A Research On Voting Trust Legal System

Voting Trust essentially means the shareholders transfer their stock to trustees, who thus get and exercise the power to vote the shares in trust by virtue of his legal ownership, in return for trust certificates, which are freely transferable subject to the trust. Although this subject stirs much theoretical debates, it has acquired increasing importance on account of recent events in the current economy and society. This dissertation mainly analyzes the necessity of the establishment of Voting Trust and the theoretical conflicts and balance on the transplantation of Voting Trust within China’s legal system.This dissertation consists of four main parts:In the first part, the dissertation introduces the proposition of the separation of corporate ownership and management in public corporations, which means that the shareholders cannot control the company’s affairs, and shareholder voting as a controlling device is ineffective. After analyzing the validity of the corporate ownership structure, we can further conclude that one or more shareholders have capacity of controlling the company’s affairs. The voting right is just the link between corporate ownership and management. However, many shareholders encounter difficulties to exercise their voting right. Voting Trust, as one of the means to get corporate control, is widely used to help shareholders to exercise their voting right.The second part traces back the historical development of Voting Trust legal system, particularly its development in the United States.The third chapter addresses the functions of the Voting Trust legal system. In the game of controlling power seeking, Voting Trust acts as an effective control device, which enables the controlling shareholders to provide for the continuity of management and meanwhile the senior managers to prevent against the hostile take-over in order to maintain and strengthen their status. Voting Trust also provides opportunities for the minority shareholders to anti-control those present controllers and creditors to secure debt capital, thus contributing to a balanced structure inside the corporation.The fourth part of this paper is about the theoretical conflicts and balance on the transplantation of Voting Trust legal system. Firstly, it has always been controversial that whether the object of Voting Trust is the ownership of share or the voting right. The author agrees with the opinion that the ownership of share is the object of Voting Trust, which conforms to the regulation of the Trust Law. Secondly, by making comparisons between Voting Trust and other similar systems, the dissertation concludes that there is no full and effective substitute for Voting Trust. Thirdly, along with the expansion and even abuse of controlling power into the outside market, Voting Trust may bring about the structural imbalance there, which means monopoly. As long as Voting Trust performs uniquely useful and desirable functions in the law of corporate control, concerns should focus not only on a conceptual rationalization of the device itself, but also on control of its abuse. We should promote the application of anti-monopoly law to prevent and regulate any possible misuse. Only in this way can we maximize the effectiveness and minimize the side effects of Voting Trust.