This article explains when voting rights are excluded in connection with the discharge of the board of directors and who may not vote at the general meeting. It covers typical scenarios such as board members as shareholders, representation situations and group structures. It also outlines the legal risks of non-compliance with Art. 695 CO.
Introduction
The discharge of the board of directors is a standard agenda item at every general meeting (GM). It signals trust and may have legal implications in terms of liability. Before the vote takes place, however, a key question arises: who is actually entitled to vote – and who is not?
This is precisely where Art. 695 CO applies. The provision governs the exclusion of voting rights in connection with the discharge of the board of directors and prevents individuals from voting on their own liability.
Table of contents
- Legal framework: exclusion of voting rights on discharge
- Board member as shareholder: a classic conflict of interest
- Representation by third parties: no workaround
- Board member representing other shareholders
- Group structures: when the parent company votes
- Legal consequences of unlawful participation
- Conclusion
Legal framework: exclusion of voting rights on discharge
Art. 695 CO provides that shareholders who have participated in the management of the company in any way may not vote on their own discharge.
This exclusion goes further than often assumed. It applies not only to formal board members, but also to:
- members of executive management
- de facto governing bodies
- individuals exercising significant influence over the company
What matters is not the formal role, but the actual involvement in management.
The purpose is clear: to prevent conflicts of interest and safeguard the integrity of GM resolutions.
Board member as shareholder: a classic conflict of interest
The most common situation is also the most straightforward.
A board member is also a shareholder and intends to vote on their own discharge.
This is not permitted.
In such a case, the individual would directly influence their own liability situation. Art. 695 CO applies without restriction: the voting right is excluded.
Importantly, the relevant shares are deemed not represented for this specific vote. They are not taken into account when determining represented votes or calculating majorities.
As a result, the total number of represented votes is reduced by all shares held by shareholders excluded under Art. 695 CO. In practice, this often leads to a significantly lower number of represented votes for this agenda item compared to others.
Representation by third parties: no workaround
In practice, the question often arises whether the exclusion of voting rights can be circumvented by having a third party exercise the voting rights on behalf of a board member.
This is not permissible.
Case law makes it clear that the exclusion applies regardless of whether the person votes personally or through a representative. What matters is their involvement in management and the resulting conflict of interest.
This also applies to indirect arrangements such as:
- voting through a proxy or nominee
- transferring shares shortly before the GM to avoid the restriction
Such arrangements are considered abusive and have no legal effect.
Board member representing other shareholders
A particularly relevant scenario arises where a board member not only votes for themselves but also represents other shareholders based on a proxy.
In this situation, the exclusion of voting rights still fully applies. The board member may not vote on the discharge, neither with their own shares nor with the shares they represent.
The reason lies in the purpose of Art. 695 CO. The rule focuses not on the formal ownership of shares, but on the person actually exercising the voting rights. If that person has participated in management, the conflict of interest exists regardless of whether they act in their own name or on behalf of others.
Allowing such voting would effectively undermine the rule. Therefore, represented votes are also excluded where the decision-maker is subject to the voting ban.
Group structures: when the parent company votes
The application of Art. 695 CO becomes more complex in group structures.
A typical scenario arises where a parent company participates in the GM of its subsidiary and is represented by individuals who also sit on the subsidiary’s board.
If these individuals vote on the discharge of the subsidiary’s board, an indirect conflict of interest arises. Formally, they act on behalf of the parent company, but in substance they are deciding on their own discharge.
In such cases, the exclusion of voting rights applies. What matters is not the formal holder of the voting rights, but the person who actually makes the decision.
Allowing such voting would enable circumvention through the use of legal entities. This is precisely what Art. 695 CO seeks to prevent. The parent company must therefore appoint independent representatives who are not involved in the subsidiary’s management.
Legal consequences of unlawful participation
If voting takes place despite a valid exclusion, the legal consequences must be assessed carefully.
Such a resolution is not automatically void, but it is generally subject to challenge (Art. 706 CO). The decisive factor is whether the unlawful votes influenced the outcome.
If this is the case, any shareholder may challenge the resolution within two months (Art. 706a CO).
This creates significant risks. The validity of the discharge remains uncertain, potential liability issues may re-emerge, and there may be negative implications for financing rounds or transactions.
Conclusion
The exclusion of voting rights on discharge is a central element of sound corporate governance.
Art. 695 CO applies broadly and covers indirect situations such as:
- board members as shareholders
- representation structures
- proxy voting
- group constellations
The key question is always the same: who makes the decision, and is there a conflict of interest?
If the rule is not properly applied, resolutions become challengeable and legal uncertainty arises.
If you want to ensure that your general meeting is legally compliant and that voting exclusions are correctly implemented, it is worth reviewing your processes.
Within Konsento, shareholders who have participated in management can be automatically excluded from voting on discharge. They still see the agenda item in the GM tool, but do not have any voting options. This prevents affected persons from inadvertently voting on their own discharge and rendering the resolution challengeable.
This mechanism is a further element of Konsento’s GM tool designed to ensure legally compliant and practical general meetings.