Shareholders of Fonterra, the world's largest dairy exporter, have voted to allow themselves to hold shares amounting to 120 per cent of their production in the first step of a strategy to restructure the company.

Holders of 89.6 per cent of the stock voted in favour of strengthening Fonterra's share structure while agreeing to an effective freeze on the so-called Fair Value Share price at $4.52. Fonterra will change the way it values the shares to recognize they can't be freely traded and will hold the price at current levels until the 'restricted market' price catches up.

The initial steps, approved at Fonterra's annual meeting in Ashburton today, are a precursor to a more radical shake up, requiring a separate vote, where the shares would become tradable among shareholders.

The company would also cease redemptions of the shares, which it does now, to ensure farmers' holdings match up with their production each year - a process that causes huge fluctuations in Fonterra's equity capital. Current arrangements forced it to pay out $742 million in redemptions after the 2007/2008 drought.

The vote showed "great confidence in the cooperative and our future," chairman Henry van der Heyden said in a statement after the meeting. Farmers "said give us the opportunity to back our cooperative."

Allowing farmers to add try shares to their holding may allow Fonterra to raise as much as $900 million. It is the cooperatives second attempt at restructuring in as many years.Fonterra would have raised as much as $2.5 billion selling about a fifth of the stock in the sale it abandoned last year.

The current process is in three stages and is aimed at tackling the loss of equity value on the balance sheet as shares are redeemed when production declines.