Voting trust agreements have been used in rail roads, industrial hnd banking enterprises. Fre quently they are used as part of a reorganization plan. The stockholders surrender their stock to trustees who really represent the bondholders and insure a capable and stable management. The trust agree ment. when created for such a purpose, is likely to be continued till the new securities of the reorganized company have been placed on a fairly stable income basis.
Thys, it has been provided that the voting trust should, at the latest, he terminated whenever (often after a five-year period or other term) the general mortgage bonds had re ceived four per cent for two years (Central New England) ; when the first preferred stock had received four per cent for three years (Colorado and Southern), or for two years (St. Louis and San Francisco); when the preferred stock had received four per cent for two years (Mexican National) or fiVC per cent for three years (Northwestern Elevated) ; or, for an extreme case, when both classes of stock had re ceived five per cent for five consecutive years (Omaha Water ).1 • 13. Trusts within trusts.—Often the purpose of a voting trust seems to be to continue in the adminis tration of the company certain well informed per sons whose advice might be lost film some change in the ownership of a large block of stock. This was true in the case of the International Harvester Com pany's voting trust agreement.' In other cases the trust is used to avoid some provisions of local law. Thus by the agreement of Aug,ust .19, 1896, prac tically all of the stock of the Oregon Railroad and Navigation Companies was deposited with the Cen tral Trust Company of New York and provision was made that the certificates of beneficial interest issued by that trust company might be deposited with the Old Colony Trust Company of Boston or the Deutsche Treuhand-Gesellschaft of Berlin in ex change for certificates of beneficial interest issued by those institutions.
14. Voting trusts and the railroads.—Cushing has shown that voting trusts have been used in almost all the large American railroads at some time in aid of soine piece of financing. The following account of
the use of the voting truA under the direction of a Federal Court, illustrates another application of this device: In accordance with the decree, of October 17, 1914, of the United States District Court for the Southern District of New York, dissolving the New Haven system, three sets of voting trustees were created, each consisting of five mem bers, who also were made "officers of this court for the pur pose of carrying this decree into effect." To ex-Judge Walter C. Noyes and associates was transferred the entire capital stock of the Connecticut Company, then owned by the Nevr England Navigation Company; to Rathbone Gard ner and associates were transferred the entire capital stock of the Rhode Island Company, owned by the New Haven itself, and certain shares and bonds, owned by- the New Eng land Navigation Company, of the Providence and Danielson Railway Company and of the Sea View Railroad Company: and ex-Judge Marcus P. Knowlton and associates took title both to certain shares, then owned by the New Haven, of sixteen companies leased to the Boston and Maine Railroad Company, and also to the entire common stock and all but about 9.8,000 shares of the preferred stock of the Boston Railroad Holding Company, which in turn owned the con trolling Stock interest in the Boston and Maine Railroad Company. The trustees in each instance have all the rights of owners, for varying terms which may extend over a period of about five years; subject only to certain directions as to the ultimate sale of the securities held by them, and subject also to detailed provisions of the decree and further orders of the court. They are furthermore authorized to issue, with respect to the property held by them, negotiable certifi cates of beneficial interest therein. In no other instance has there been an establishment, in a single transaction, of voting trusts of such significance.