The revision of Swiss company law modernises Swiss company law while retaining its core principles.
Initial situation
On 19 June 2020, Parliament adopted the revision of Swiss company law after many years of preparatory work. Through various adjustments, the company law is modernised while retaining its core principles.
Almost all areas of company law were adapted. The revision of the company law covered the following topics in particular:
- Greater flexibility in share capital and dividend distributions,
- Enhancement of corporate governance in listed and unlisted companies,
- Strengthening shareholder and minority rights,
- Modernisation of the General Meeting, in particular through the use of digital technologies,
- Adoption of the Ordinance against Excessive Compensation in Listed Stock Corporations (VegüV) into the CO,
- Adjustments to the reorganisation law with a focus on the solvency of the public limited company,
- Introduction of a benchmark for the representation of both genders on the board of directors and the executive board of major listed companies, and new disclosure requirements for commodity companies.
- The introduction of gender benchmarks in the board of directors and executive board as well as the disclosure obligations for commodity companies do not require implementing provisions. For this reason, they were adopted by the Federal Council by means of corresponding
- Amendments to the Code of Obligations (CO) to come into force on 1 January 2021.
The most important innovations of the company law are briefly presented below.
More flexibility in share capital and dividends
The reform of company law entails a harmonisation of the capital structure and with regard to dividend distributions.
The most important innovations at a glance:
- Nominal value also less than one centime: The nominal value of a share may also be less than the current minimum of CHF 0.01. The amount may be set arbitrarily as long as it is greater than zero.
- Share capital in foreign currency: The share capital can also be set in the foreign currency essential for the business, whereby the permissible currencies are determined by ordinance.
- Facilitated capital increase or capital reduction: The general meeting may authorise the board of directors to increase or reduce the share capital for a maximum of five years within a bandwidth (so-called capital band) of +/- 50%. In this way, the legislator replaces the previous instrument of the „authorised capital increase“, with which capital increases could previously be carried out within two years of the AGM resolution.
- Distribution of interim dividends: Profits of the current business year can now also be distributed, provided that interim financial statements are available and the general requirements for dividend distributions are met.
- Regulations in the area of reserves: The repayment of statutory capital and profit reserves to shareholders is harmonised. The distribution of capital reserves is explicitly permitted.
Strengthening shareholder and minority rights
The reform of stock corporation law brings about a strengthening of shareholder and minority rights and thus aims to improve corporate governance. The focus is on the participation, control and protection rights of shareholders, regardless of whether they are structured as individual or minority rights.
The most important innovations at a glance:
- Questions from shareholders of non-listed companies: Shareholders holding at least 10% of the share capital or votes are entitled to ask the Board of Directors questions at any time. The Board of Directors shall answer these questions within four months, provided that no interests of the Company worthy of protection are endangered.
- Placing of items on the agenda: Shareholders who together hold at least 0.5% of the share capital or the votes in the case of listed companies or 5% in the case of non-listed companies may request that items be placed on the agenda. (Until now, a threshold of 10% of the share capital or shares with a nominal value of CHF 1 million applied to all public limited companies).
- Convening an extraordinary general meeting: For listed companies, the threshold for the right to convene an extraordinary general meeting is lowered to 5% of the share capital or votes (previously: 10% of the share capital).
- Inspection of business books and correspondence: Shareholders holding at least 5% of the share capital or votes may now inspect the business books and correspondence of the company limited by shares without the approval of the general meeting. However, the inspection of the business books and correspondence by the shareholder must not endanger the interests of the company that are worthy of protection and must be directly related to the exercise of the shareholder rights.
Strengthening the General Assembly
The reform of company law also entails a modernisation of the general meeting. The focus is on the use of digital technologies, which should in particular ensure more flexibility in the organisation of the general meeting.
The most important innovations at a glance:
- Use of electronic means of communication: If the articles of association of a public limited company provide for it, the holding of a virtual general meeting is now explicitly permitted.
- Multiple venues for a general meeting: General meetings with multiple venues are explicitly permitted.
- Restrictions on voting by proxy: In the case of listed companies, proxies for corporate bodies or deposited shares are no longer permitted. An independent proxy must meet higher independence requirements and abstain from voting if no instructions are available.
- General meetings abroad: If the articles of association provide for it and the shareholders‘ rights are not impeded in an unobjective way, general meetings can now also be held abroad.
- Holding of universal meetings: Universal meetings of a public limited company can now be held in written or electronic form.
- Shareholders‘ instructions to the independent proxy: In the case of listed companies, the independent proxy must treat the instructions confidentially until the general meeting. He may pass on general information to the public limited company regarding the instructions he has received no earlier than three working days before the general meeting.
Innovations at the Board of Directors
The reform of company law is intended to further improve the corporate governance of public limited companies. In the case of listed companies, there will be a shift in authority from the board of directors to the general meeting.
The most important innovations at a glance:
- Term of office: For listed companies, the term of office is now limited to one year, but re-election remains possible.
- Individual election: The members of the board of directors must now be elected individually. However, the articles of association may provide for a different regulation for unlisted companies.
- Use of electronic means of communication: The board of directors has the possibility to pass circular resolutions by electronic means of communication.
- Procedure in case of conflicts of interest: Members of the board of directors and the management board must now immediately and fully inform the board of directors of any conflicts of interest, and the board of directors will take the necessary measures to safeguard the interests of the company.
Restructuring law: focus on solvency
Restructuring law is harmonised and focuses on the solvency of the joint-stock company
The most important innovations at a glance:
- Improved early warning system: The new company law assigns the board of directors the duty to monitor the solvency of the company limited by shares. In doing so, it must assess the economic situation of the company with regard to liquidity as well as the available capital.
- Introduction of the offence of „imminent insolvency“: If there is a justified concern of imminent insolvency, the board of directors must take measures to ensure solvency and, if necessary, initiate additional restructuring steps.
- More time for reorganisation: In the case of justified concern of over-indebtedness, the board of directors has the option of waiving notification of the judge, provided there is a reasonable prospect of reorganisation within a reasonable period of time, but at the latest within 90 days after the audited interim financial statements are available. However, the claims of the creditors may not be further jeopardised by this.
Gender guidelines
The reform of company law introduces gender guidelines for the board of directors and executive board for listed companies above a certain size.
The political motivation for this change is that large listed companies domiciled in Switzerland should in future employ more women in their management functions. Each gender should be represented by at least 30% on the board of directors and at least 20% on the executive board. No sanctions are foreseen in case of non-compliance with these benchmarks, but the reasons and the measures decided upon must be disclosed in the remuneration report (so-called „comply or explain“ principle) if the benchmarks are not met.
According to the transitional provisions, the gender benchmarks will become binding for the board of directors 5 years and for the executive board 10 years after the entry into force of the new company law.
Transfer of the VegüV into law
The reform of company law replaces the Ordinance against Excessive Compensation in Listed Companies (VegüV), which the Federal Council had only enacted as an interim solution. The provisions of the VegüV will be largely integrated into the new company law.
The most important innovations at a glance:
- Expanded concept of external mandates: The articles of association must specify the number of permissible activities of members of the BoD, GM and advisory board in newly „comparable functions“ (formerly: in the highest management or administrative bodies) at other companies with an economic purpose.
- Votes of the general meeting on remuneration: If variable remuneration is voted on prospectively (i.e. in advance), the remuneration report must now be submitted to the next general meeting for an advisory vote.
- Inadmissible remuneration: Here it was specified in the introduction that former members of the board of directors, management board and advisory board as well as persons closely related to them may also be considered as recipients of inadmissible remuneration. Inadmissible are:
- Severance payments agreed in advance or provided for in the articles of association (as before);
- Compensation resulting from a non-competition clause, provided that it is excessive or the prohibition was not justified by business reasons (new);
- Remuneration not in line with the market on the basis of a previous board activity (new);
- Starting bonuses, provided they do not compensate for a demonstrable financial disadvantage, e.g. bonus payments forfeited due to a change of position (new);
remuneration paid in advance (as before); - Commissions for the takeover or transfer of companies/parts of companies (as before);
- Other benefits and advantages such as employee shares, the principles of which are not provided for in the Articles of Association.
Disclosure obligations of commodity companies
In accordance with EU Directive 2013/34 and 2013/50, larger public limited companies active in the field of extractive industries are required to disclose payments to government entities in an annual report or, if applicable, group payment report, which includes all payments of at least CHF 100,000 to government entities (individual payments and cumulative partial payments).
Entry into force and transitional periods
The date of entry into force of the revision of company law will be determined by the Federal Council. The referendum deadline passed unused in October 2020. We assume that the new provisions will enter into force in the second half of 2021 at the beginning of 2022 at the earliest.
After the revision comes into force, the companies will have two years to amend their articles of association if necessary. Authorised capital existing at the time of entry into force will continue to exist during this transitional period, but will no longer be renewable or amendable.
We recommend that Swiss public limited companies review their articles of association and internal regulations in order to benefit from the greater flexibility and the new instruments and to ensure compliance with the new requirements. CAPSTONELAW will be happy to assist you in this regard.