## Facts

- American Independent Oil Company, a Delaware corporation, was formed by eleven investors to develop an oil concession; ownership was dispersed, with no single majority holder.
- Phillips Petroleum Company held the largest block (about one-third of the shares), creating concern among other investors that Phillips could obtain voting control.
- In 1950, a coalition of stockholders holding more than half of the shares entered into an “Agents’ Agreement” to obtain and maintain voting control and to prevent Phillips from gaining control.
- The agreement required participating stockholders to deposit their shares in escrow with a bank.
- For a ten-year term, the agreement granted eight designated “agents” irrevocable authority to vote the escrowed shares; at least seven agents had to agree on voting decisions.
- The agreement attached a voting-trust form that mirrored the same control arrangement, differing mainly by adding statutory mechanics associated with a formal voting trust (e.g., registration in trustees’ names and voting-trust certificates).
- The coalition exercised control for several years, but shifting board allegiances threatened that control, prompting litigation.
- Plaintiffs (Abercrombie, Phillips, and Sunray) sued in the Delaware Court of Chancery seeking a declaration that the Agents’ Agreement was an unlawful voting trust and an injunction against its operation.

## Issues

1. Whether the Agents’ Agreement functioned as a “voting trust” under Delaware law despite being labeled an agency arrangement.
2. If it was a voting trust, whether it was invalid for failure to comply with statutory voting-trust requirements (including transfer/registration formalities and issuance of voting-trust certificates).
3. How to distinguish permissible shareholder voting agreements from arrangements that must comply with the voting-trust statute.

## Decision

- The Delaware Supreme Court reversed the Court of Chancery’s denial of plaintiffs’ summary judgment motion.
- The court held the Agents’ Agreement was, in substance, a voting trust.
- Because the arrangement did not comply with Delaware’s voting-trust statute’s required formalities, the court held it invalid and directed that it be declared unlawful.
- The case was remanded for entry of relief consistent with the holding.

## Legal Principles

- Courts classify shareholder voting-control arrangements by their practical operation, not their labels; substance controls over form.
- An agreement that centralizes voting power in selected individuals for a definite term, separating voting rights from other incidents of ownership as a control device, is treated as a voting trust.
- Voting trusts are permitted only if statutory safeguards are satisfied; parties may not create a de facto voting trust that bypasses statutory transparency and procedural requirements.
- Shareholder agreements to vote in concert may be valid, but when they reproduce key features of a voting trust, the voting-trust statute governs and noncompliance renders the arrangement unlawful.

## Conclusion

The Delaware Supreme Court treated the Agents’ Agreement as a voting trust because it centralized long-term voting control in designated agents while beneficial ownership remained with the depositing stockholders, and it invalidated the arrangement for noncompliance with Delaware’s voting-trust statute.


Abercrombie v. Davies, 36 Del. Ch. 371, 130 A.2d 338 (Del. 1957)