The M&A Perspective
Implementation of Revised Recommendations of the Financial Action Task Force (FATF) of 2012 - Some Points to Bear in Mind for Private M&A Deals
29.07.2015
After a lengthy and complex parliamentary process, a new act aimed at improving Swiss money laundering prevention in line with the above-mentioned FATF recommendations was approved on 12 December 2014. Because the Global Forum on Transparency and Exchange of Information for Tax Purposes will start its Switzerland country evaluation this autumn and, as it appears, transparency of legal entities are an important point on the Forum's checklist, things had to move quickly: Already on 1 July 2015, certain amendments to Swiss corporate law entered into force, affecting in particular Swiss joint stock corporations and their shareholders (some transitional grace periods apply).
In a nutshell, they face the following new duties:
- Holders of bearer shares (Inhaberaktien; actions au porteur) in a privately held Swiss corporation must report their ownership to the corresponding company and the company must register the bearer share holders in a new so-called bearer share register.
- In case a significant shareholding in a privately held Swiss corporation (>25%) is acquired (bearer or registered shares), the ultimate beneficial owner of the shares must be reported to the corresponding company and the company must keep record of such reporting.
The penalties for non-compliance are harsh: Failure to report means the relevant shareholder is barred from exercising any membership or financial rights with respect to the relevant shares. If a shareholder fulfills the reporting obligation only after the statutory time limits for reporting, the financial rights may only be exercised from the reporting date onwards. Thus, non-compliance may inter alia potentially lead to a loss of dividends.
Going forward, due diligence in private transactions should definitely include verification of compliance with these newly introduced rules. Furthermore, in deals where control does not shift to the acquirer and the target company is not itself involved, reporting the acquiring beneficial owner to the target company must become an additional task on the post-closing checklist.
