Voting Trust - Purposes

Purposes

There are several reasons why shareholders may wish to put a voting trust arrangement in place.

• Several shareholders may wish to create a unified block of votes, which together gives them more power than the collective sum of their fragmented interests.
• In many countries, in order to call general meetings, shareholders need to hold a certain percentage of the issued shares of the company. By aggregating their shares, the shareholders can confer this power on themselves collectively where they might not have it individually.
• Locking shares up in voting trusts can in some countries help deter a hostile takeover.
• Voting trusts are also sometimes used to resolve conflicts of interest. By putting the shares in a trustee who can vote them at arm's-length from the beneficiary(ies) of the trust, this can in some circumstances mitigate or absolve the original shareholder from what might otherwise constitute a conflict of interest (although in practice, to resolve conflicts of interest the trust will ordinarily be "blind trust"; while all blind trusts are necessarily voting trusts, not all voting trusts are blind trusts).
• Shares are sometimes aggregated into a voting trust to facilitate a corporate reorganisation.
• Promoters of companies sometimes aggregate their shares in a voting trust to safeguard control of the company.