Non-listed Swiss corporations may be required to appoint an independent proxy for their general meetings. This article explains when such a requirement arises and which independence standards apply. The legal framework is mainly based on Art. 689d CO and the independence rules for auditors in Art. 728 CO. It also discusses how financial interests or economic dependence may affect the assessment of independence.
Introduction
In non-listed Swiss corporations, proxy voting is often handled pragmatically. Shareholders represent each other or delegate their vote to a trusted person.
However, the law provides for situations in which a company must allow its shareholders to appoint an independent proxy. The legal basis is Art. 689d of the Swiss Code of Obligations (CO). Whenever such a proxy is appointed, an immediate question arises: when is a proxy truly independent?
The law answers this question indirectly. Art. 689b para. 4 CO requires that the independence of the independent proxy must not be impaired either in fact or in appearance and refers, for further specification, to the independence rules applicable to statutory auditors (Art. 728 paras. 2–6 CO).
This means that an established concept from audit law is applied to the independent proxy.
Table of contents
- When an independent proxy must be appointed
- Independence requires sufficient distance from the company
- Personal financial interests may undermine neutrality
- When shareholdings or mandates become problematic
- Independence also extends to the surrounding environment
- Conclusion: neutrality builds trust at the general meeting
When an independent proxy must be appointed
Non-listed corporations may provide in their articles of association that shareholders may be represented at the general meeting only by another shareholder (Art. 689d para. 1 CO).
If such a restriction exists, a shareholder may request that the board of directors designate an additional representative to whom shareholders may delegate their voting rights. This may be either:
- an independent proxy, or
- a corporate proxy (Organstimmrechtsvertreter)
(Art. 689d para. 2 CO).
The board of directors must inform shareholders at least ten days before the general meeting whom they may appoint as their proxy (Art. 689d para. 3 CO).
If an independent proxy is appointed, the person’s independence must be ensured. For this purpose, the law refers to the independence rules applicable to statutory auditors (Art. 689b para. 4 in conjunction with Art. 728 CO).
Independence requires sufficient distance from the company
The independent proxy is intended to act as a neutral representative of the shareholders.
According to the independence rules of audit law, the following situations are particularly problematic (Art. 728 para. 2 CO):
- membership of the board of directors or another decision-making role in the company
- employment with the company
- close personal relationships with members of the board of directors or significant shareholders
- involvement in activities where one would effectively review one’s own work — in the context of proxy voting, this could occur if the general meeting were required to vote on matters directly affecting the proxy
- economic dependence on the company
- contracts concluded on non-arm’s-length terms
- acceptance of valuable gifts or special benefits
These principles can be applied directly to independent proxies. Anyone who is too closely connected to the company organisationally or personally cannot credibly act as an independent representative of the shareholders.
Personal financial interests may undermine neutrality
Another key issue concerns financial interests in the company.
The law expressly identifies a direct or significant indirect shareholding as a potential obstacle to independence (Art. 728 para. 2 no. 2 CO).
An indirect shareholding may exist, for example, where a person holds shares:
- through a holding company
- through an investment company or fund
- through a related entity.
The law does not define precisely when such a shareholding becomes “significant”. For interpretation purposes, however, the independence guidelines of ExpertSuisse may provide helpful guidance. These guidelines are based on the same statutory provisions and relate to auditor independence.
According to these guidelines, an indirect financial interest is typically considered significant if it exceeds approximately 10% of the relevant person’s equity or net assets.
This threshold does not apply directly to independent proxies. However, it provides a useful point of reference: the greater the economic interest in the company, the more likely independence may be called into question.
In practice, this means that a person who is materially invested in the company — even indirectly — is unlikely to be perceived as a neutral representative of shareholders.
When mandates create economic dependence
In addition to shareholdings, economic dependence arising from mandates may also jeopardise independence.
The law expressly identifies mandates that lead to economic dependence as incompatible with independence (Art. 728 para. 2 no. 5 CO).
Again, the ExpertSuisse guidelines provide useful guidance. Economic dependence may arise, for example, where a single client accounts for a significant proportion of a service provider’s revenues over several years.
As a rule of thumb, thresholds of around 30% of annual fee income are often used. Even stricter thresholds may apply to public-interest entities.
These thresholds are not directly applicable to independent proxies. However, they illustrate the underlying principle: if a person depends economically on the goodwill of the company, their neutrality may be questioned.
Typical risk situations include:
- a trustee or adviser generates a large share of their income from the company
- the role as proxy is part of a broader advisory relationship
- the relationship with the company is economically central to the service provider’s business model.
In such cases, at least the appearance of dependence may arise.
Independence also extends to the surrounding environment
Independence requirements do not apply only to the proxy personally.
They also extend to:
- persons involved in carrying out the mandate
- members of the management of an organisation acting as proxy
- related persons
- controlled or controlling companies.
These extended requirements derive from the general independence provisions of audit law (Art. 728 paras. 3–6 CO).
They are intended to prevent conflicts of interest from arising indirectly through family relationships, business partners or affiliated companies.
Conclusion: neutrality builds trust at the general meeting
The independent proxy ensures that shareholders can exercise their rights even if they cannot attend the general meeting in person.
To maintain credibility, the law imposes strict requirements on both actual and perceived independence (Art. 689b para. 4 CO).
For proxies, this means in particular:
- sufficient organisational distance from the company
- no significant financial interests in the company
- no economic dependence on the mandate
- no problematic relationships through related persons or affiliated entities.
In the general meeting tool of Konsento, proxies can be recorded as a standard feature. Proxies may also be explicitly designated as independent proxies. This information is visible to shareholders in the meeting tool and enables a transparent and informed choice of proxy.
During the general meeting, the independence status of the proxy is reflected both in the overview of represented votes (Art. 702 para. 2 no. 2 CO), in the voting results, and in the automatically generated minutes.
Upon request, Konsento can also act as independent proxy at general meetings — naturally only where the statutory independence requirements are fulfilled.