Continuation vote

Most listed companies don’t have a fixed lifespan – essentially they’re intended to carry on trading until they go bust or are taken over. Hence many successful companies have been around for decades or even longer: US utility Consolidated Edison has been listed on the New York Stock Exchange since 1824. However, listed investment companies – also known as investment trusts or closed-end funds – may be different.

These are companies whose business is to invest in stocks and other securities rather than carrying on a business. So it may be in shareholders’ best interests if these companies wind up once their investments mature, or if they are persistently underperforming the market.

To ensure this happens, an investment company’s articles of association often provide for the shareholders to vote on whether the company should continue to exist under certain circumstances. This is known as a continuation vote and is usually automatically triggered annually, or after a certain period of time (for example, five years after the fund was set up). If shareholders vote against continuation, the assets will be sold, cash returned to shareholders, and the company will be wound up.