Newsletter on the revision of the Swiss stock corporation law
Revision of the Swiss stock corporation law
In our latest newsletter, Reto Strittmatter and Lara Gachnang present the most important innovations of the "major" revision of the Swiss stock corporation law. The new provisions are - apart from a few regulations already in force since 1 January 2021 - applicable to existing companies as of 1 January 2023.
The law governing stock corporations has been updated and modernized in many details as a result of the revision. Among other things, the new law provides for greater flexibility in the area of capital and new forms for holding general meetings and board meetings, strengthens shareholders' rights in certain areas and modifies the law on financial distress.
The most significant changes (without claiming to be exhaustive) are as follows:
Capital, Reserves, Dividends
The share capital can now be denominated in a foreign currency that is significant for the business, provided that it is equivalent to at least CHF 100,000. If the share capital is denominated in a foreign currency, bookkeeping and accounting must be carried out in the same currency. The Federal Council has defined USD, GBP, EUR and YEN as permissible foreign currencies.
The par value of a share can now less than the previous minimum par value of 1 centime, as long as it is greater than zero.
The (intended) acquisition in kind is no longer considered a qualifying event in the formation or capital increase.
The provisions on authorised capital increases will be repealed when the revision comes into force. The Annual General Meeting ("AGM") may authorise the Board of Directors ("BoD") in the Articles of Association to increase or reduce the share capital registered in the Commercial Register within a certain range for a maximum period of 5 years. The capital band may not exceed or fall below half of the registered capital. The statutory minimum capital must always be observed.
The revision simplifies the capital reduction procedure. A single call for debts is now sufficient (previously: three), and creditors must submit any request to secure their claims within 30 days (previously: within two months).
Terminological adjustments and clarifications have been made to the law on reserves. Reserves are divided into statutory capital reserves, statutory retained earnings and voluntary retained earnings. The law then specifies the mandatory order in which losses must be set off against retained earnings and reserves.
The AGM can now decide to pay an interim dividend based on interim financial statements. The auditors must audit the interim financial statements before the AGM takes its decision. No audit is required if the company is not required to have limited statutory audits of its annual financial statements. The audit may be waived if all shareholders approve the payment of the interim dividend and the claims of creditors are not thereby jeopardised.
New forms of AGM
The AGM is convened by notifying the shareholders in the manner laid down in the Articles of Association. It is possible to convene the meeting exclusively in electronic form (e.g. by e-mail).
The revised law stipulates that the AGM
can be held simultaneously at different locations, provided that the votes of the participants are transmitted directly to all locations in sound and vision;
can be held abroad, provided that the Articles of Association provide so and the BoD designates an independent proxy in the notice of the meeting. In the case of companies whose shares are not listed on a stock exchange, the BoD may dispense with the appointment of an independent proxy if all shareholders agree;
can be held by electronic means. The Board of Directors may provide that shareholders who are not present at the venue of the General Meeting may exercise their rights electronically (hybrid General Meeting). An AGM may be held by electronic means without a venue (virtual AGM) if the Articles of Association provide this and the BoD appoints an independent proxy in the notice of the meeting. In the case of companies whose shares are not listed on a stock exchange, the Articles of Association may provide that the appointment of an independent proxy may be waived.
In addition to the (physical) general meeting, it is now permissible to hold a general meeting without complying with the requirements for convening a meeting if resolutions are adopted in writing, on paper or in electronic form, unless a shareholder or their representative requests an oral discussion.
Resolution in the BoD
The Board of Directors can pass its resolutions:
at a meeting with a venue;
by electronic means;
in writing on paper or in electronic form, unless a member requests an oral discussion. If resolutions are passed by electronic means, no signature is required (unless otherwise determined in writing by the Board of Directors).
Minutes, signed by the Chairman and the Secretary, shall be kept of the proceedings and resolutions of the BoD.
Strengthening shareholder rights
The threshold for convening an extraordinary general meeting will be lowered to 5% of the share capital or votes for listed companies (previously 10%). For unlisted companies, the previous threshold of 10% of the share capital or votes will be maintained.
For the exercise of the right to put items on the agenda 0.5% of the share capital or votes (listed companies) or 5% of the share capital or votes (unlisted companies) is required. Under the same conditions, shareholders may request that proposals for items on the agenda be included in the notice convening the meeting.
In the case of unlisted companies, shareholders holding at least 10% of the share capital or votes are entitled to request written information from the board of directors on the company's affairs at any time (instead of only at the general meeting).
Shareholders representing at least 5% of the share capital or votes may now inspect the company's books and correspondence without the authorisation of the general meeting, provided that this is necessary for the exercise of shareholders' rights and does not jeopardise the company's interests worthy of protection.
Revised financial emergency law
In the event of imminent insolvency of the company, the BoD is obliged to take measures to ensure the solvency of the company. If necessary, it takes further measures to restructure the company or proposes such measures to the General Meeting if they fall within its remit. If necessary, it applies for a moratorium on debt restructuring.
If the latest annual financial statements show that the assets less liabilities fall below half of the sum of the share capital, the legal capital reserve not repayable to the shareholders and the legal retained earnings (capital loss), the BoD is obliged to take measures to eliminate the capital loss and, if necessary, to take further measures to restructure the Company or to propose such measures to the General Meeting if they fall within its remit. If the company has no auditors, the last annual accounts must also be subjected to a limited audit by a licensed auditor before they are approved by the general meeting.
If there is reasonable cause to believe that the company's liabilities are not covered by its assets (over-indebtedness), the BoD must immediately prepare interim financial statements (generally on a going-concern and sales value basis). The interim accounts must be audited by a licensed auditor. If the company is overindebted according to the two interim financial statements, the BoD must notify the court. Notification may be waived (as before) if the company's creditors subordinate to all other creditors to the extent of the over-indebtedness, with the law now specifying the requirements for subordination. Notification to the court can now also be waived if there is a reasonable prospect that the over-indebtedness can be remedied no later than 90 days after the audited interim financial statements are available and that the creditors' claims will not be further jeopardised.
Adjustments to restitution and liability claims
The action for restitution (Art. 678 et seq. CO) has been made stricter. Bad faith on the part of the unjust enriched party is no longer a prerequisite. The obligation to restitute exists if there is a clear imbalance between performance and consideration; the economic situation of the company is no longer taken into account.
Only a few changes have been made to the liability action (Art. 754 et seq. CO). The revised law stipulates that in the event of bankruptcy, a subordinated claim may not be added to the loss. The discharge resolution of the general meeting may now be contested by non-voting shareholders within 12 months (previously 6 months).
It is clarified that the AGM has the power to bring an action for restitution or liability against the company (previously disputed). The general meeting may entrust the board of directors or a representative with the conduct of the proceedings.
The relative prescription period for actions for restitution and liability is reduced from five to three years. The absolute limitation period for both actions remains ten years.
Statutory arbitration clauses
The admissibility of arbitration clauses in articles of association was controversial under the previous law. The new law provides clarity:
The articles of association may now contain an arbitration clause for corporate disputes in favour of an arbitral tribunal domiciled in Switzerland. Unless the statutes provide otherwise, the arbitration clause binds the company, its organs and their members as well as the shareholders. The commercial register must show that the articles of association contain an arbitration clause. New shareholders are ipso iure bound by the arbitration clause. There is no additional approval or formal requirement for the arbitration clause to be binding.
Inclusion of the Ordinance Against Excessive Remuneration in Listed Companies (VegüV) in the CO
With the revision, the provisions of the Ordinance against Excessive Compensation in Listed Stock Corporations of 20 November 2013 ("VegüV") were incorporated into the CO with minor changes (see Art. 732 et seq. CO).
Transitional provisions
Except for a few areas that came into force earlier (see "Excursus" ), the provisions of the new law will apply to existing companies as of January 1, 2023.
Companies that do not comply with the new provisions must amend their articles of association and regulations to comply with the new provisions within two years. Provisions of the articles of association and regulations that are incompatible with the new law will remain in force until they are amended, but for no longer than two years after the new law comes into force.
For authorised and conditional capital increases resolved before the new law comes into force, the previous law applies. The resolutions of the Annual General Meeting can no longer be extended or amended.
Excursus: Provisions already in force since 1 January 2021
1) Introduction of gender benchmarks
For listed companies that, in two consecutive financial years, exceed two of the following thresholds:
a. total assets of CHF 20 million
b. Turnover of CHF 40 million
c. 250 full-time positions on an annual average
Each gender shall be represented at least 30% on the Board of Directors and at least 20% on the Executive Committee. If these benchmarks are not met, the reasons for the under-representation and the measures taken to promote the under-represented gender must be explained ("comply or explain"). There are no other sanctions. Companies are granted a transitional period of five years (board of directors) or ten years (executive board).
2) Transparency in Extractive Industries
Companies that are legally subject to a statutory audit and are engaged in the extraction of minerals, oil or gas, or the logging of timber in primary forests, either directly or through a company they control, must prepare an annual report on payments made to government authorities. This requirement will apply for the first time in respect of the 2022 financial year.