Private Equity Minority Investments - Universität St.Gallen

Part Three: Case Study – SimilorGroupGAAP FER orally. Apart from the reporting standards, further qualitystandards or rules on the procedure of the exchange of information were notagreed upon. Confidentiality undertakings were not part of the shareholders’agreement. Moreover, no specific information-related cost sharingarrangements were stipulated as part of the shareholders’ agreement.Regarding information upon request, the shareholders’ agreement statedthat the chairman of the board authorized each director to requestinformation at any time directly from the Company’s or its subsidiaries’executive management on both the general course of business and singularbusiness matters. Moreover, each board member was granted a direct rightto inspect company files.5.2 Assessment and Lessons LearnedThe shareholders’ agreement did not stipulate any particular shareholders’information rights. Only the board members’ information rights wereregulated as all shareholders were present or represented on the board ofdirectors. The board members were granted broad information rights interms of information providers (access to both the board chairman andexecutive management), time (monthly and ad hoc reporting, requests atany time, i.e., also outside board meetings), and scope (both informationconcerning the general course of business and singular business matters).The directors’ information rights had no expressly stated limitations (e.g.,concerning the type of information, circumstances of the requests, setdates). In essence, the parties attempted to remove any existing informationasymmetries to the extent possible, at least on paper.With hindsight, Madison reports that it is satisfied with the legal structuringof information rights. This is not surprising given the comprehensive accessto information it had negotiated for its board members. The board meetings,which were scheduled every second month and where the most importantKPIs were discussed, served as the main platform for exchanging information.Requests for information were generally placed with A. Kräuligeror, at least, Madison informed him of information requests in case itapproached employees directly. Moreover, Madison views the auditor as acritical source of information. While the access to information of Madison’sboard representatives may have been comprehensive, its information rightsas shareholder were not enhanced via the shareholders’ agreement. As aresult, Madison ran the risk of having no better access to information asprovided by law if the controlling shareholder voted the minority investor’srepresentatives off the board (even though thereby infringing upon theshareholders’ agreement). Hence, in the author’s view, it would have been416