Corporate Law Reform

On 19 June 2020, after decades of preparatory work, the Swiss Parliament has adopted the "major" revision of the Swiss corporate law. The most important changes are summarized below:

 

More flexibility in terms of share capital and dividends

The revision brings more flexibility in terms of capital structure and dividends:

  • The share capital may now be denominated in a permissible foreign currency;
  • The nominal value of shares can also be smaller than the current minimum of CHF 0.01 as long as it is higher than zero;
  • The rules on (intended) acquisitions of assets are abolished;
  • Companies can introduce a so-called capital band with a range between plus 50% and minus 50% of the registered share capital. Within the capital band, the board of directors is authorised to increase or decrease the share capital within a maximum of 5 years. The capital band replaces the previous authorised capital, which only permits capital increases and is valid for a maximum of two years;
  • Interim dividends can also be paid out of profits of the current financial year (currently not accepted by some auditing firms);
  • The regulation of reserves is harmonised with accounting law. In particular, the distribution of capital reserves (i.e. agio and other shareholder contributions in excess of the nominal value) is permitted.


Shareholder rights

The rights of shareholders and minorities are strengthened, in particular through the following innovations:

  • In the case of non-listed companies, shareholders holding at least 10% of the share capital or votes can address questions to the board of directors at any time (instead of only at the general meeting as in the past). The board of directors must answer the questions within four months;
  • Shareholders who together hold at least 0.5% of the share capital or votes in the case of listed companies and 5% in the case of non-listed companies may request that items be added to the agenda (currently 10% or shares with a par value of CHF 1 million for all companies);
  • The threshold for the right to convene an extraordinary general meeting will be lowered to 5% of the share capital or votes for listed companies (currently 10%);
  • Shareholders who hold at least 5% of the share capital or votes may now also demand access to the company’s books and correspondence without the authorization of the general meeting, but only to the extent that this is necessary for the exercise of shareholders' rights and the interests of the company worthy of protection are not jeopardized.


General assembly

The revision modernises the general assembly, allows the use of digital technologies and grants more flexibility in the organisation:

  • The holding of virtual general meetings is expressly permitted, provided that the articles of association provide a provision for it;
  • General meetings with more than one venue are expressly permitted;
  • General meetings can also be held abroad if the articles of association provide for this and if this does not make the exercise of shareholders' rights unduly burdensome without valid reasons;
  • Universal meetings can now also be held in written or electronic form;
  • In the case of listed companies, the independent representative of voting rights must now treat shareholders' instructions confidentially until the general meeting and may provide the company with general information on the instructions received no earlier than three working days before the general meeting.


Corporate restructuring and insolvency: liquidity in the centre

The law on corporate restructuring is being modernized and, in addition to the existing balance sheet elements, places the company's liquidity at the centre of attention:

  • The board of directors must monitor liquidity. In the event of justified concerns about imminent insolvency (illiquidity), the board of directors must take measures to ensure solvency. This explicitly defines the practically important fact of the danger of illiquidity as a triggering element for the board of directors' duty to act;
  • In the event of justified concern about over-indebtedness, it is clarified that the notification of the judge can be omitted as long as there is a justified prospect of corporate restructuring within a reasonable period of time, but at the latest within 90 days of the audited accounts being available, provided that the creditors' claims are not additionally jeopardised.


Implementation VegüV (ordinance against excessive remuneration in listed companies)

The draft law replaces the ordinance against excessive remuneration in listed companies (VegüV), which was issued as a transitional solution. Most of the previous rules of the ordinance will be adopted. The main differences between the new law and the previously valid VegüV can be summarized as follows:

  • Incentive payments for taking up a new job position are only permissible if they compensate for a "demonstrated financial disadvantage" associated with the change of position;
  • Prospective votes of the general assembly on variable remuneration remain permissible, but in this case an advisory vote on the remuneration report is mandatory;
  • Compensation for prohibition of competition clauses is only permissible if the non-compete clause is justified on business grounds and the compensation does not exceed the average annual compensation of the last three years.


Gender quota

The revision contains a benchmark for the representation of both genders on the board of directors and the executive board of major listed companies. If each gender is not represented by at least 30% on the board of directors or at least 20% on the executive board, the compensation report must state the reasons for this and explain the measures taken to promote gender diversity. This "comply or explain" rule will come into force five years after the revision comes into effect with respect to the board of directors and ten years after the revision comes into effect with respect to the executive board.

 

Disclosure requirements for companies exploiting natural resources

In accordance with EU Directives 2013/34 and 2013/50, larger companies that are active in the exploitation of natural resources must disclose payments in excess of CHF 100,000 to public authorities.

 

Entry into force and need for action

The Federal Council will decide when the revision of the law enters into force. It seems likely that it will come into force on 1 January 2022, but an earlier date is not excluded.

After the revision comes into force, companies have two years to make any necessary amendments to their articles of association. We recommend that Swiss companies limited by shares (AG), limited liability companies (GmbH) and cooperatives review their articles of association and internal regulations to ensure compliance with the new rules and, if necessary, to benefit from greater flexibility and new opportunities.

We are gladly at your disposal to answer your questions about the new law and support you in the concrete implementation within your company.

June 2020 | Authors: Dr. Alex Enzler

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