Voting agreements also have some drawbacks compared to voting companies. In particular, because a voting agreement is a contract, there is less room for manoeuvre to exercise future margins of appreciation. For example, if the future is not clear, a confidence in the law may set general decision guidelines for an agent and allow the agent to make the final decision, whereas in a voting agreement, each party will likely make its own choice, which could nullify the objective of the agreement. The less clear or subjective the requirements of the agreement, the less likely it is that a court will actually enforce the agreement. Since voting agreements may be unlimited, a party that no longer wishes to be bound by a voting agreement may be permanently bound by the agreement. Management contracts are contracts entered into by shareholders on the management of the company. Management agreements can address a wide range of issues, including the approval or payment of dividends, the identity of the company`s directors or senior executives, and the powers of the board of directors. Management agreements are so powerful that they can even be used to completely eliminate the board of directors or to give a particular shareholder the power to manage the transaction. Due to the enormous effectiveness of management agreements, Section 7.32 of RMBCA severely limits the methods of developing a management agreement. Under the RMBCA, a shareholders` pact can be concluded in two ways: a voting agreement is an agreement between shareholders to choose their shares in a certain way. Instead of delegating voting power to a third party, as is the case with an agent, each shareholder commits, in a voting contract, to respect the agreement. If the contract is effectively executed, any party may sue for the practical performance of the contract if another party refuses to comply with the contract. If an action is successful, the court orders the parties to vote on the shares in accordance with the voting agreement.
Unlike proxy limited companies, voting agreements may apply for any length of time and should not be submitted to the company. Under Section 7.31 of the RMBCA, a voting agreement is valid if three conditions are met: an agent is best interpreted as a group of shareholders who agrees to delegate the voting rights of its shares to a third party known as the trustee of the voting trust. Voting Trusts are written agreements in which shareholders transfer their shares to a trust in exchange for interest on the trust`s income. Typically, a group of shareholders transfers their shares to the Trust in exchange for a share in the trust`s income, proportional to the number of shares in each transfer. As its interest in the trust is proportional to the interest of its shares, the financial share of each party (i.e. the amount each shareholder receives from dividends) remains unchanged. The agent is entitled to choose the shares and distribute the trust`s proceeds. Often, the agent also receives instructions on how to choose the trust`s shares.
For example, the agent may be responsible for «choosing the shares of the trust for the benefit of a member of the Smith family to become a director of the business if at least one member of the Smith family tries to become a director.» In general, the trust`s only proceeds are dividends paid to the shares. In accordance with Section 7.30 of the RMBCA, five elements must be put in place for an agent to be valid: the voting agreement is an agreement or a plan whereby two or more shareholders group their voting shares together for a common purpose. It is also known as the pooling arrangement. B. Unless the voting treaty is otherwise provided, a voting contract in this section is expressly enforceable.»