Closely held corporations are those in which a small group of shareholders control the operating and managerial policies of the corporation. Most, but not all, closely held corporations are also family businesses. Family businesses may be defined as those companies where the link between the family and the business has a mutual influence on company policy and on the interests and objectives of the family.
A voting trust is a device for combining the voting power of shareholders. It is not unlawful for shareholders to combine their voting stock for the election of directors so as to obtain or continue the control or management of a corporation. Some state laws limit the duration of voting trusts to a period of a certain number of years.
The Alabama Voting Trust of Shares in a Closely Held Corporation is a legal arrangement created to consolidate the voting power of shareholders in a closely held corporation for a specific purpose or period of time. It allows shareholders to pool their voting rights and appoint a trustee who will hold and exercise those rights on their behalf. In Alabama, there are two main types of voting trusts: Statutory Voting Trusts and Common Law Voting Trusts. 1. Statutory Voting Trusts: A Statutory Voting Trust is established according to the guidelines set forth in the Alabama Business Corporation Act. It involves the transfer of legal title of shares to the trustee, who then exercises the voting rights in accordance with the instructions given by the beneficial owners. 2. Common Law Voting Trusts: Common Law Voting Trusts, also known as Unincorporated Voting Trusts, are established through a contractual agreement between shareholders. The agreement specifies the transfer of shares to a trustee who will manage and vote them as per the terms agreed upon. The purpose of creating an Alabama Voting Trust may vary, but it often serves to streamline decision-making, enhance corporate governance, and provide stability in closely held corporations. Shareholders can entrust their shares to the voting trust, ensuring their voting rights are exercised collectively and in the best interest of the corporation. Upon the establishment of a voting trust, the trustee assumes the responsibility of voting the shares as directed by the beneficial owners. This trustee can be an individual, such as an attorney or a trusted business associate, or a corporate entity specifically appointed for this purpose. The trust agreement outlines the trustee's powers, responsibilities, term, and other relevant details. It is important to note that the Alabama Business Corporation Act imposes certain requirements and restrictions on voting trusts. These include the need for a written trust agreement, the obligation to produce annual trust reports, and restrictions on transfers of voting trust certificates. In summary, an Alabama Voting Trust of Shares in a Closely Held Corporation is a legal mechanism that consolidates voting power in a closely held corporation. It ensures a unified voting approach on behalf of the shareholders and promotes effective decision-making within the corporation. The two main types of voting trusts in Alabama are Statutory Voting Trusts and Common Law Voting Trusts.
