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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
In order to distinguish a voting trust agreement from proxies, it must pass three criteria or tests, namely: (1) that the voting rights of the stock are separated from the other attributes of ownership; (2) that the voting rights granted are intended to be irrevocable for a definite period of time; and (3) that the principal purpose of the grant of voting rights is to acquire voting control of the corporation. Ramon C. Lee et. al. v. Court of Appeals et. al. (G.R. No. 93695 February 4, 1992)
The law says –
Section 57. Manner of Voting; Proxies. – Stockholders and members may vote in person or proxy in all meetings of stockholders or members
When so authorized in the bylaws or by a majority of the board of directors, the stockholders or members of corporations may also vote through remote communication or in absentia: Provided, That the votes are received before the corporation finishes the tally of votes.
A stockholder or member who participates through remote communication or in absentia shall be deemed present for purposes of quorum.
The corporation shall establish the appropriate requirements and procedures for voting through remote communication and in absentia, taking into account the company’s scale, number of shareholders or members, structure and other factors consistent with the basic right of corporate suffrage.
Proxies shall be in writing, signed and filed, by the stockholder or member, in any form authorized in the bylaws and received by the corporate secretary within a reasonable time before the scheduled meeting. Unless otherwise provided in the proxy form, it shall be valid only for the meeting for which it is intended. No proxy shall be valid and effective for a period longer than five (5) years at any one time.
Section 58. Voting Trusts. – One or more stockholders of stock corporation may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote and other rights pertaining to the shares for a period not exceeding five (5) years at any time: Provided, That in the case of a voting trust specially required as a condition in a loan agreement, said voting trust may be for a period exceeding five (5) years but shall automatically expire upon full payment of the load. A voting trust agreement must be in writing and notarized, and shall specify the terms and conditions thereof.
A certified copy of such agreement shall be filed with the corporation and with the Commission; otherwise, the agreement is ineffective and uneforceable. The certificate or certificates of stock covered by the voting trust agreement shall be cancelled and new ones shall be issued pursuant to said agreement. The books of the corporation shall state that the transfer in the name of the trustee or trustees is made pursuant to the voting trust agreement.
The trustee or trustees shall execute and deliver to the transferors, voting trust certificates, which shall be transferable in the same manner and with the same effect as certificates of stock.
The voting trust agreement filed with the corporation shall be subject to examination by any stockholder of the corporation in the same manner as any other corporate book or record: Provided, That both the trustor and the trustee or trustees may exercise the right of inspection of all corporate books and records in accordance with the provisions of this Code.
Any other stockholder may transfer the shares to the same trustee or trustees upon the term and conditions stated in the voting trust agreement, and thereupon shall be bound by all the provisions of said agreement.
No voting trust agreement shall be entered into for purposes of circumventing the laws against anti-competitive agreements, abuse of dominant position, anti-competitive mergers and acquisitions, violation of nationality and capital requirements, or for the perpetuation of fraud.
Unless expressly renewed, all rights granted in a voting trust agreement shall automatically expire at the end of the agreed period. The voting trust certificates as well as the certificate of stock in the name of the trustees shall thereby be deemed cancelled and new certificates of stock shall be reissued in the name of the trustors.
The voting trustee or trustees may vote by proxy or in any manner authorized under the bylaws unless the agreement provides otherwise.
Jurisprudence says –
By its very nature, a voting trust agreement results in the separation of the voting rights of a stockholder from his other rights such as the right to receive dividends, the right to inspect the books of the corporation, the right to sell certain interests in the assets of the corporation and other rights to which a stockholder may be entitled until the liquidation of the corporation. However, in order to distinguish a voting trust agreement from proxies and other voting pools and agreements, it must pass three criteria or tests, namely: (1) that the voting rights of the stock are separated from the other attributes of ownership; (2) that the voting rights granted are intended to be irrevocable for a definite period of time; and (3) that the principal purpose of the grant of voting rights is to acquire voting control of the corporation. (5 Fletcher, Cyclopedia of the Law on Private Corporations, section 2075 [1976] p. 331 citing Tankersly v. Albright, 374 F. Supp. 538)
A voting trust agreement may confer upon a trustee not only the stockholder’s voting rights but also other rights pertaining to his shares as long as the voting trust agreement is not entered “for the purpose of circumventing the law against monopolies and illegal combinations in restraint of trade or used for purposes of fraud.” (section 59, 5th paragraph of the Corporation Code) Thus, the traditional concept of a voting trust agreement primarily intended to single out a stockholder’s right to vote from his other rights as such and made irrevocable for a limited duration may in practice become a legal device whereby a transfer of the stockholder’s shares is effected subject to the specific provision of the voting trust agreement.
The execution of a voting trust agreement, therefore, may create a dichotomy between the equitable or beneficial ownership of the corporate shares of a stockholders, on the one hand, and the legal title thereto on the other hand.
The law simply provides that a voting trust agreement is an agreement in writing whereby one or more stockholders of a corporation consent to transfer his or their shares to a trustee in order to vest in the latter voting or other rights pertaining to said shares for a period not exceeding five years upon the fulfillment of statutory conditions and such other terms and conditions specified in the agreement. The five year-period may be extended in cases where the voting trust is executed pursuant to a loan agreement whereby the period is made contingent upon full payment of the loan.
RAMON C. LEE and ANTONIO DM. LACDAO vs. THE HON. COURT OF APPEALS, SACOBA MANUFACTURING CORP., PABLO GONZALES, JR. and THOMAS GONZALES (G.R. No. 93695 February 4, 1992)
Read also: VOTING BY PROXY
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