Definition of Trust Business Combination
Trust is the business Combination in which shareholders of the Constar tenet organizations transfer a continuing amount of their stock or shares to a board of trustees in exchange for trust certificates. It consists of the fusion the existing independent units, which lose their independence and merge themselves into a single combined unit thus trust means by the unification of the existing independent concurs at first trust was formed in unrated states of America to reduce the economic crisis. Then it expanded in England, France in other continuous.
Combination trusts are more stable when compared to pools and cartels. Trusts are formed for a fixed period and for that period its existence is ensured, whereas pools and cartels can be broken up anytime.
From the discussion, we can say that trust is a form of business combination established through temporary consolidation, in which stockholders of the constituent organization under a trust agreement transfer a controlling amount of their stock to a board of trustees in exchange for trust certificates. Their certificates show their equitable interest in the income of the combination.
Disadvantages of Combination Trusts
- It is difficult to form when compared to pools.
- It is quite rigid in nature and lacks flexibility.
- The monopoly power might be used to exploit consumers by restricting output.