| Peer-Reviewed

The Impact of Voting Trust System on Corporate World and Its Significance for China & Its Economy

Received: 18 July 2020     Accepted: 12 August 2020     Published: 19 August 2020
Views:       Downloads:
Abstract

Shareholder voting trusts have had a huge impact on the world as an important device for the protection of shareholders and corporations alike. However, this instrument is missing in the corporate sector of China – one of the world’s leading economies. In Part 1, this paper looks at the history of voting trust systems and the path toward legality. Historically, voting trusts were challenged by corporations and majority shareholders before the Court realized the public benefits of shareholder trust agreements. Part 2 uses examples of voting trust systems in other countries to demonstrate its necessity for the well-being of China’s corporate system. On the one hand, voting trusts are required for the protection and faith of shareholders and their participation in the market. One of the biggest threats to public participation in investment is lack of protection for minority shareholders. On the other hand, as a corporate safeguard, voting trusts provide an avenue for minority shareholder voices to be heard and prevent corporate dissolution resulting from majority shareholder activism or hostile takeover. Consequently, for China to reach its ultimate goal of becoming the world’s largest economy and “Made in China 2025,” establishment of a voting trust system within the Chinese corporate sector is essential.

Published in International Journal of Business and Economics Research (Volume 9, Issue 4)
DOI 10.11648/j.ijber.20200904.25
Page(s) 282-287
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Voting Trust, Minority Shareholders Rights, Corporate Law, Chinese Economy

References
[1] Leroy Horton, “Voting Trusts in Corporations”, CORNELL, Historical Theses and Dissertations Collection, Paper 357, (1896) available at https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=1343&context=historical_theses.
[2] Wanda Bartos, “Uses of The Voting Trust” 34: 2 N.Y. U. L. REV., 290-303 (1959) available at https://heinonline.org/HOL/Page?public=true&handle=hein.journals/nylr34&div=25&start_page=290&collection=journals&set_as_cursor=4&men_tab=srchresults
[3] Arthur Stone Dewing, Financial Policy of Corporations (3) (1934) available at https://heinonline.org/HOL/Page?public=true&handle=hein.beal/fnlpcor0001&div=21&start_page=386&collection=beal&set_as_cursor=2&men_tab=srchresults
[4] Marshall Hargrave, “Statutory Voting”, Investopedia (Aug. 29, 2019) available at https://www.investopedia.com/terms/s/statutoryvoting.asp.
[5] James Chen, “Cumulative Voting”, Investopedia (Apr. 30, 2019) available at https://www.investopedia.com/terms/c/cumulativevoting.asp.
[6] Will Kenton, “Proxy Vote”, Investopedia (Jun. 27, 2018) available at https://www.investopedia.com/terms/p/proxy-vote.asp.
[7] “Quotation Southern Railway Voting Trust Extension Circular”, 393 n. (h).
[8] English v. Rosenkrantz, 152 Ga. 726, 111 S. E. 198 (1922) available at https://heinonline.org/HOL/CaseLaw?1=1&native_id=7844103&cop=1&collection=journals.
[9] Morel v. Hoge, 130 Ga. 625, 61 S. E 487 (1908) available at https://heinonline.org/HOL/CaseLaw?1=1&native_id=7552335&cop=1&collection=journals.
[10] Luthy v. Ream, 270 III.170, 110 N. E 375 (1915) available at https://heinonline.org/HOL/CaseLaw?1=1&native_id=9502830&cop=1&collection=journals.
[11] Mackin V. Nickollet Hotel, Inc., 25 F.2d 783 (8th cir.), cert denied 278 U.S 618 (1928).
[12] V. Kentucky Ref. Co., 144 Ky. 264, 138 S. W. 264 (1911).
[13] Bowditch v. Jackson Co., 76 N. H.351, 360, 82 Atl. 1014, 1019 (1912).
[14] Boyer v. Nesbitt, 227 P. A. 398, 76 Atl. 103 (1910).
[15] Milton M. Bergerman, “Voting Trust and Non-Voting Stock” YALE L. J. 445, 454 available at https://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=3268&context=ylj.
[16] Smith v. San Francisco & N. P. Ry., 115 Cal. 584, 47 PAC 582 (1897).
[17] Henry. W. Ballantine, “Voting Trusts, Their Abuses and Regulation,” 21 TAX L. REV. 139, 153 (1942) available at https://heinonline.org/HOL/Page?handle=hein.journals/tlr21&page=139&collection=journals.
[18] Robert W. Miller, "Voting Trusts." 4: 9 INDIANA L. J. 600, 600-07, (June 1929) available at Hein Online, https://heinonline.org/HOL/P?h=hein.journals/indana4&i=612.
[19] Carl Martin Ross, “Comparative Note on Shareholders Voting Agreement”, 15 SCANDINAVIAN STUDIES IN LAW, 163-190 (1971) available at https://heinonline.org/HOL/Page?handle=hein.intyb/svnsl0015&id=163&collection=intyb&index=.
[20] Corporation Code of The Philippines, Sec 59.
[21] “Trust-Type Rights Plan”, Trust Companies Association of Japan (2020) available at https://www.shintaku-kyokai.or.jp/en/trusts/trusts03_14_10.html.
[22] Erika Johansen, “Voting Trust VS. Voting Proxy”, ZACKS (accessed 19 Feb. 2019) available at https://finance.zacks.com/voting-trust-vs-voting-proxy-7370.html.
[23] Voting Trust and Holding Companies”, 3: 3 YALE L. J. 109-123 (1904) available at https://www.jstor.org/stable/783089?Search=yes&resultItemClick=true&searchText=corporation&searchText=voting&searchText=trust&searchText=revocation&searchUri=%2Faction%2FdoBasicSearch%3FQuery%3Dcorporation%2Bvoting%2Btrust%2Brevocation&ab_segments=0%2Fbasic_SYC-4341%2Fcontrol&refreqid=search%3Aa394d99e2235fcd69db1de73f026a10e&seq=1#metadata_info_tab_contents.
[24] Article 4, Company Law of China available at http://lawinfochina.com/display.aspx?id=e797dd968c30e172bdfb&lib=law.
[25] Graham Topa & Amy Marcen Gaudaur, “Voting Trusts: Think Ahead”, MONDAQ (Mar. 13, 2017) available at http://www.mondaq.com/canada/x/576308/Corporate+Commercial+Law/Voting+Trusts+Think+Ahead.
[26] Nick Leung, “China Brief: The State of the Economy”, MCKINSEY & CO. (Mar. 2019), available at https://www.mckinsey.com/featured-insights/china/china-brief-the-state-of-the-economy.
[27] Jonathan Woetzel, et al., China and the World, MCKINSEY GLOBAL INST. (2019) available at https://www.mckinsey.com/~/media/mckinsey/featured%20insights/china/china%20and%20the%20world%20inside%20the%20dynamics%20of%20a%20changing%20relationship/mgi-china-and-the-world-full-report-june-2019-vf.ashx.
[28] Wayne M. Morrison, “The Made in China 2025 Initiative: Economic Implications for the United States”, CONG. RES. SERV., Paper No. IF10964 (2019) available at https://fas.org/sgp/crs/row/IF10964.pdf.
[29] Kimberly Amadeo, “China’s Economic Growth, Its Causes, Pros, Cons and Future” (2019) available at https://www.thebalance.com/china-s-economic-growth-cause-pros-cons-future-3305478.
[30] China Business: Protecting Your Corporate Rights as a Shareholders (2019) available at https://www.thesquare.blog/2019/08/06/china-business-protecting-your-corporate-rights-as-a-shareholder/.
Cite This Article
  • APA Style

    Ali Raza Ansari, Alexandra Jane Davis, Kashif Imran Zadi. (2020). The Impact of Voting Trust System on Corporate World and Its Significance for China & Its Economy. International Journal of Business and Economics Research, 9(4), 282-287. https://doi.org/10.11648/j.ijber.20200904.25

    Copy | Download

    ACS Style

    Ali Raza Ansari; Alexandra Jane Davis; Kashif Imran Zadi. The Impact of Voting Trust System on Corporate World and Its Significance for China & Its Economy. Int. J. Bus. Econ. Res. 2020, 9(4), 282-287. doi: 10.11648/j.ijber.20200904.25

    Copy | Download

    AMA Style

    Ali Raza Ansari, Alexandra Jane Davis, Kashif Imran Zadi. The Impact of Voting Trust System on Corporate World and Its Significance for China & Its Economy. Int J Bus Econ Res. 2020;9(4):282-287. doi: 10.11648/j.ijber.20200904.25

    Copy | Download

  • @article{10.11648/j.ijber.20200904.25,
      author = {Ali Raza Ansari and Alexandra Jane Davis and Kashif Imran Zadi},
      title = {The Impact of Voting Trust System on Corporate World and Its Significance for China & Its Economy},
      journal = {International Journal of Business and Economics Research},
      volume = {9},
      number = {4},
      pages = {282-287},
      doi = {10.11648/j.ijber.20200904.25},
      url = {https://doi.org/10.11648/j.ijber.20200904.25},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20200904.25},
      abstract = {Shareholder voting trusts have had a huge impact on the world as an important device for the protection of shareholders and corporations alike. However, this instrument is missing in the corporate sector of China – one of the world’s leading economies. In Part 1, this paper looks at the history of voting trust systems and the path toward legality. Historically, voting trusts were challenged by corporations and majority shareholders before the Court realized the public benefits of shareholder trust agreements. Part 2 uses examples of voting trust systems in other countries to demonstrate its necessity for the well-being of China’s corporate system. On the one hand, voting trusts are required for the protection and faith of shareholders and their participation in the market. One of the biggest threats to public participation in investment is lack of protection for minority shareholders. On the other hand, as a corporate safeguard, voting trusts provide an avenue for minority shareholder voices to be heard and prevent corporate dissolution resulting from majority shareholder activism or hostile takeover. Consequently, for China to reach its ultimate goal of becoming the world’s largest economy and “Made in China 2025,” establishment of a voting trust system within the Chinese corporate sector is essential.},
     year = {2020}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - The Impact of Voting Trust System on Corporate World and Its Significance for China & Its Economy
    AU  - Ali Raza Ansari
    AU  - Alexandra Jane Davis
    AU  - Kashif Imran Zadi
    Y1  - 2020/08/19
    PY  - 2020
    N1  - https://doi.org/10.11648/j.ijber.20200904.25
    DO  - 10.11648/j.ijber.20200904.25
    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
    JO  - International Journal of Business and Economics Research
    SP  - 282
    EP  - 287
    PB  - Science Publishing Group
    SN  - 2328-756X
    UR  - https://doi.org/10.11648/j.ijber.20200904.25
    AB  - Shareholder voting trusts have had a huge impact on the world as an important device for the protection of shareholders and corporations alike. However, this instrument is missing in the corporate sector of China – one of the world’s leading economies. In Part 1, this paper looks at the history of voting trust systems and the path toward legality. Historically, voting trusts were challenged by corporations and majority shareholders before the Court realized the public benefits of shareholder trust agreements. Part 2 uses examples of voting trust systems in other countries to demonstrate its necessity for the well-being of China’s corporate system. On the one hand, voting trusts are required for the protection and faith of shareholders and their participation in the market. One of the biggest threats to public participation in investment is lack of protection for minority shareholders. On the other hand, as a corporate safeguard, voting trusts provide an avenue for minority shareholder voices to be heard and prevent corporate dissolution resulting from majority shareholder activism or hostile takeover. Consequently, for China to reach its ultimate goal of becoming the world’s largest economy and “Made in China 2025,” establishment of a voting trust system within the Chinese corporate sector is essential.
    VL  - 9
    IS  - 4
    ER  - 

    Copy | Download

Author Information
  • Guanghua Law School, Zhejiang University, Hangzhou, China

  • Guanghua Law School, Zhejiang University, Hangzhou, China

  • Guanghua Law School, Zhejiang University, Hangzhou, China

  • Sections