MBE Rules · Business Associations
Voting Agreements and Trusts
Cal. Corp. Code § 706
The rule
Written shareholder pooling agreements are specifically enforceable among the parties; voting trusts transfer legal title to a trustee, require filing with the corporation, and are limited in duration (10 years, extendable).
In plain English
Voting agreements allow shareholders to pool their votes and are enforceable as long as they are in writing. Voting trusts involve transferring the legal title of shares to a trustee for a specified duration, which must be filed with the corporation.
Worked example
Shareholders A, B, and C enter into a written agreement to vote together on corporate matters. When a dispute arises over the validity of their agreement, a court enforces it, recognizing the pooling of votes as valid. In contrast, Shareholder D creates a voting trust with Trustee E, transferring shares for a period of 10 years, which is properly filed with the corporation. The trust is upheld as valid and enforceable.
Memory hook
Pooling votes? Get it in writing; trust the trustee for a decade!
The trap
Exams may present scenarios where students confuse the requirements for voting agreements and voting trusts, especially regarding enforceability and filing requirements.
How examiners test it
Questions often test the distinctions between written shareholder agreements and voting trusts, focusing on their enforceability and procedural requirements.
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