General corporate law reform was adopted in June 2020. The deadline elapsed unused on 8 October 2020, however, this reform should not come into force before 1 January 2023, although some limited amendments have already come into effect, as of 1 January 2021.
We have summarized the new corporate law changes expected, to help businesses understand the new flexibilities and protection these reforms bring them.
Simplification of the incorporation rules
The complicated rules on newly incorporated companies taking over material assets of related parties have been abolished.
Share Capital and Equity Distributions
Foreign Currency- To correct some inconsistencies arising between accounting rules and Swiss corporate law, share capital may now be denominated in an approved foreign currency such as EUR, USD, GBP or JPY.
Repealed Minimum Nominal Value- To allow for enhanced flexibility in CHF share splitting, there is no longer a minimum nominal value of CHF 0.01. Shares may now be split limitlessly, as their nominal value may be anything higher than CHF 0.
“Capital Band” Introduction- Corporations now have greater flexibility for equity capital structure. Previously, a combination of a capital increase and capital reduction was not permitted. With these changes, it is now possible for a Board of Directors to increase a company’s share capital to up to 150% of their registered share capital. They may also reduce it to 50% over a period of 5 years.
Legal Reserves- For clarity, legal reserve rules have been aligned with accounting rules. The rules surrounding the formation and termination of reserves have been clarified. This includes clarifying that the distribution of capital reserves to shareholders is permitted as long as certain limits are observed.
Dividend Payments- Previously, there was some disagreement as to the payment of dividends. It has now been explicitly permitted for dividends from the profits for the current financial year to be paid.
The flexibility of Meetings- Under certain conditions, electronic shareholders’ meetings (virtual such as Zoom or Skype) are now permitted.
Meetings can also now be held outside Switzerland, or at different locations at the same time. The Articles of Association must permit this, and the shareholders’ rights must be upheld and an independent voting proxy must be appointed.
Shareholders’ meetings may also be held in paper form through circular resolution.
Extraordinary Meetings- For listed companies, the threshold to convene an extraordinary meeting of shareholders is lowered from 10% to 5% of the voting rights or share capital.
Private companies retain a threshold of 10% of the voting rights, but now the threshold is also extended to 10% of the share capital, similar to listed companies.
Agenda and Motions- For listed companies, the threshold to place items on an agenda or submit motions has been lowered to 0.5%, whereas it’s been lowered to 5% for private companies.
Out-Of-Meeting Questions- Previously, questions may only be posed to the Board of Directors at shareholders’ meetings. Shareholders of private companies who hold at least 10% of shares or voting rights now have the right to ask questions of the Board outside meetings. The Board must answer these within 4 months.
Inspection of Books- To properly exercise shareholders’ rights, shareholders with at least 5% share capital or voting rights may inspect the company’s books. This is subject to the company’s confidentiality interests.
Lawsuits Regarding Repayment- The laws now simplify the process for bringing a lawsuit against shareholders, directors, and managers with regards to repayment of unduly received benefits. The outcome is now entirely separate from the financial situation of the company. Claims can now also be brought against people related to directors, shareholders, or managers.
Companies in financial distress
Debt-Restructuring Triggers- The risk of being unable to pay debts is now expressly an event requiring the Board of Directors to take action. This triggers restructuring actions they must take or propose to shareholders to ensure the company’s ability to pay their debt. They may also apply for a debt restructuring moratorium.
Notification of Insolvency- In the case of companies with concerns of insolvency, companies can put off notification of insolvency courts if enough creditors agree to the subordination of their claims. The new legislation states that there must be a reasonable prospect of restructuring within 90 days for a company to request that their creditors subordinate their claims. The latter is in line with current laws. This is assuming the deferrals do not endanger the creditors’ claims.
Elimination of Bankruptcy Deferral- The restructuring moratorium is now the only court-sanctioned restructuring procedure, as the deferral of bankruptcy is no longer allowed.
Rules About Listed Companies Only
Statutory Law- Rules on listed companies have moved from the Ordinance against Excessive Compensation to statutory law on corporations. Any changes to these have been minor, as well as the addition of standard practices as explicit law.
Gender Representation- Board of Directors and Executive Committees now have target quotas for the representation of both genders of 30% and 20% respectively. This is subject to audit.
Boards are given a transition period of 5 years, whereas Committees are given 10 years. If the targets are not met, an explanation must be given in the compensation report for the underrepresentation. Measures taken to promote gender representation and diversity in their corporate bodies must be included with this explanation.
Increased Flexibility and Protection
Once the new law enters into force, companies have two years to adapt their articles of association and regulations. This means now is the best time to act, preparing to take full advantage of the greater flexibility and protection the reform offers businesses.