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Voting trusts are often formed by company directors, but sometimes a group of shareholders will form one to exercise some control over the corporation. It can also be used to resolve conflicts of interest, increase shareholders' voting power, or ward off a hostile takeover.
A voting trust is a contract between shareholders in which their shares and voting rights are temporarily transferred to a trustee. A voting agreement is a contract in which shareholders agree to vote a certain way on specific issues without giving up their shares or voting rights.
For a proxy vote, it is a temporary arrangement for a one-time issue; whereas, for a voting trust, it gives the trustees increased power to make decisions on behalf of all shareholders to control the company, which differs from proxy voting in terms of how much power is allocated.
A voting trust certificate is a document used to give temporary voting control over a corporation to one or several individuals. It is issued to a shareholder and represents the normal rights of any other stockholder, such as receiving quarterly dividends in exchange for their common shares.
(1) The term ?security? means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, ...
A voting trust is simply a trust of stock which is created when participating stockholders execute a written trust agreement and, pursuant to the agreement, endorse and transfer their stock certificates and the legal title to their shares to a voting trustee.
A shareholder agrees to vote its voting shares generally or in favour of a specific proposal and against any contrary proposal. Voting agreements are commonly used in business combination transactions to assure the purchaser that significant shareholders will vote to approve the subject transaction.
While the proxy may be a temporary or one-time arrangement, often created for a specific vote, the voting trust is usually more permanent, intended to give a bloc of voters increased power as a group?or indeed, control of the company, which is not necessarily the case with proxy voting.