Technical article by Dr. iur. Felix Horber

1. Initial situation and problem description

In Art. 702 para. 5 CO, the new Swiss Corporate law that came into effect on 1 January 2023 stipulates that companies whose shares are listed on a stock exchange must make electronically accessible the resolutions and the election results with details of the exact percentage of votes for and against within 15 days following the general meeting.

This new provision may lead to the conclusion that open votes in which the precise determination of the voting ratios is dispensed with due to clear majorities are no longer permitted in future.

2. Assessment

a) Clarification of terms
Before describing specific scenarios in more detail, it is necessary to clarify what is meant by an open vote. As understood here, open votes involve the passing of resolutions and conducting of elections by means of hand raising. This can be done with or without counting all the votes. If all the votes are counted, the precise voting ratio can be calculated – as with electronic voting – and the vote meets the requirements of Art. 702 para. 5 CO. If votes are not all counted out because there is a clear majority (1), i.e., the few votes against or abstentions do not carry any weight, there is no exact percentage of votes in the sense of Art. 702 para. 5 CO. In such a situation, the chair of the meeting usually records for the minutes that the general meeting has approved the proposal by a “large majority” or “overwhelming majority”.

(1) This is the case when, for example, there is a majority shareholder or when representatives of large blocks of shares are known and they all vote for or when only a small percentage of the share capital represented is physically present in the room and the lion’s share of the votes is represented by the independent proxy, who has been instructed by a large majority to vote in favour.

b) Transitional considerations
When seeking an answer to the question whether open votes without determining the exact proportion of votes are permitted even under the new Corporate law, we must differentiate in terms of timing.

aa) Legal situation until the end of 2024
Companies whose current articles of association state provisions that contradict the new Art. 702 para. 5 CO must amend these provisions according to Art. 2 of the transitional provisions within two years, i.e. until 31 December 2024, so that they comply with the new law.

Companies whose articles of association allow open votes therefore may (continue to) pass resolutions and conduct elections in their AGM seasons 2023 and 2024 without having to determine the precise voting results. If voting is done using electronic means and the voting devices should fail, the chair of the meeting can easily switch to open voting as described above.

bb) Legal situation from 1 January 2025
The two-year transition period will expire on 31 December 2024. Provisions stated in articles of association or in company regulations that contradict the aforementioned Art. 702 para. 5 shall lose their validity. The consequence of this is that an open vote without determining the exact results will no longer be permitted. The chair of the meeting will therefore have to arrange for a vote using electronic means – which will usually be the case – or a written vote, or conduct an open vote including counting of all the votes.

3. Failure of electronic voting devices

But what if a failure occurs in the devices used for electronic voting? In such a situation, is it possible to switch to an open vote? (2) The new law states that listed companies must make accessible the exact percentage of votes, which is why an open vote without counting all the votes will no longer be possible as per 1 January 2025.

In order to continue the AGM, the chair of the meeting has two options that allow the votes to be counted precisely despite the failure of the voting machines, namely by means of a written vote.

(2) A failure of electronic voting devices does not constitute a technical problem in the sense of Art. 701f para. 1 CO, leading to the result that the general meeting cannot be duly conducted, because there are alternatives to electronic voting. Otherwise, the Annual General Meeting would have to be repeated (see Dr. iur. Felix Horber’s “AGM freezing”: repeating a hybrid or virtual general meeting, blog article published by Nimbus AG on 10 March 2023).

a) a) First option: recording all votes
In this case, the chair of the meeting must instruct the vote counters to record the stock votes of every single shareholder, i. e. the votes in favour, against and abstentions on every agenda item individually. This shall be done either by using hand scanners or by collecting and processing the voting coupons. If a person behaves in a passive way, i.e., does not wish to participate in the vote, these votes not given will not be taken into account if the articles of association prescribe the votes cast only. Written votes in public companies with several hundred or even thousands of attendees are time-consuming and can lead to massive delays in the AGM’s schedule, for the votes must be recorded for every person present and every single item on the agenda.

The result of the analysis of the votes cast in the hall needs to be added to those represented by the independent proxy. The total of these figures reflects the precise percentage of votes for every agenda item, thus complying with the requirements of Art. 702 para. 5 CO.

b) Second option: recording only the votes against and abstentions
In this scenario, the chair of the meeting waives the counting of all the votes cast in the hall but has the counters record only the votes against and the abstentions (written vote “light”). This is also done by using hand scanners or collecting and analysing vote coupons. Specifically, it is assumed that all shareholders who do not vote against or abstain are voting in favour. The proportion of “yes” votes is the result of the total of share votes present in the hall minus the total of votes against and abstentions. If a “passive” shareholder does not want to vote at all, they would have to speak up explicitly and their votes would most likely have to be recorded as well (as votes not cast). These votes would have to be subtracted from the sum of votes in favour.

Before carrying out the written vote “light”, the chair of the meeting needs to present the function and calculation method of this vote transparently and in all details to the shareholders. This should enable them to get an idea of the implications of this counting mode. Specifically, the fact that votes in favour will not be recorded separately must be pointed out.

As in the first option, the result of the count of votes present in the hall will be added to the share votes represented by the independent proxy. The advantage of this option (at least in the case of a high “yes” percentage) is the much smaller number of shareholders whose votes must be counted. This saves time, which has a positive effect on the progress of the Annual General Meeting.

As an alternative to a written (secret) vote, the chair of the meeting can also request an open vote in case of failure of the voting devices. In this situation, it is also conceivable to conduct an open vote “light”, where only the visible votes against and abstentions will be counted. It will then be presumed that all other attendees are voting in favour.

4. Conclusion

Listed stock companies will be allowed to conduct open votes without determining the precise voting results until 31 December 2024.From 1 January 2025, elections and votes should be held using electronic means in order to comply with Art. 702 para. 5 CO. In cases where voting by electronic means is not available (any longer), a written vote “light” or an open vote “light” can be requested. By choosing the latter, however, one must renounce the “secret character” of the vote.

Companies whose shares are not listed can continue to vote openly without the exact voting ratios being recorded.

Dr. iur. Felix Horber, president, Advisory Board, Nimbus AG