Voting trusts were popularized in Delaware corporate law, but they have since been widely used by other states in the United States. They have also been widely adopted in offshore jurisdictions. There are several reasons for the existence of voting trust agreements. These include: The transfer of shares also gives trustees the power to vote on certain critical decisions that help the company regain profitabilityResy and loss (P&L) survey An income statement (P&L) or income statement or statement of operations is a financial report that contains a summary of it. A voting trust certificate is a document issued to a shareholder in exchange for the transfer of shares by the shareholder to one or more persons designated as trustees. By accepting this certificate, the shareholder agrees to temporarily transfer control of his or her rights and powers to a voting trustee in order to make decisions about the corporation without interference. The voting trust certificate exists for the voting trust period, after which the shares are returned to the fair owners. When a company faces financial difficulties, it can be subject to a tax-free reorganizationTo be considered a tax-free reorganization, a transaction must meet certain requirements that vary considerably depending on the form of the transaction. to help them restructure their business and restore viability. By transferring their shares to a group of trustees or creditors, shareholders express confidence in the trustees` ability to effectively resolve the issues that caused the financial problems. Voting trusts can be used to obtain a majority block by combining the voting power of several minority shareholders. It can also be used by minority shareholders to increase the power of their representation. Sometimes, the voting trust can be an instrument of oppression, where a majority shareholder convinces other minority shareholders to grant them the power of their votes (usually shareholders who are not involved in the company or who are very interested, such as children or grandchildren who inherited their shares in the company) and then uses that power to vote their shares against their best interests.
However, if the trust agreement gives the trustee unbridled discretion over voting rights, the trustee is still a trustee and owes fiduciary duties to the cheap owner, presumably including the obligation to vote on the shares in the best interests of the fair owner and not to personally enjoy voting power….