Key Takeaways

  • A pooling agreement is a legally binding contract where shareholders or property owners combine their rights or interests to achieve common objectives, such as controlling corporate votes or optimizing resource extraction.
  • In corporate governance, vote pooling ensures collective shareholder power by requiring participants to vote uniformly, often strengthening minority voices.
  • In finance, pooling and servicing agreements (PSAs) govern mortgage-backed securities, detailing parties’ rights, payment collection, and foreclosure procedures.
  • In oil and gas law, a pooling agreement allows multiple landowners to combine their mineral rights into a single drilling unit, sharing costs and revenues based on ownership proportion.
  • Pooling clauses and statutory frameworks (such as Act 85 in Pennsylvania) significantly impact landowners’ rights, lease obligations, and revenue distribution.
  • Understanding the terms, limitations, and legal implications of a pooling agreement is crucial before signing — especially in complex contexts like securitization or mineral extraction.

A pooling agreement is a type of contract in which shareholders of a corporation create a voting trust by pooling their voting rights and transferring them to a trustee. This is also called a voting agreement or shareholder-control agreement since it is used to control the affairs of the corporation.

What Is Vote Pooling?

The right to vote is often one of the primary rights given to corporate shareholders. Shareholders can use various strategies to help leverage their votes, one of which is vote pooling. With this strategy, a group of shareholders agrees to vote the same way for directors ahead of time, making it more difficult to sway the vote. While vote pooling is generally legal, it may be disallowed by your shareholder agreement. For this reason, it's important to consult an attorney before entering a pooling agreement.

Legal Requirements and Enforceability of Pooling Agreements

For a pooling agreement to be valid and enforceable, it must meet basic contract law principles, including mutual consent, consideration, and legality of purpose. Shareholders or parties must explicitly state their intent to pool votes or resources and outline the scope, duration, and enforcement mechanisms in writing.

Courts generally uphold pooling agreements as long as they don’t violate corporate bylaws, shareholder agreements, or state statutes. However, they can become unenforceable if they are vague, conflict with fiduciary duties, or attempt to override non-waivable shareholder rights. To strengthen enforceability, parties should:

  • Clearly define voting obligations and remedies for breach.
  • Specify the duration of the agreement and conditions for termination.
  • Include dispute resolution clauses (e.g., arbitration or mediation).

Because pooling arrangements can significantly impact corporate control, companies sometimes require participants to disclose them in shareholder disclosures or proxy statements.

What Is a Pooling and Servicing Agreement?

Also called a PSA, a pooling and servicing agreement dictates the obligations and rights over a pool of mortgage loans required of parties to the agreement. This controls what can be done with this type of trust and is created when mortgages are bundled into securities and sold to investors.

If your home is being foreclosed, you should access the PSA to determine where your fees go and how the loan servicer is paid, as well as how mortgages may be modified, how payments are collected, and what process must be followed to foreclose on the loan.

In most cases, pool agreements do not allow parties to transfer or assign their rights.

What Is a Pooling Arrangement?

Pooling arrangements are used by ship owners to optimize a return on their vessels by grouping them with similar ships to create a fleet with increased availability and revenue.

Pooling Agreements in the Oil and Gas Industry

Pooling agreements are also widely used in the oil and gas sector. Here, multiple landowners or mineral rights holders combine their individual tracts into a single drilling or production unit. This allows energy companies to develop resources more efficiently while distributing costs and profits proportionally based on acreage contributed.

These agreements are especially relevant when:

  • A single parcel is too small for economic drilling.
  • Regulatory spacing requirements require a minimum unit size.
  • Several adjacent tracts overlay the same resource reservoir.

Pooling ensures that no single owner monopolizes the benefits of a shared resource. Instead, all owners receive royalties based on their fractional share, even if drilling occurs on a neighboring tract within the pooled unit. However, signing such an agreement can also limit a landowner’s individual control — for instance, they may not independently lease their portion once it’s pooled.

Pooling Clauses, Statutory Rights, and Litigation Risks

Most oil and gas leases include a pooling clause, granting the lessee (often a drilling company) the right to pool the leased property with adjacent tracts. These clauses can have significant legal and financial consequences. For example, once pooling occurs, production anywhere within the unit typically satisfies the lease’s production requirements — extending its duration even if drilling does not occur directly on a particular property.

Some states also have compulsory pooling laws, which allow regulators or courts to mandate pooling when it’s necessary for efficient resource extraction. While this can protect collective interests, it may also limit individual landowners’ ability to refuse participation.

Legal disputes often arise over whether pooling was conducted properly, whether the lessee complied with statutory or contractual obligations, and whether revenue distribution aligns with the agreement. In Hordis v. Cabot Oil & Gas Corp., for example, the court examined whether a drilling company could ignore a pooling clause and rely solely on state statute — highlighting the complex interaction between private contracts and public law.

Mortgages and Securitization

When you obtain a mortgage loan, the bank gives you the money to buy a home in exchange for a contract in which you promise to pay back the amount plus interest. The home serves as collateral, or security, for the loan.

With securitization, several similar mortgage loans are bundled together and sold in a package called mortgage-backed securities. These investments are often purchased by trusts in which investors in the trust receive payments.

The PSA, in this case, controls the activities of the trust. It typically includes the following individuals:

  • The servicer, who collects monthly loan payments and distributes the proceeds to the investors
  • The originator, who creates the secured assets (in this case, the mortgage itself)
  • The investors, who buy shares in the trust

Aspects of a PSA

The main elements of a PSA include information about:

  • The steps that must be taken to establish a trust
  • How mortgage loan bundles can be acquired by the trust
  • The process by which securities will be issued
  • The obligations, rights, and duties of each party to the PSA
  • Who retains late fees and other fees collected from the debtor
  • How payments are collected
  • How loan modification and foreclosure are handled

Strategic Considerations Before Entering a Pooling Agreement

Before signing a pooling agreement — whether related to voting, securitization, or natural resources — parties should carefully assess potential impacts. Key considerations include:

  • Control and Influence: Will pooling dilute or strengthen your decision-making power?
  • Duration and Exit Options: How long are you bound, and under what circumstances can you withdraw?
  • Revenue Allocation: Are distribution formulas clearly defined and fair?
  • Compliance and Reporting: Are there any regulatory disclosures or filings required?
  • Legal Remedies: What happens if one party breaches the agreement?

Because the consequences of pooling can span decades — particularly in oil and gas or mortgage-backed securities — seeking legal review before signing is strongly recommended. An attorney can help identify hidden risks, negotiate terms, and ensure that the agreement protects your interests.

Obtaining a PSA

Public securities are required to file a PSA with the Securities and Exchange Commission (SEC), with copies available to the public on the agency's EDGAR system. If you are having trouble paying your mortgage, you should obtain a copy of this document by searching by the name of your original lender and/or by the name of the loan pool. The date you made the loan is also useful during your search. For example, if you are attempting to short sell your property and the lender will not approve this transaction, the PSA might provide some insight as to why they prefer to foreclose.

Start by clicking company filings and then searching for the name of the lender or the name of the trust. Clicking on the identification number will return a list of documents filed by that lender or trust. The PSA may be uploaded on its own or included as part of a document such as a Prospectus. You can note the name and document number and then request a certified copy of the PSA from the SEC. A lawyer can help you understand this document and its implications.

Frequently Asked Questions

  1. Is a pooling agreement legally binding?
    Yes. As long as it meets standard contract requirements — offer, acceptance, consideration, and legality — a pooling agreement is enforceable in court.
  2. Can I withdraw from a pooling agreement once signed?
    It depends on the agreement’s terms. Some allow withdrawal under certain conditions, while others bind parties for a fixed duration or until a specific event occurs.
  3. How do pooling clauses affect oil and gas leases?
    Pooling clauses often extend lease terms if production occurs anywhere within the pooled unit and can significantly impact royalty payments and drilling rights.
  4. What happens if a party breaches a pooling agreement?
    Remedies can include damages, specific performance (forcing compliance), or termination, depending on the terms and governing law.
  5. Why should I consult an attorney before signing a pooling agreement?
    Because pooling affects ownership rights, revenue, and control, legal review helps you understand obligations, minimize risks, and negotiate more favorable terms.

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