Private Equity Minority Investments - UniversitÃƒÂ¤t St.Gallen

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Part Two: Legal Framework and Toolsshareholders’ agreement. 1403 However, precisely because the representationrights of groups of shareholders as stated in the articles of association arenot mandatory, PEMIs can only rely on such rights if they have de factoveto power against unfavorable amendments or removal of those rights(e.g., by stipulating high quorum and majority vote requirements forrespective resolutions). Hence, PEMIs (ex ante) should take respectiveprecautions to ensure that such rights cannot be withdrawn against their willonce they have invested in the firm. Moreover, of note is that if boardrepresentation rights are conferred to the shareholders holding a certainpercentage of the share capital, PEMIs may effectively be forced tocontribute to subsequent capital increases to avoid dilution and losing theirrights of representation. 1404 It is therefore advisable from the PEMI’sperspective to define representation rights in absolute terms (e.g., for sharesof class B held by the PEMI) and – additionally – to secure representationrights via a shareholders’ agreement.1.3.3 Board Representation Rights via Voting Agreements1.3.3.1 Legal ConceptProbably the most prevalent method for PEMIs to ensure boardrepresentation is via voting agreements with fellow shareholders. 1405Contractually, the parties may agree on the size and composition of theboard as well as the allocation of board seats whereby all or certain groupsof shareholders receive the right (possible only after consultation with theother shareholders) to nominate a certain number of directors to the board,to remove these board members from office, and to appoint othercandidates in their place. The parties typically mutually undertake to casttheir votes in the elections of the board of directors at the general meetingin favor of each other or each others’ proposed representatives unless acandidate does not fulfill mandatory and, if applicable, contractuallyagreed-upon eligibility criteria, or is obviously unsuitable or a threat tocorporate interests. 14061403See Section III.B.1.3.1404See WYSS, Aktionärbindungsvertag, p. 514.1405See BÖCKLI, Aktienrecht, § 13, N 79; BAUEN/VENTURI, § 1, N 55; WERNLI, BaslerKommentar, CO 709, N 28; VON BÜREN/STOFFEL/WEBER, 125, N 590; KRNETA, CO 709, N382; HOMBURGER, Zürcher Kommentar, CO 709, N 197; FORSTMOSER/MEIER-HAYOZ/NOBEL, § 27, N 95.1406See WERNLI, Basler Kommentar, CO 707, N 31; FRICK, § 12, N 1384. For contracttemplates, see STREIFF/PELLEGRINI/VON KAENEL, p. 339 et seq.; KNECHT/KOCH, p. 245.224
Chapter IV: Voice1.3.3.2 Assessment of Legal ToolFor an assessment of voting agreements among shareholders and the relatedbenefits and drawbacks, see Section IV.D.3.3.5.11. Although the mostwidely used tool to obtain board representation rights, contractual boardrepresentation rights should be combined, to the extent possible, withcorresponding instruments at the corporate level for the representationrights to be effective for all shareholders and not only for the parties to thevoting agreement. 14071.3.4 Board Representation via Cumulative Voting and ProportionalRepresentation Voting1.3.4.1 Legal ConceptAnother legal tool to ensure that the PEMI’s interests are represented on theboard of directors is the stipulation of special procedures to be observed bythe general meeting for the election of board members. 1408 Alternativeelection procedures other than a straight voting system, 1409 such ascumulative voting and proportional representation voting, allow the PEMIto obtain de facto influence on the board of directors’ composition. 1410Cumulative voting is a voting system in which shareholders are entitled tomultiply the number of votes (not shares 1411 ) they are entitled to cast by thenumber of directors to be elected, and cast the product of the multiplicationfor a single candidate or distribute their votes among two or morecandidates. 1412 By casting all of their votes for a single or a few1407See also BAUEN/VENTURI, § 1, N 55.1408The law does not stipulate precise details on how to carry out elections and allows the generalmeeting ample scope to determine suitable procedures. Such election procedures may beintroduced based on CO 709 II. See WERNLI, Basler Kommentar, CO 709, N 27 (“DasWahlverfahren kann im Rahmen des Gesetzes frei gestaltet werden.”); for further referencesto legal expert opinion, see GLANZMANN, Cumulative Voting, p. 406; KÄCH, p. 55; KUNZ,Zwischenhalt, p. 403, FN 20. In detail on the different procedural options, seeMÜLLER/LIPP/PLÜSS, p. 47 and 536 et seqq.1409See FN 1369.1410See WERNLI, Basler Kommentar, CO 709, N 27; HOMBURGER, Zürcher Kommentar, CO 709,N 196.1411See TANNER, Quoren, § 2, N 52.1412See BÖCKLI, Aktienrecht, § 13, N 80 et seq.; DUBS/TRUFFER, Basler Kommentar, CO 698, N16a; WERNLI, Basler Kommentar, CO 709, N 27; WATTER/MAIZAR, p. 429; GLANZMANN,Cumulative Voting, p. 402; GARZA, p. 647; KUNZ, Minderheitenschutz, § 6, N 111 et seqq.;RUFFNER, Grundlagen, p. 188 et seqq.; FORSTMOSER/MEIER-HAYOZ/NOBEL, § 27, N 94;BÜRGI, Zürcher Kommentar, CO 708, N 70; SCHUCANY, <strong>St</strong>immenkumulierung, p. 129 etseqq.225
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Private Equity Minority Investments
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AcknowledgementsThe process of writ
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Executive SummaryTriggered by the f
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Summary ContentsSummary ContentsSum
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Table of Contents3.2.1 Source of Ca
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Table of ContentsXIV2 Ex Ante and E
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Table of ContentsXVI3.3.5 Voting Ag
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Table of ContentsProtection .......
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Table of Contents5.3.2 Board of Dir
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List of FiguresList of FiguresFigur
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BibliographyTable of ReferencesACHA
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BibliographyASTRACHAN, Joseph H. an
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Bibliography- “Corporate Governan
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BibliographyBURKHALTER, Thomas, Ein
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Bibliography- “Herausforderungen
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Bibliography- “Interessenkonflikt
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Bibliographyavailable at http://www
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BibliographyHART, Oliver, “Incomp
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BibliographyHUSER, Patrick A., Anle
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BibliographyLUBATKIN, Michael H., S
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BibliographyMODIGLIANI, Franco and
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of MPRDC without reference to the a
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BibliographyRÜDISSER, Michèle, Bo
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BibliographySTOUT, Lynn A., “The
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Bibliography- “Interessenkonflikt
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BibliographyWEBER, Martin, “Recht
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List of AbbreviationsList of Abbrev
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lit.MBI / MBOMerger ActNNBERNo.NZZl
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Part One: Introduction andTheoretic
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Chapter I: Introductionfinancial cr
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Chapter I: IntroductionBResearch To
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Chapter I: Introductionaddress in p
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Chapter I: Introductioninvestment s
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Chapter I: Introductioninvestors pu
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Chapter I: Introductioninvestments
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Chapter I: Introductioncorporations
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Chapter II: Theoretical Foundations
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2.1.2 Underlying Assumptions and Ke
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Part Two: Legal Framework and Tools
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Part Three: Case Study - SimilorGro
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Judith Verena Söding (1983) studie
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Private Equity Minority Investments - UniversitÃƒÂ¤t St.Gallen

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