Private Equity Minority Investments - Universität St.Gallen

Chapter IV: Voice3.3 Legal Structuring OptionsIf PEMIs wish to enhance their voice allowing them de facto say, at leastwith respect to critical business decisions, one fundamental strategy theycan use at the shareholder level is to enhance voting power via votingshares, voting caps, and participation certificates. These options, however,are not possible at the board level since, pursuant to the mandatory onedirector-one-voteprinciple, each director can only cast one vote. 1527 Director indirect voting privileges for individual board members are notallowed. 1528 Only the chairperson of the meeting 1529 can cast a decisive votein case of a tie unless provided otherwise in the articles of association, 1530which may disallow the chairperson the casting vote for all or certainresolutions, or it may be assigned to a different person. In attempting toenhance their voting power, PEMIs must therefore use alternativeinstruments: they may negotiate for (i) a greater share of board seats, (ii)suitable quorum and majority vote requirements, so that the PEMI boardrepresentatives’ attendance is necessary to constitute a quorum or to pass aresolution, and (iii) contractual shareholder control agreements.3.3.1 Number of Minority Investor Board SeatsThe articles of association may stipulate an exact number of board seats or aminimum or maximum number 1531 depending on the degree of flexibilitythe shareholders would like with respect to the possibility of future changesin board size. A minimum or maximum number allows the general meetingto change the number of board seats without having to comply with the1527In German, Kopfstimmprinzip. See BGE 71 I 187 (E. 5., justifying this rule by stating that thedirectors are primarily elected because of their personality and the associated trust). SeeBAUEN/VENTURI, § 3, N 297; BÖCKLI, Aktienrecht, § 13, N 127; WERNLI, BaslerKommentar, CO 713, N 8; HOMBURGER, Zürcher Kommentar, CO 713, N 293;FORSTMOSER/MEIER-HAYOZ/NOBEL, § 31, N 22. The same principle applies to decisionmaking of the managing officers in a GmbH, see WATTER/ROTH PELLANDA, BaslerKommentar, CO 809, N 18; NUSSBAUM/SANWALD/SCHEIDEGGER, CO 809, N 14; NATER, p.118.1528See BÖCKLI, Aktienrecht, § 13, N 127; FRICK, § 12, N 1447; WERNLI, Basler Kommentar,CO 713, N 8; KRNETA, CO 707, N 284; HOMBURGER, Zürcher Kommentar, CO 713, N 293;FORSTMOSER/MEIER-HAYOZ/NOBEL, § 31, N 22. With respect to the GmbH, seeSIFFERT/FISCHER/PETRIN, CO 809, N 11.1529The chairperson of the meeting is the person presiding the board meeting and does notnecessarily coincide with the chairman of the board of directors. See BÖCKLI, Aktienrecht, §13, N 106; BAUEN/BERNET, p.163, N 475; HOMBURGER, Zürcher Kommentar, CO 713, N312; FORSTMOSER/MEIER-HAYOZ/NOBEL, § 31, N 30.1530CO 713 I. With respect to the GmbH, 809 IV.1531See BÖCKLI, Aktienrecht, § 13, N 50; WERNLI, Basler Kommentar, CO 707, N 5;MÜLLER/LIPP/PLÜSS, p. 3.241