Voting Trust
Candlefocus EditorThe primary purpose of a voting trust is to ensure that shares are not bought or sold without the permission of the group of shareholders. This way, majority control can be retained. Voting trusts are often used when the shareholders do not want someone to acquire a majority of the stock, preventing hostile takeovers. It also helps if the shareholders have conflicting interests or priorities, since it reduces the possibility of them voting in different directions.
A voting trust also prevents shareholders from being able to sell or transfer their shares without the permission of the trust. This helps protect against future shareholders leaking company secrets or making decisions that aren't in the best interest of the company, since they are bound to vote with the trust.
The trustee chosen to lead the voting trust is typically experienced in corporate management and finance. They are responsible for voting the shares in the trust and making sure the vote aligns with what the shareholders have agreed on. The trustee typically serves for a set period of time, such as five years.
Creating a voting trust is often a complex process that requires the expertise of lawyers and financial advisors. Generally, the voting trust should be registered with the Securities and Exchange Commission, as well as the state in which the company operates. Once the trust has been established, it cannot be easily dissolved or changed, making it an effective tool for shareholders to maintain control of their company in the long term.
Overall, a voting trust offers a powerful solution for shareholders who want to protect their company from hostile takeovers and maintain control of the company. It also helps reduce uncertainty and conflict of interest among shareholders, so they can all make decisions that are in the best interest of the company.