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FATF-Act to Create a Need for Action for Swiss Companies

May 2015

The Swiss Federal Act on the Implementation of the Revised Recommendations of the Financial Action Task Force (FATF) of 2012 will partially enter into force on 1 July 2015 (hereinafter: "FATF-Act").

Aimed at stepping up the fight against money laundering in Switzerland, the FATF-Act provides for numerous changes to existing laws. Heeding the FATF's call for more transparency with regard to legal entities, these changes introduce new obligations for privately held Swiss companies and their equity holders. The new rules are not applicable, however, to listed companies.

Obligation to Report the Purchase of Bearer Shares in Privately Held Stock Corporations

According to the new rules, an acquirer of bearer shares in a privately held Swiss stock corporation must report the share purchase to the respective stock corporation (or, if so provided, to an instructed financial intermediary) within one month following the purchase. This reporting obligation is not linked to any specific threshold, i.e. even the purchase of one single bearer share must be reported.

The stock corporation, in turn, must register the holders of its bearer shares in a new bearer share register, which must be accessible within Switzerland at any time. Further, the bearer share register and all related records are subject to a mandatory retention period of ten years.

Obligation to Report the Beneficial Owner(s) of Significant Shareholdings in Privately Held Stock Corporations

If a person, alone or acting in concert with third parties, acquires bearer or registered shares in a privately held Swiss stock corporation and thereby reaches or exceeds the threshold of 25% of the stock corporation's share capital or voting rights, such purchase triggers the obligation to identify and report the beneficial owner(s) of the relevant bearer or registered shares to the respective stock corporation (or, if so provided, to an instructed financial intermediary) within one month following the purchase. No such reporting obligation exists where the threshold of 25% is not reached.

The ultimate beneficial owner of the shares can be either the direct holder of the respective bearer or registered shares or a third party. The reporting obligation, however, always lies with the direct shareholder. The direct shareholder who is not the beneficial owner must identify and report the ultimate beneficial owner of the shares at the end of the control chain.

The stock corporation must keep a record of the so reported ultimate beneficial owner(s) in a new register of beneficial owners, which must be accessible within Switzerland at any time. Same as the bearer share register, the register of beneficial owners is subject to a mandatory retention period of ten years.

Consequences in Case of Non-Compliance with the Reporting Obligations

If an acquirer of bearer or registered shares does not comply with the aforementioned reporting obligations, the new shareholder is barred from exercising any membership rights (in particular, the voting rights) or financial rights (in particular, the right to receive dividends) with respect to the relevant shares until the reporting obligations have been complied with.

According to the text of the new law, the financial rights shall even be deemed forfeited if holders of bearer shares or registered shares do not comply with their reporting obligations within the prescribed period of one month. If a shareholder fulfills the reporting obligation at a later stage, the financial rights may only be exercised from the reporting date onwards. Depending on the specific circumstances, non-compliance with the reporting obligations can, thus, lead to a loss of dividends in favour of the stock corporation.

Application of Certain Provisions to Limited Liability Companies and Cooperatives

The FATF-Act provides that the rules regarding the obligations to report and keep a register of the ultimate beneficial owner(s) as well as the consequences of failure to comply with these rules shall also be applicable to limited liability companies (GmbHs) and their quotaholders.

Furthermore, in the future, cooperatives (Genossenschaften) will be required to maintain a list of their members, which can be accessed within Switzerland at all times and which is subject to a mandatory retention period of ten years.

Entry into Force / Transitional Provisions

  • The amendments to Swiss corporate law will enter into force on 1 July 2015 and will immediately be applicable to all existing companies;
  • Holders of bearer shares must report their shareholdings at the time of entry into force of the new law as well as ultimate beneficial ownership (if the threshold of 25% is reached or exceeded) to the respective stock corporation within six months from the date of entry into force (i.e. until 31 December 2015); otherwise their financial rights shall be deemed forfeited.
  • The six-months-deadline does not apply to holders of registered shares in a stock corporation or quotas in a limited liability company. The obligation to report the ultimate beneficial owner(s) for these shares is only triggered by a future purchase of shares or quotas as a result of which the respective share- or quotaholding reaches or exceeds the 25% threshold.
Immediate Action

Holders of Bearer Shares:
  • Verify existing shareholdings in Swiss stock corporations and identify beneficial owner(s) of such shareholdings; report such shareholdings and, provided that the shareholding amounts to or exceeds the threshold of 25%, the beneficial owner(s) thereof to the respective stock corporation.
Stock Corporations with Bearer Shares:
  • Prepare for maintaining and safe-keeping a bearer share register as well as a register of beneficial owners by 1 July 2015.
Stock Corporations with Registered Shares as well as Limited Liability Companies:
  • Prepare for maintaining and safe-keeping a register of beneficial owners of the shares by 1 July 2015.
Cooperatives
  • Prepare for maintaining and safe-keeping a list of the cooperative's members by 1 July 2015.

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