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The Reformation of the Voting and Control System

1. Introduction

The reformation of the voting and control system is a task that entails complex and accurate considerations, as well as a thorough assessment of the existing control system. The main purpose of the proposed reformation is to increase the stability of the control over companies and to protect the interests of investors.

At present, the system of voting and control in companies is based on the principle of one vote per share. This principle gives rise to a number of problems, the most important of which are:

– Divergence of interests between shareholders with a large number of shares and shareholders with a small number of shares;

– Lack of stability of control;

– Possibility of a hostile takeover.

In order to solve these problems, it is proposed to introduce an additional control element – diversification of control power. The role of the additional control element will be to ensure that the company is controlled by a group of shareholders with different interests. This will make it possible to avoid the situation when one shareholder controls the company and can make decisions that are not in the interests of other shareholders.

The financial difficulties that may arise in connection with the introduction of the additional control element will be discussed in more detail in section 3.

2. The additional control element

As already mentioned, the main purpose of the additional control element is to diversify control power. This will make it possible to avoid situations when one shareholder controls the company and can make decisions that are not in the interests of other shareholders. At present, such situations are quite common, especially in companies with a small number of shares outstanding.

The additional control element will also make it possible to avoid situations when a company is controlled by a minority shareholder. Such situations often lead to financial difficulties for the company, as the minority shareholder may refuse to invest in the company or may even sell his shares at a lower price than their market value.

3. Financial difficulties

As already mentioned, one of the main disadvantages of the existing voting and control system is that it makes it possible for a minority shareholder to control the company. This often leads to financial difficulties for the company, as the minority shareholder may refuse to invest in the company or may even sell his shares at a lower price than their market value.

In order to avoid such situations, it is proposed that companies with less than a half votes in an entity will not be controlled effectively, or it may get under the control of shareholders who have lesser amounts of shares but together hold more than 50% per entity. In this case, it will be necessary to introduce some restrictions on the sale or transfer of shares. Such restrictions may include:
1) A minimum holding period; 2) A maximum number of shares that can be sold or transferred; 3) A requirement for prior approval from shareholders; 4) A right of first refusal for other shareholders; 5) A restriction on voting rights; 6) A restriction on dividends; 7) A restriction on share capital increase; 8) Other restrictions that may be imposed by law or by the articles of association. All these restrictions will make it more difficult for a minority shareholder to sell his shares and will therefore protect the interests of other shareholders.

4. Conclusion

The reformation of the voting and control system is a task that entails complex and accurate considerations, as well as a thorough assessment of the existing control system. In order to assess the feasibility of the proposed reformation, it is necessary to carry out a thorough analysis of the pros and cons of the existing system and of the proposed changes.

FAQ

The reformers were motivated to seek a change in the voting and control system because they felt that it was unfair and needed to be updated.

They went about changing the system by proposing new laws and working with the government to implement them. Some of the obstacles they faced were resistance from people who didn't want to change, and lack of support from the government.

The results of their efforts were mixed; some changes were made, but not all of their goals were met.

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