As part of the “Major Company Law Revision” Swiss limited companies, as well as corporations, have the opportunity to introduce a so-called capital band into their articles of association (art. 653s-653v CO).
So what are the possibilities the new capital band will bring to the table?
The capital band gives authority to the Board of Directors of a limited company to gather for a general meeting in order to pass a decision to raise or decrease the ordinary capital share registered in the commercial register. This can be done for a period of five years at most, within a bandwidth of up to 50% (meaning the capital share could be raised up to 150% or decreased down to 50% from the initial amount).
Conditions and limitations of the capital band
In order to pass a decision at a Board of Directors’ general meeting about the capital band, a qualified majority is required, pursuant to article 704 paragraph 1 no. 5 of the Swiss Code of Obligations (A resolution by the general meeting requires at least two-thirds of the voting rights represented and an absolute majority of the nominal value of shares).
In all cases, the Board of Directors cannot decrease the capital share below CHF 100,000, which is the legal minimum for Ltd.
Also, the raise or decrease of capital share is allowed for a period of a maximum of five years.
If a company’s article of association provides a capital band with the option to decrease the capital share, such a company is obliged to have its annual financial statements audited on a limited basis. It is no longer possible to waiver the limited audit for purposes of creditor protection. Companies with capital bands that only allow the Board of Directors to increase the share capital, still have the right to waiver the limited audit.
Rules for combining the capital band with existing capitals
The existing share capital retains validity until expiration but can’t coexist with the capital band. However, when a capital band is in place, the existing authorized share capital has to be revoked.
Conditional share capital is a different situation. When a capital band is introduced, two options are possible, it can remain valid together with the capital band, or become an integral part of it.
In cases where the general meeting passes an ordinary increase or decrease of the capital share, or the currency of the capital share is changed for the period of the capital band’s existence, then the article of association has to be amended accordingly.
Taxation of the capital band
The tax assessment of the capital band (especially with respect to stamp duty and the repayment of capital contributions reserves) is only carried out at the end of its term after a net assessment of any increases and reductions.
A new requirement for the notes to the annual financial statements is that all capital increases and decreases made by the board of directors within the capital band should be included unless this information can already be derived from the balance sheet or income statement (article 959c paragraph 2 no. 14 Swiss Code of Obligations).