Private Equity Minority Investments - Universität St.Gallen

Part Two: Legal Framework and Toolsbetween representatives and neutralize conflicts between differentshareholder groups.1.3.6.4 LimitationsThe right of the general meeting to elect board members can only berestricted (and only to a limited extent) via the articles of association.Provisions in the articles of association must not limit the general meeting’sinalienable power to elect the members of the board at its core. 1456Provisions that limit the election of the general meeting to candidatesproposed or approved by the board of directors are null and void. 1457Moreover, when defining eligibility criteria, the general principles of lawmust be observed, including the protection of board members’ personalrights 1458 and the principles of objectivity 1459 .1.3.7 Term of Office for Board MembersIn closely held companies with fixed majorities, the term of office for boardmembers is of minor importance since the respective representatives aretypically reappointed by the shareholders they represent. Depending on thespecific circumstances, it may be wise to provide for a longer term (up tosix years) in the articles of association than the statutory term of office toreduce the administrative burden associated with re-election 1460 and toensure that certain leading figures remain on the board of directors for anextended period of time because of their intimate and broad knowledge ofthe company, representational functions, and/or because their presencesignals stability and continuity to the business world. 1461 On the other hand,refreshing the board’s composition at regular intervals is beneficial forvarious reasons: to plan for succession in good times and bring in ‘freshblood’ thereby challenging established principles and procedures. 1462 Ashorter term of office is also beneficial for certain potential directors whocan sit on the board for just a limited period due to time and other1456See BÖCKLI, Aktienrecht, § 13, N 48.1457CO 706b. Ibid.1458CC 27 II. See WATTER/ROTH PELLANDA, Zusammensetzung, p. 82; for further references onadmissible and inadmissible requirements, see MÜLLER/LIPP/PLÜSS, p. 14; KÄCH, p. 47.1459See FN 801.1460The articles of association may, however, not provide for an automatic re-election of theboard members because such a rule would infringe upon the general meeting’s inalienableelection authority, see WERNLI, Basler Kommentar, CO 710, N 3.1461See ROTH PELLANDA, p. 199, N 400; NEUBAUER/LANK, p. 117.1462See ROTH PELLANDA, p. 199, N 399; KRNETA, CO 707, N 68; NEUBAUER/LANK, p. 118.232