A voting trust is a type of trust used when shareholders in a corporation want to transfer stock and voting rights to certain individuals for a specific period of time. These individuals are voting trustees and have power over the stocks contained in the trust.

Stockholders use a voting trust for convenience when one or more of the stockholders is unavailable or as a way to consolidate the position of a group of shareholders. It’s also a good option to help prevent a hostile takeover. Most countries require a corporation contemplating a takeover, or raider, to file documents when they have ownership of a certain percentage of a company. At that point, shareholders often form a voting trust to allow the trustee to keep the raider at bay and often enter into an agreement to purchase the shares held by the raider by the shareholders in the voting trust. Use a voting trust to:

1. Transfer stock and voting rights to a trustee for a short period.

2. Make voting and decision-making more convenient through a voting trust.

3. Fight a hostile takeover by another party.

Action Steps
The best contacts and resources to help you get it done

Find voting trust information from specialists in voting trusts

Using trusts for short-term answers to immediate decision making needs means getting the right advice about how and when to put them in place. Each stockowner in a voting trust is a shareholder of an S corporation, so proper formation is crucial to proper voting trust management.

I recommend: Paul, Hastings, Janofsky & Walker LLP is a Los Angeles based law firm with a large national and global presence and a large estate planning division. Fulbright & Jaworski is also an international firm with a trusted estate planning practice.

Create voting trust documents with the right online tools and advice

There are few voting trust requirements, but they do need to be in writing, give the right to vote stock to one or more trustees and guarantee that all distributions must benefit all owners. Simple online forms help companies create voting trusts for their stockholders.

I recommend: Both Megadox.com and USLegal have online forms and documents available for voting trust formation.

Work with voting trust experts for voting trust advice in your state

Each state has its own laws governing the terms of a voting trust. State law dictates how voting trusts function and for how long a voting trust is in effect. Using a qualified voting trust expert guarantees the terms of the voting trust meet all state requirements.

I recommend: Lawyers.com provides access to lawyers in your state who handle voting trusts. For names of attorneys in your area, type your city and state as well as the words "Voting Trust" in the lawyer area of law field. NOLO provides the same type of service by clicking on your county and state or zip code and "Wills, Trusts and Estates" in the legal issues field.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Shareholders in a voting trust can trade their shares for voting trust certificates that have the same value of their shares but are securities separate from their stock that represent their right of ownership to the stock. Use these carefully since a voting trust certificate may or may not have the same value as the selling price of the stock and can cause problems in the management of the voting trust.