Proxy Voting: Europe's Most Ignored Compliance Risk

If you were to examine a representative sample of contested European assembly decisions, you would find one issue appearing in the majority of them: proxy voting. Not fraud, not malice, not administrative incompetence — just the gap between how organisations think proxy voting works and what the law actually requires.

Proxy voting is the mechanism by which shareholders and members who cannot attend an assembly delegate their right to participate. In principle, it is a straightforward concept. In practice, it is the area of assembly administration where informal practice has diverged most dramatically from legal requirement — and where that divergence most reliably generates disputes.

What a valid proxy requires

Under Danish law, the requirements for a valid proxy are set out in the Companies Act (Selskabsloven) for companies and in the foundation statutes or association law for other organisations. The core requirements are consistent across entity types.

First, written authorisation. A proxy must be in writing. An oral statement — including a verbal instruction to a colleague, a spoken authorisation to the chair at the start of the meeting, or a message passed through an intermediary — does not constitute a valid proxy. Writing in this context means a document that identifies the grantor, identifies the proxy holder, specifies the scope of the authorisation (which meeting, which agenda items), and is signed by the grantor. An email may meet this standard if it contains all required elements, but that determination depends on the specific requirements of the articles and the jurisdiction — and an email sent the morning of the meeting typically fails on timing grounds regardless.

Second, specific authorisation.A proxy authorises a specific named person to act. It does not authorise an organisation, a role, or an unspecified representative. "I authorise my lawyer" is insufficient. "I authorise Henrik Jørgensen, attorney at Kromann Reumert" meets the standard. The specificity requirement exists because the proxy holder's identity is part of what is being recorded — the vote is attributed to them, and their authority must be traceable to the original grantor.

Third, timing requirements. Most company statutes and articles of association specify a deadline by which proxy forms must be submitted — typically 24 to 48 hours before the meeting. This is not administrative convenience. It serves the function of giving the company secretary time to verify proxies, check them against the shareholder register, and confirm quorum calculations before the meeting begins. A proxy submitted after the deadline creates a verification problem: it cannot be properly checked, and counting it toward quorum or the vote creates exposure.

The verbal proxy problem

The most common proxy failure is also the most human one. A member knows they cannot attend and calls a colleague to ask them to represent them at the meeting. The colleague agrees and turns up. This happens in organisations of all sizes, across every sector, at virtually every general meeting.

From the perspective of everyone in the room, this seems entirely reasonable. The member wanted to participate, they made arrangements to do so, and their representative is present. What could be wrong?

What is wrong is that "she said I could vote for her" is not, in any European jurisdiction, a legally valid basis for casting a vote on another person's behalf. There is no document. There is no written authorisation that can be checked against the shareholder register. There is no chain of evidence that connects the vote cast in the room to the specific rights of the absent member.

If the vote is close — close enough that removing one improperly held proxy changes the outcome — then the organisation is exposed to a challenge that it cannot defend. The representative may be entirely honest, the absent member may genuinely have asked them to attend, and the organisation may have acted in complete good faith. None of that matters. The proxy was invalid, the vote counted on its authority was invalid, and the result is challengeable.

Good faith is not a legal defence against a procedural failure. The proxy either meets the requirements or it does not.

Proxy chains

A proxy chain occurs when a proxy holder does not exercise the proxy themselves but instead delegates their authority to a third party. This is almost always invalid.

The principle is simple: a proxy is a specific authorisation from a specific person to a specific person. It creates a direct relationship: A authorises B to act for A. It does not create a transferable authority: B cannot authorise C to act for A simply because B holds A's proxy. The original grantor authorised B, not C, and the authority to act on A's behalf cannot be re-delegated without A's explicit further authorisation.

Most European company statutes either prohibit proxy chains outright or limit them to cases where the articles of association explicitly permit sub-delegation with specific formalities. The vast majority of organisations have no such provision in their articles — and the vast majority of organisations have no policy on the subject at all. Proxy chains happen at assemblies simply because someone asks, and no one knows to say no.

The practical consequence of an unchecked proxy chain depends on the vote margin. If the resolution passes by a comfortable majority, an improperly held proxy is unlikely to attract attention. If the resolution is decided by a narrow margin — and the improper proxy changed the outcome — the chain of authority can be traced back and the vote challenged.

Digital proxy management: what best practice looks like

The organisations that manage proxy risk effectively share a common approach: they treat proxy submission and verification as a system, not an ad-hoc process.

A well-designed proxy management system begins with a standardised form that requires all legally necessary information: grantor identity, proxy holder identity, scope specification, date, signature, and submission timestamp. The form makes it impossible to submit a proxy without this information, which eliminates most of the failure modes described above at the point of submission.

The submission deadline is enforced — not as a preference but as a rule. Late proxies are declined or flagged for a specific review process, not simply accepted because the proxy holder appears in person and seems legitimate. The verification step — checking each proxy against the shareholder or member register, confirming the grantor's identity and entitlement — is conducted before the meeting and documented.

In a digital platform, each proxy is registered against the specific assembly, linked to the specific voters (grantor and representative), and stored as an immutable record. When the proxy holder votes, their vote is attributed to them as the registered representative of the grantor, with the grantor's share weight applied. The proxy registration, the vote, and the relationship between them are all part of the permanent record.

The five scenarios in the quiz below are drawn from the most common proxy situations that governance administrators encounter in practice. For each one, there is a legally correct approach — and multiple approaches that seem reasonable but create exposure.

Building a proxy process that holds up

The good news about proxy risk is that it is almost entirely preventable. Unlike some governance vulnerabilities — which require significant investment in systems or legal infrastructure — robust proxy management requires primarily a change in discipline: a standardised form, an enforced deadline, a documented verification step, and a clear policy on the situations described above.

The organisations that are most exposed are typically not those that are trying to cut corners. They are the ones operating on the assumption that because things have always worked informally, they will continue to work informally. That assumption holds until it is tested — by a shareholder with a legal team, by a close vote where the margin matters, or by a challenge brought by someone who knows exactly where to look.