Yes, the agreement was an illegal voting trust. The law has very clear rules for creating a 'voting trust,' which is when shareholders hand over their voting power to a trustee. A key rule is that the agreement must be filed with the company so everyone knows who really has voting control. The court found that this 'Agents' Agreement' did exactly what a voting trust does: it separated voting power from stock ownership and gave that power to the Agents for 10 years to control the company. It doesn't matter what they called it ('Agents' Agreement') or that they didn't officially transfer the stock's title. Because it acted like a voting trust but was kept secret and didn't follow the rules, the deal was illegal and void.

No, the shareholders' agreement is not okay. It's like a secret voting trust, which is against the law. The agreement takes away the normal rights that come with owning shares and gives the power to vote to a small group (the agents). It's supposed to last a long time and control the company. That's what a voting trust does, but they didn't follow the rules to make one properly. They needed to write down who has the power and let everyone see it, but they didn't. The agreement also tries to control the directors too much, which isn't allowed.

A court "cannot give legal sanction to agreements which have the effect of removing from directors in a very substantial way their duty to use their own best judgment on management matters."

A review of the Delaware decisions upon the subject of voting trusts shows that our courts have indicated that one essential feature that characterizes a voting trust is the separation of the voting rights of the stock from the other attributes of ownership

—six often stockholders set up agreement with eight of fifteen directors to control board of directors

The Delayed Redemption Provision "tends to limit in a substantial way the freedom of [newly elected] directors' decisions on matters of management policy

Delaware law "does not permit actions or agreements by stockholders which would take all power from the board to handle matters of substantial management policy."

In 1955 the Delaware Chancery Court struck down a "sterilizing" shareholders' agreement but intimated that less intrusive agreements with unanimous shareholder approval might be enforced

—voting agreement construed in effect as a voting trust which was void for failing to comply with statute

It is noteworthy, in this connection, that in Abercrombie, this Court distinguished between purpose and motive, stating that it considered only purpose to be material

The courts generally recognize three criteria for a voting trust:(1) The voting rights of the stock must be separate from other attributes of ownership;(2) the voting rights must be intended to be irrevocable for a definite period of time; and (3) the principal purpose of the grant of voting rights must be to acquire voting control of the corporation.

A group of shareholders together holding a voting majority agreed that eight designated agents would vote their shares under proxies granted for 10 years.

Yes, the stockholder agreement constitutes an illegal voting trust. A stockholders' agreement that is so drawn as to occupy the field reserved for a statutory voting trust is illegal if it does not comply with the statute. The court determines the legal effect of an agreement from its provisions, not the parties' stated intent. The essential features of a voting trust are: (1) the separation of the voting rights of the stock from the other attributes of ownership; (2) the transfer of those voting rights to fiduciaries (trustees); (3) the granting of voting rights for a definite period; and (4) the principal object of acquiring voting control. The Agents' Agreement contains all these elements, as it divorces voting rights from ownership and transfers them to the Agents via irrevocable proxies for ten years with the purpose of controlling the corporation. The failure to formally transfer title on the corporate books or calling the fiduciaries 'Agents' instead of 'Trustees' are superficial distinctions that do not change the substantive nature of the arrangement. This agreement created a secret voting trust, circumventing the statutory requirements of filing a copy with the corporation and transferring the shares on the books, which are designed to ensure transparency for all stockholders. The agreement is therefore void.

No. The Agents' Agreement is void as an illegal voting trust because it fails to comply with the statutory requirements for voting trusts. The agreement separates the stock's voting rights from its other ownership attributes, transfers the voting rights to fiduciaries (the Agents) for a fixed period (ten years), and aims to achieve voting control of American. These are the defining features of a voting trust under Delaware law. The parties' subjective intent to avoid creating a voting trust is immaterial if the agreement effectively does so. By not transferring the shares on the corporate books and filing a copy of the agreement at the corporation's registered office, the agreement creates a secret voting trust, which the statute forbids. Upholding this agreement would enable stockholders to circumvent the statutory voting trust requirements through creative drafting. Moreover, the provisions that substantially restrict the directors' independent decision-making discretion are legally impermissible.

Abercrombie v. Davies

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