Private Equity Minority Investments - Universität St.Gallen

Chapter IV: Voice3.3.2.3 Legal NatureAlthough formally not a type of share, 841 participation certificates are ineffect non-voting shares. 8423.3.2.4 IntroductionParticipation certificates are created via implementation in the articles ofassociation. 843 Formally, participation certificates are introduced in theinitial articles of association via unanimous consent. Subsequently, they arecreated via a capital increase, conversion of shares into participationcertificates, or via a stock split, each of which the general meeting mustdecide upon. 844 The majority vote requirement depends on the respectivecreation method and whether preemptive rights are withdrawn. In case of anordinary capital increase from contributions in cash and maintaining thepreemptive rights the absolute majority vote requirement applies. 845 Everyother form of a capital increase 846 is subject to a qualified majority vote. 847The preemptive rights may be withdrawn only for valid reasons (e.g.,takeover of an enterprise, participation of employees) and no one shall beadvantaged or disadvantaged without proper reason. 848 The creation ofparticipation certificates via conversion of common shares is rare. 849 Awithdrawal of the minimum voting right requires the unanimous consent ofall holders of impaired shares. 850 Participation certificates can also becreated via a two-for-one-type of stock split, that is, a stock split into oneshare of a lower nominal value and one (or more) participation certifi-841See BÖCKLI, Aktienrecht, § 5, N 13.842See ibid; VON BÜREN/STOFFEN/WEBER, N 231; HOFSTETTER, Corporate Governance Report,p. 24; RÖTHLISBERGER, p. 56. The term is, however, deliberately avoided in order to upholdthe par value principle, see DRUEY/GLANZMANN, § 10, N 4; BAUMANN, p. 138.843CO 656a I i.c.w. Art. 627 Sec. 9; see VON BÜREN/STOFFEL/WEBER, p. 52, N 232; KRATZ,Möglichkeiten, § 9, N 113.844See BAUMANN, p. 138 et seq.845See ibid, p. 138; HUGUENIN JACOBS, p. 142.846An authorized or conditional increase of capital; an increase of capital out of equity, againstin-kind contributions, or to acquire assets, and to grant special benefits; see BÖCKLI,Aktienrecht, § 5, N 21; BAUMANN, p. 138 et seq.847CO 656g I i.c.w. CO 704 I Sec. 4, 5 and 6. See FORSTMOSER/MEIER-HAYOZ/NOBEL, § 46, N65 i.c.w. § 52, N 19 et seqq.; BAUMANN, p. 138 et seq.; HUGUENIN JACOBS, p. 142.848CO 652b II. See BÖCKLI, Aktienrecht, § 5, N 71.849See BÖCKLI, Aktienrecht, § 5, N 30.850Ibid.143