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Swiss Parliament adopts Revision of Company Law

25.06.2020

The revision of the Swiss law on stock corporations (Company Law), originally initiated by the Swiss federal council (Bundesrat) back in 2005 as the so-called "big" Company Law reform, finally gained parliamentary approval on 19 June 2020. Up to the very end, important differences remained unresolved between the two chambers of the Swiss parliament, the national council (Nationalrat) and the council of states (Ständerat). It was the conciliation conference of the Swiss parliament which addressed and resolved the remaining controversial issues at last. Points of intense final debate included the gender guidelines for the boards of directors and executive managements of listed companies and the admissibility of general meetings being held abroad. On 19 June 2020, the proposals of the conciliation conference were approved by a large majority of both the national council (143 votes to 51) and the council of states (37 votes to 4).

Below, we provide a selection of important amendments of the newly approved bill:

  • Gender Guidelines for boards of directors and executive managements of listed companies: Following long-lasting controversial discussions the bill now adopts in relation to listed companies the gender guidelines initially proposed by the federal council: each sex shall be represented on the board of directors by at least 30 percent and in the executive management by at least 20 percent. If these benchmarks are not met, no sanctions are envisaged, but the reasons for deviating from the new guidelines and measures for improvement must be explained in the remuneration report ("comply or explain"). The reporting obligation begins five years (for the board of directors) and ten years (for the executive management) after the bill has come into force.
  • Implementation of "Minder Initiative" in Company Law: The bill implements at legislative level the so-called "Minder Initiative" on remuneration for Swiss listed companies. Subject to very few amendments, Swiss parliament thereby largely followed the rules that already apply today based on the corresponding transitory federal ordinance in force since 1 January 2014, which will thus be replaced by the new Company Law.
  • Admissibility of general meetings to be held abroad: The proposal to expressly allow for general meetings of shareholders to be held abroad was made by the federal council. In contrast to the council of states, the national council was in favor of such proposal, but added the condition that the determination by the board of directors of the meeting venue must not be detrimental to shareholders in exercising their rights. This condition was adopted by the conciliation conference which further added that general meetings abroad are only permissible if the articles of association explicitly allow for such option and if an independent proxy is appointed for the meeting abroad (unless waived by unanimous shareholder consent in case of privately held companies).
  • Admissibility of general meetings to be held virtually: In line with the aim of modernizing the general meeting, the bill now allows for general meetings to be held virtually (i.e. without a physical meeting venue) if so provided by the articles of association and if an independent proxy (unabhängiger Stimmrechtsvertreter) is appointed for the virtual meeting (unless waived by unanimous shareholder consent in case of privately held companies).
  • Introduction of a capital bandwidth (Kapitalband): The capital bandwidth introduced by the bill allows companies to provide in their articles of association for a flexible statutory capital by authorizing the board of directors for a maximum period of five years to increase or reduce the share capital within the range of maximum plus/minus 50% of the share capital registered in the commercial register without shareholder's approval.
  • Admissibility of share capital in a foreign currency: As proposed by the federal council, the bill allows for share capital in a foreign currency (such currencies to be determined by the federal council), provided that such currency is essential for the business activities of the company concerned. In such a case, bookkeeping and accounting must be kept in the same foreign currency.
  • No introduction of loyalty shares: Swiss parliament did not come to a consent on the issue of loyalty shares, which would have allowed shareholders holding shares for a certain period of time to benefit from preferential rights and higher dividends. The bill now does not provide for the possibility of companies to introduce loyalty shares, thereby following the position taken by the council of states.
  • Confidentiality obligations for independent proxies in listed companies: The bill now stipulates that independent proxies must treat shareholders' instructions as confidential until the general meeting. Although independent proxies may provide the company ahead of a general meeting with generic information on voting instructions received, they must not do so earlier than three working days before the general meeting. At the general meeting, they must declare what information they have provided to the company ahead of the general meeting.
  • No facilitation of the incorporation process: The councils rejected the idea of facilitating the incorporation process, as it was initially proposed by the federal council. Thus, the requirement to incorporate a stock corporation, limited liability company or cooperation in the form of a public deed in front of a notary public remains in place.
  • New transparency requirements for commodity companies (Rohstoffunternehmen): In line with current EU regulations, the bill requires those (economically important) commodity companies that are required by law to submit to an ordinary audit to also draw up a specific annual report on any payments to government agencies (Konzernzahlungsbericht).

While an evolution rather than a revolution, the revision of the Company Law represents an important milestone towards a modern, more flexible and business friendly Swiss Company Law. The bill is largely, though not enthusiastically, welcomed by important Swiss business associations such as the Gewerbeverband, Economiesuisse and Swissholdings.

Following its approval by the federal assembly on 19 June 2020, the bill will, as a next step, be published in the Swiss federal gazette, marking the start of the 100-day referendum period. If the referendum is not taken – which seems likely at this stage – or once the bill is adopted in the referendum vote, the final date of entry into force will be determined by the federal council. The bill is not expected to enter into force before mid-2021 or even 2022.

 

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