Private Equity Minority Investments - Universität St.Gallen

Part Two: Legal Framework and Tools3.3.5.10 EnforcementOftentimes, votes subject to a voting agreement have already been cast inbreach thereof, specific performance is no longer possible, 1162 and damagesare difficult to prove. 1163 The practical difficulties of legally enforcingvoting agreements have led legal practitioners to develop various preventivemeasures to ensure the fulfilment of contractual agreements 1164 including (i)stipulating a contractual penalty to be paid if contractual duties are notfulfilled, regardless of the exact damage, and if necessary, the shares of theinfringing party are used to guarantee the obligations (repressiveprecautionary measures); 1165 (ii) stipulating contingent exit rights, purchaserights, and other preferential rights or sanctions (e.g., loss of managementrights 1166 ) affecting the infringing party in case of a breach of contract; 1167(iii) placing the party’s shares in the joint property of all parties to theagreement. Here, the votes are cast by a representative 1168 who receivesinstructions by the shareholders, decided by simple majority if soagreed; 1169 (iv) pooling of the shares in a holding company owned by theparties 1170 (the votes are exercised by the board of directors); 1171 (v)effecting a fiduciary transfer of all committed shares to a third-persontrustee who votes the shares in accordance with the shareholders’agreement; 1172 and (vi) establishing an usufruct with the shareholders’1162Cf. APPENZELLER, p. 58 et seqq. (arguing in favor of specific performance even after voteshave been cast. However, he is critical insofar as the legal processing of claims on specificperformance of the voting agreements sometimes take years).1163See LANG, p. 67 et seqq.; APPENZELLER, p. 14.1164On the different measures, see, inter alia, JÖRG/ARTER, p. 475; BAUEN/BERNET, p. 111-112;HINTZ-BÜHLER, p. 225 et seqq.; FORSTMOSER/MEIER-HAYOZ/NOBEL, § 39, N 195 et seqq.;FORSTMOSER, Aktionärbindungsverträge, p. 375 et seq.1165The problem with contractual penalties is that, albeit their deterrent effect, they cannotprevent a breach of the voting contract as such. See, for further references, LANG, p. 125 etseqq.; HINTZ-BÜHLER, p. 227. See also DRUEY/GLANZMANN, § 11, N 87 (stating thatcontractual penalties stand on shaky ground since the court can reduce them due to excesses).1166See SCHENKER, Familiengesellschaften, p. 29.1167See, for further references, HINTZ-BÜHLER, p. 230; HAYMANN, p. 25.1168CO 690 I, 534 I.1169See BGE 4A.197/2008; DOMENICONI/VON DER CRONE, p. 226. A prerequisite for the poolingof shares in the joint property is that the shareholders’ agreement is qualified as a simplepartnership (CO 544 I). Moreover, parties may dislike the idea that they practically loosedirect control over their shares, see STUBER, p. 36.1170See WEBER, Vertrags- und Statutengestaltung, p. 87.1171See DRUEY/GLANZMANN, § 11, N 87; with further references, LANG, p. 162 et seqq.; KRATZ,Möglichkeiten, § 9, N 7; BÜRGI, Zürcher Kommentar, CO 692, N 40; FORSTMOSER,Aktionärbindungsverträge, p. 376. A drawback of this protection measure is that it may betime-intensive and costly. Moreover, it represents merely a transfer of structuring personorientedelements to a different level, see LANG, p. 96.1172See WEBER, Vertrags- und Statutengestaltung, p. 87. A perceived drawback is that ownershipof shares is transferred with the parties losing their shareholder status, see HINTZ-BÜHLER, p.136 et seq.; LANG, p. 160. Moreover there is a risk that the fiduciary transfer could be190