8919 / Does participation in an employer’s stock bonus plan entitle the employee-participant to voting privileges?

A stock bonus plan is required to pass through certain voting rights to participants or beneficiaries. If an employer’s securities are “registration-type,” each participant or beneficiary generally must be entitled to direct the plan as to how securities allocated to him or her are to be voted.¹ “Registration-type” securities are securities that must be registered under Section 12 of the Securities and Exchange Act of 1934 or that would be required to be registered except for an exemption in that law.²

If securities are not “registration-type” and more than 10 percent of a plan’s assets are invested in securities of the employer, each participant (or beneficiary) must be permitted to direct voting rights under securities allocated to his or her account with respect to approval of corporate mergers, consolidations, recapitalizations, reclassifications, liquidations, dissolutions, sales of substantially all of the business’s assets, and similar transactions as provided in future regulations.³

If the plan contains non-registration-type securities, the plan satisfies this requirement if each participant is given one vote with respect to an issue and the trustee votes the shares held by the plan in a proportion that takes this vote into account.⁴