On Voting Agreements

The right to vote is one of the most important rights of shareholders. Broadly speaking, voting agreements are agreements between shareholders or shareholders and other persons on how to vote. Voting agreements are one of the mechanisms of voting, which are based on company law and contract law. In practice, it's common to see shareholders to control the company through voting agreements. Because of its flexibility, voting agreements are widely used in countries like America, UK, and Germany etc. Voting agreements are stipulated in their laws. In China, there's no stipulation about voting agreements in Company Law and it's not much discussed among experts on company law. But there're shareholders entering into voting agreements in practice. If one of the parties disobeys the contract and sues before court, there will be no law to follow when judging such case. Following the practice in different countries and analysis of the mechanism itself, the article wants to give some suggestions on transplanting, or rather, building this mechanism in China to satisfy the practical needs of Chinese corporate governance.This article consists of three parts, which are preamble, the main body and conclusion. There're five sections in the main body.The first section is a general description of the voting agreement. Voting agreements have different meanings in different persons'views. This article takes the broad description, which is that voting agreements talks about agreements on how to vote. It not only exists in the contracts with the title"voting agreements", but also exists in shareholders agreements with some terms about agreements on how to vote. Then the way to function of the mechanism is talked as well as the different functions in public and private companies.The second section reviews the mechanism in different countries. It's interesting to see that nearly in every country this mechanism was forbidden in the earlier times and later is recognized. The problem focuses on that whether the right to vote can be the object of the contract. The right to vote is specific in that it is different from the personal right or property right. Although it has close relation with the shareholders, it can be seen as an object to meet the needs of the times. So I agree that the right to vote can be the object of the voting agreement.The third section distinguishes the mechanism from other similar mechanisms. Voting agreements have much similarity with voting proxy, voting trusts and cumulative voting. They functions similar but they have different legal systems. They can not take the place of the others. From another perspective, the law should provide as much possibility as it can to the private persons. So it's necessary to have different arrangements for shareholders to vote.The fourth section offers an explanation of voting agreements. It discusses the general rules about the voting agreements in different countries and brings up my own idea about this mechanism. It will talk about the general restriction of the law, how to enter into a valid voting agreement, how to deal with the voting agreement if the shares of one party are transferred to others, what kind of remedy will be used when and the effects on the decisions of the general meeting if one party disobeys. The fifth section explores paths for China to build this mechanism. The main problem to deal with in Chinese corporate governance is still the contradiction between controlling shareholders and minority shareholders.Voting agreements can provide the way to maintain the controlling of the company between majority shareholders and can provide the way to speak in general meetings for minority shareholders. In practice, there've been agreements like Agreements on Acting in Concert, Agreements on Arrangement of Voting etc. But there's no law to regulate them. So it's necessary to build this mechanism in China. Besides, since it's the combination of company law and contract law, there's on hindrance in building it into our law system. The last part of the section offers some suggestions on building this mechanism in China.