optimizing the corporate governance structure and safeguarding the interests of minority shareholders; resolving the company's financial crisis and protecting the interests of creditors; retaining control of companies; reducing corporate decision-making costs and improving management efficiency and performance of the company.Voting trust is the product of the integration of the Company Law and the Trust Law; it's setting up procedures are subject to the Trust Law and the Company Law. The effective elements of voting trust include: entering into a written voting trust agreement; legitimate purpose; registering; the statutory or agreed deadline. An effective voting trust displays its effectiveness in five areas, including the effect to shareholders, trustees, voting trust certificate holders, the third individual and the company. The major criteria for judging a voting trust valid is the legitimate purpose of its establishment in America. A voting trust which purpose is illegal is absolutely null and void. Voting trusts of some states provide a more substantive requirement that the basic purpose of the voting trust must be appropriate. If the voting trust violates anti-monopoly laws, encourages fraud or loots the company's assets, it shall be considered invalid.The voting trust involves shareholders, trustees, the other shareholders, the company and other mainstays by analyzing it from the point of legal relations. The both parties of voting trust are Commissioned shareholders and voting trustees; other shareholders and the company are the interested individuals to the voting trust. What is the object of voting trust, the shares or the voting right? This problem gives rise to a good deal of controversy. I believe the object of voting trust is shareholders' voting right according to the legal principles and practices. Commissioned shareholders, trustees and voting trust certificate holders have their own rights and obligations respectively, which constitute the legal relationship of the voting trust. Trustees' exercising of voting right is the key to achieving the function of voting trust, so trustees should follow some basic rules. If trustees exercise their rights to profit or to damage the interests of the beneficial owners, their rights will be restricted.China's joint-stock companies especially listed companies show the dual shares ownership structure. There are many design flaws in the corporate governance structure, for example, the damage to the interests of minority shareholders by major shareholders, the dominance of state-owned shares etc. The transplanting of voting trust can help to improve our company's shareholders voting system, regulate the behavior of shareholders, promote the healthy operation of the securities market, and realize the market-oriented operation of state-owned assets particularly. In short, voting trust has practical significance to improve the corporate governance structure of listed companies in China. We should adopt voting trust by appropriate legislation and plan for its localization through the specific design of the system and the legislative style.