Swiss Corporate Law Reform: Main Changes

1. Organization of the Shareholders’ Meeting

• The shareholders’ meeting may be held simultaneously in several locations. In this case, the discussions held during the shareholders’ meetings will be broadcasted live by audiovisual means on all meeting sites.
• The shareholders’ meeting may be held abroad. If the articles of association allow it, the shareholders’ meeting may be held abroad. In this case, the board of directors must appoint an independent representative. If all the shareholders consent to it, the board of directors of non-listed companies may waive the appointment of the independent representative.
• The shareholders’ meeting may be held virtually. In order to do so, the articles of association have to provide for the possibility to hold a virtual shareholders’ meeting completely electronically. Besides, the board of directors must appoint an independent representative. For companies whose shares are not listed on a stock exchange, the articles of association may provide for the possibility to waive this requirement. During the virtual meeting, the board of directors must ensure that the identity of the participants is established, that speeches are transmitted simultaneously, that participants can make proposals and take part in the debate and that there is no vote tampering. In the event of technical problems, the shareholders’ meeting shall be convened again.

2. Capital Structure

• Creation of a capital fluctuation band. With the Reform, the authorized capital increase will be replaced by the creation of a capital fluctuation band. The shareholders’ meeting may authorize the board of directors to increase or reduce the share capital during a 5 year period within the limits of the fluctuation band, the lower limit being half of the share capital registered in the commercial registry – but not less than CHF 100,000 – and the upper limit being one and a half times the share capital registered in the commercial registry. Each capital fluctuation must be followed by an amendment to the articles of association (by public deed).
• Share capital expressed in foreign currency. As a result of the Reform, Swiss corporations will be able to have their share capital expressed (and paid-in) in a foreign currency. The foreign currency cannot be lower than the equivalent of CHF 100,000. The foreign currency must be the most relevant currency to the company’s activities. Existing companies may change the currency in which the share capital is stated by a resolution of the shareholders’ meeting (by a public deed).
• Reduction of the minimum nominal value of the shares. Currently, the minimum value of a share may not be less than one cent. With the Reform, a share may have a nominal value of less than one cent but must be greater than zero. The aim is to make shares more liquid, e.g. in the event of a share split, without adopting a system of shares without any nominal value.

3. New restructuring provisions

• Threat of insolvency. The integration of the concept of insolvency into the Code of Obligations is one of the new features of the Reform. The board of directors will have to monitor the solvency of the company: if there is a risk of insolvency, it will have to take measures to guarantee its solvency without having a legal obligation to establish a cash flow plan. The board will then have to take additional restructuring measures or propose such measures to the shareholders’ meeting. If necessary, the board of directors will file a moratorium request before the court. In addition, the Reform will impose an explicit duty of rapidity on the board of directors.
• Capital loss. Under the current law, a capital loss occurs when, based on the last annual balance sheet, half of the share capital and legal reserves are no longer covered. In such a case, the board of directors is obliged to convene a shareholders’ meeting immediately and to propose restructuring measures. The new provisions clarify the definition of capital loss, meaning that a company is in a situation of capital loss when the assets, after deduction of the losses, no longer cover half of the share capital, the statutory capital reserves and the statutory earning reserves. The board of directors must then take the appropriate measures to put an end to the capital loss. As in the case of a threat of insolvency, the board of directors will have to take further restructuring measures or propose such measures to the shareholders’ meeting.
• Over-indebtedness. Under the current law, a company is over-indebted when its assets no longer cover its debts. The Reform maintains the obligation, in case of risk of over-indebtedness, for the board of directors to draw up interim accounts at going concern value as well as at liquidation value. The interim accounts have to be audited. If the interim accounts show that the company is in fact over-indebted, the board of directors will be obliged to notify the judge of the over-indebtedness and the judge will either declare the company’s bankruptcy or proceed with a moratorium. However, the board of directors will not have the obligation to notify the court in two situations: in the event claims have been subordinated or if there are serious reasons to admit that it would be possible to eliminate the over-indebtedness within 90 days after the drawing up of the interim accounts, and this without jeopardizing the settlement of the claims during this period.

4. Quotas for representation on the board of directors and the executive board

1. Large listed companies (i.e. exceeding, during two successive financial years, two of the following values: total of balance sheet of CHF 20 millions, revenue of CHF 40 millions and 250 full-time positions) must have a representation of each gender of 30% at the level of the board of directors and 20% at the level of the executive board. There is no penalty for non-compliant companies, but, according to the “comply or explain” principle, if the thresholds are not met, the board of directors has to explain the reasons in the remuneration report and state the measures to be taken to remedy the situation. The new provisions related to the quotas entered into force in January 2021, but, due to long transition periods, the concerned listed companies will only have to comply with the reporting obligations in 2026 (board of directors) or 2031 (for the executive board).

5. Excessive remuneration

• The Ordinance against excessive remuneration in listed companies, which derived from the Minder initiative and which came into force on 1 January 2014, will be incorporated into the Swiss Code of Obligations with some amendments. Listed companies will continue to be subject to these provisions and unlisted companies will be able to comply with them on a voluntary basis. According to these new provisions, it will be the task of the shareholders’ meeting to elect a remuneration committee which will prepare a detailed remuneration report related to the board members’ and the executive board’s remuneration. In addition, the shareholders’ meeting will vote on the remuneration to be paid to the board of directors and the executive board (prospective vote).

6. Strengthening shareholders’ rights

• Right to convene a shareholders’ meeting. Currently, shareholders representing 10% of the share capital may request that a shareholders’ meeting be convened. Following the Reform, for companies whose shares are listed on the stock exchange, the threshold will be lowered to 5% of the share capital or voting rights. For companies whose shares are not listed on the stock exchange, shareholders representing 10% of the share capital or voting rights may request that a shareholders’ meeting is convened. The new law specifies that the appropriate period within which the board of directors must respond to a request to convene a shareholders’ meeting is 60 days.
• Right to demand that an item be placed on the agenda or motions concerning an item on the agenda. Under the current law, shareholders representing shares with a total nominal value of CHF 1 million may ask that an item be placed on the agenda. With the Reform, the threshold will be 5% of the share capital or voting rights for companies whose shares are not listed on the stock exchange, and 0.5% for companies whose shares are listed on the stock exchange. Shareholders will be able to briefly express the reasons for their request in the agenda.
• Request for information and institution of a special examination. This new concept corresponds more or less to the current “special audit”. Once a shareholder makes a request for information about the company’s business, the board of directors must respond within four months (currently 30 days). After exercising their information rights, the shareholders are then entitled to propose to the shareholders’ meeting the establishment of a special examination. In case the special examination is approved, the shareholders or the company will have to request the court to appoint an expert. In case the special examination is not approved by the shareholders’ meeting, shareholders representing 10% of the share capital or voting rights (5% for listed companies) must request the establishment of a special examination by a court within three months.

7. Transparency in commodities companies

• Companies subject to ordinary audit and active in the production of minerals, oil, natural gas or in the exploitation of wood from primary forests will be obliged to draw up an annual report on payments of more than CHF 100,000 made to Swiss or foreign governments. To ensure transparency, the report must remain available to the public for a period of at least 10 years. The Federal Council may also decide to extend the obligation to report payments to companies active in commodity trading. The new provisions related to transparency entered into force in January 2021 and are applicable as from 2022.

8. Arbitration clause in the articles of association

• With the Reform, an arbitration clause may be contained in the articles of association. If this is the case, the clause will specify that disputes arising under company law will be handled by an arbitral tribunal with its seat in Switzerland. The company, its organs, the members of the organs and the shareholders will in principle be bound by this arbitration clause.

This important reform – which will enter into force in January 2023 (quotas and transparency entered into force in 2021 already) – gives companies more flexibility in organizing their shareholders’ meeting and capital structuring (in particular the capital fluctuation band), while strengthening shareholders’ rights. In addition, it codifies practice on many points. However, the impact of the Reform on the board of directors is less significant, since the issue of representation quotas only concerns a limited number of companies and no penalty is foreseen in case of non-compliance. On the other hand, the board of directors will have to closely monitor the financial situation of the company in the light of the new provisions on the threat of insolvency, capital loss and over-indebtedness.

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