Which statement best differentiates a voting trust agreement from a proxy?

• A. The representative acquires legal title to the shares to be voted
• B. The exercise of the right to vote is limited to a particular meeting
• C. The representative cannot vote if the stockholder is present during the meeting
• D. The agreement need not be recorded with the Securities and Exchange Commission

Answer: (A)

The key idea here is who holds legal title to the shares and who exercises the votes. In a voting trust, the stockholder transfers legal title to a trustee, who then votes the shares according to the trust agreement. The stockholder retains beneficial ownership and the economic benefits, but loses voting control for the duration of the trust. In contrast, a proxy keeps the stockholder as the legal owner with voting rights, and the stockholder merely delegates the authority to vote to someone else for a specified period or meeting.

That makes the statement about the representative acquiring legal title to the shares the best differentiator. The other options describe scenarios that can occur in various arrangements but do not capture the fundamental distinction between transferring legal title to a trustee in a voting trust versus retaining title and voting rights in a proxy.