Guideline for a shareholder's register

Dear Board of Directors,

Are you aware of your obligation to keep a shareholder’s register and do you know how to keep the shareholder’s register of your company up to date or have you already made yourself liable to prosecution? Read the following guidelines for the correct requirements according to the new practice.

 

I. Obligation of the company or the board of directors to keep a shareholder’s register

The company or the board of directors has a duty to keep the shareholder’s register in accordance with the regulations. To this end, they must keep the shareholder’s register conscientiously and for share transfers; checks need to be conducted to see whether legally valid transfers have taken place. However, a complete proof of the ownership rights of previous shareholders need not be evident from the current shareholder’s register. The shareholder’s register should, however, be updated within a reasonable period of time. The old versions, including transfer documents, should be retained in order to prove the complete chain of ownership. This can be particularly relevant for later M&A transactions.

 

II. Content of the shareholder’s register (art. 686 CO)

The respective owner of the shares must be entered in the shareholder’s register. In addition, registered shareholders who acquire equity rights and thereby reach or exceed the limit of 25 percent of voting rights or capital shares must report the first and last name and the address of the beneficial owner of the shares to the company within one month (so-called FATF notification). Whether or not the shareholder has complied with this reporting obligation must also be stated in the shareholder’s register with a positive or negative notice.

 

III. Criminal law consequences for the company or the board of directors

If the company or the board of directors intentionally fails to comply with its duty to maintain the shareholder’s register in an orderly manner, the company or the board of directors may be fined up to CHF 10,000. If the fine for the board of directors amounts to more than CHF 5,000, this will also result in an entry in the criminal register, which will be available for consultation for ten years. Incorrect entries in the shareholder’s register are also punishable. The latter occurs, for example, if shareholders are entered in the shareholder’s register without the board of directors having proof of the acquisition of the shares and the shareholder is not the legal owner of the shares. Furthermore, violation of the obligation to retain these documents is also punishable by law.

 

IV. Corporate law consequences

Both the corporate resolutions at the general meeting and the dividend payments are based on the shareholder’s register. Without an entry on beneficial ownership, the voting rights of defaulting shareholders are suspended and the property rights are forfeited. Whether the shareholder has complied with his/her reporting obligation can be quickly verified by means of the noted positive or negative reports. Before every general meeting, the shareholder’s register must be verified as to which shareholders are entitled to exercise their voting rights and which are not. Otherwise, the resolutions passed by the general meeting could be challenged.

 

V. Conclusion

In addition to the threat of fines, disregarding the obligation to keep the register is misconduct which, under the new law, can lead to a lack of organisation and, in the worst case, to the dissolution of the company. The company or the board of directors must therefore list and track all registered shareholders in the share register and note whether any notification in accordance with the above-mentioned threshold of 25 percent is fulfilled. A free template for a legally compliant shareholder’s register can be found by clicking here.

MME-Shareholder-Register-Template

June 2020 | Authors: Michèle Landtwing Leupi, Andreas Rudolf, Sabrina N. Weiss

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