Where the Chain of Control Breaks – Indirect Interests and the Transparency Register

Key Points at a Glance

– At the first level, an interest of at least 25 percent is sufficient; from the second level onward, an interest of more than 50 percent is required. The interests are not multiplied.

– An interest of exactly 50 percent in an intermediary legal entity does not confer indirect control through an interest; control by other means must nevertheless be examined.

– Only the size of the direct interest at the first level must be reported, not a calculated (look-through) figure.

– In addition, information on the chain of control must be obtained and reported to the transparency register if the chain of control includes at least two intermediary natural persons, legal entities or trusts, and in all cases involving trusts, fiduciary arrangements or certain blocking measures.

What Art. 2 TLEO Regulates

Under Art. 2 para. 1 TLEO, an interest is indirect if the capital or voting rights are held through one or more intermediary natural persons, legal entities or trusts. Para. 1 is thus the counterpart to Art. 1 para. 1 TLEO. Under para. 2, an indirect interest confers control if it comprises more than 50 percent of the capital or voting rights of one or more intermediary legal entities which, in turn, directly or indirectly hold at least 25 percent of the capital or voting rights of the legal entity concerned. While Art. 1 TLEO defines a direct interest in negative terms, Art. 2 TLEO, based on Art. 6 TLEA, specifies the requirements for indirect control through an interest.

The intermediary persons, legal entities and trusts together form the chain of control that links the legal entity subject to the reporting obligation to the beneficial owner. The direction of the analysis is decisive: the starting point is always the legal entity subject to the reporting obligation. From there, the chain must be traced upward, level by level, until all natural persons who ultimately control the legal entity have been identified. Legal entities can never be beneficial owners, as Art. 4 para. 1 TLEA expressly refers to natural persons.

Two Thresholds – and No Multiplication

Art. 2 para. 2 TLEO sets two thresholds. At the first level – i.e. for the person, legal entity or trust holding a direct interest in the legal entity subject to the reporting obligation – the threshold is at least 25 percent. From the second level onward – i.e. for all persons, legal entities or trusts that do not hold a direct interest in the legal entity subject to the reporting obligation – the threshold is more than 50 percent of the capital or voting rights. Both requirements must be met cumulatively. If the interest at the first level does not reach 25 percent, it does not confer control through an interest.

Of decisive practical importance is the clarification that the interests are not multiplied across the levels. The threshold of more than 50 percent from the second level onward applies regardless of the size of the beneficial owner’s interests at other levels of the chain of control; the interests do not need to be combined into an overall share. Example: if a person holds 70 percent of a holding company which, in turn, holds 40 percent of the legal entity subject to the reporting obligation, that person is a beneficial owner – even though the calculated share is only 28 percent. The 40 percent interest of the holding company must be reported, i.e. the range “at least 25 percent and up to 50 percent”.

Conversely, falling short of the 50 percent threshold at an intermediate level precludes control through an indirect interest. If two persons hold 30 percent and 70 percent, respectively, of an intermediary company that holds 100 percent of the legal entity subject to the reporting obligation, in principle only the person holding 70 percent must be reported. An interest of exactly 50 percent is particularly sensitive: according to the wording, it falls just short, as para. 2 requires “more than 50 percent”. The Federal Council set this threshold only following the consultation – the draft had provided for “at least 50 percent” – in order to align it with anti-money laundering practice. The change is more than editorial: an interest of exactly 50 percent in an intermediary legal entity does not confer indirect control through an interest.

Vertical and Horizontal Chains

Two basic forms must be distinguished. A vertical chain of control exists where a natural person holds an interest in a legal entity which, in turn – possibly through majority interests in further intermediary legal entities – holds at least 25 percent of the shares of the legal entity subject to the reporting obligation. A horizontal chain of control exists where a natural person controls several legal entities that together hold at least 25 percent of the shares of the legal entity subject to the reporting obligation; Art. 2 para. 2 TLEO expressly refers to “one or more” intermediary legal entities in this respect. In a horizontal chain, the interests of the intermediary legal entities must be aggregated, and the total must be reported as the size of the interest. Example: two companies, each wholly owned by the same person, hold 10 percent and 20 percent, respectively, of the legal entity subject to the reporting obligation; together, this amounts to 30 percent. None of the intermediary legal entities needs to reach the 25 percent threshold on its own – only the aggregate interest establishes beneficial ownership.

This distinction affects the information on the chain of control. Under Art. 15 para. 1 lit. a TLEO, such information must be obtained if the chain of control includes at least two intermediary natural persons, legal entities or trusts. In a horizontal chain with only one intermediary legal entity per branch, this requirement is not met, as each branch comprises only one level; several interests at the same level do not extend the chain. If, by contrast, the chain comprises at least two successive intermediate levels, the information under Art. 11 TLEO must be obtained for each intermediary legal entity (company name or name, legal form, municipality, postal code and country of domicile and, if available, the UID or an equivalent foreign identification number) and reported (Art. 15 para. 2 lit. b and Art. 20 para. 1 lit. b TLEO). An example of such a structure: natural person – 100 percent in Holding A – 100 percent in Holding B – 60 percent in Company C, which is subject to the reporting obligation. The requirements are met at all levels. The range “more than 50 percent and up to 75 percent” must be reported in accordance with Holding B’s interest in C, together with the information on both intermediary companies.

Mixed Forms of Control and Joint Ventures

Different forms of control may coexist within a chain. Example: a person holds more than 50 percent of the top-tier company, which controls the intermediary company through the right to appoint its board of directors (Art. 3 para. 1 lit. a TLEO), and the intermediary company holds 100 percent of the legal entity subject to the reporting obligation. The person is a beneficial owner because control by other means may also be exercised indirectly (Art. 3 para. 3 TLEO); the legal entity must therefore examine at every level who exercises control. Direct and indirect control may also coexist: if one person holds 70 percent directly and an intermediary company holds a further 30 percent, of which a second person holds 60 percent, both must be reported – the first with the type of control “interest (direct)”, the second with “interest (indirect)”.

Of practical significance is the case of a 50/50 joint venture with legal entities as partners. If no natural person, in turn, holds more than 50 percent of these partner companies, the chain analysis under Art. 2 TLEO does not apply. If, by contrast, natural persons each hold more than 50 percent of the capital or voting rights of the partner companies, they are generally beneficial owners, as each partner company holds 50 percent and thus at least 25 percent of the joint venture company. In addition, it must always be examined whether there is control by other means (Art. 3 TLEO) – for example through veto rights under the joint venture agreement – or acting in concert (Art. 4 TLEO). If no one meets these criteria, the most senior member of the managing body of the joint venture company must be reported on a subsidiary basis – not that of one of the partners.

If no one reaches the threshold at the second level, this may result in a subsidiary reporting obligation. Example: seven natural persons each hold 10 percent of the legal entity subject to the reporting obligation; an intermediary company holds 30 percent and is owned in equal shares (one third each) by three natural persons. No one is to be reported as a beneficial owner – the former because they do not reach the 25 percent threshold, the latter because they fall short of the threshold of more than 50 percent from the second level onward. If there is also no control by other means and no acting in concert, the most senior member of the managing body of the legal entity subject to the reporting obligation must be reported on a subsidiary basis (Art. 4 para. 2 TLEA) – not that of the intermediary company.

Inquiries at Higher Levels of Control

The particular feature of the chain of control is that the legal entity knows its own shareholders but not automatically their ownership structure. From the second level onward, it depends on the cooperation of third parties. The law therefore allocates the obligations among several parties. Shareholders must report the beneficial owner to the company (Art. 13 TLEA). If control is exercised through several companies or persons – and thus through a chain of control – the beneficial owner must report the required information directly to the company (Art. 14 para. 1 TLEA); in addition, the beneficial owner and the third parties involved in the chain of control must cooperate in the verification (Art. 14 para. 3 TLEA). The legal entity itself must verify the identity and status of the beneficial owners with the diligence required by the circumstances and request the relevant supporting documents (Art. 7 para. 2 TLEA). The obligation to make inquiries must also be distinguished from the reporting obligation: even where no information on the chain of control needs to be reported, the relationships at the intermediate levels must be established – otherwise, the beneficial owner cannot be identified.

In practice, a single disclosure declaration by the shareholders covering all control criteria under Arts. 1–4 TLEO has proven effective. Separate declarations are of limited use, as control through an interest and control by other means must be examined in parallel. The declaration should address: (i) whether the shares are held for one’s own account or for the account of a third party; (ii) which person, in turn, holds more than 50 percent of a shareholder that is a legal entity or otherwise controls it; (iii) whether there are rights conferring control, such as veto rights, rights to appoint or remove members of governing bodies, or capital instruments; and (iv) whether there are agreements with other shareholders on the exercise of control. The declaration does not replace the verification with the diligence required by the circumstances; the legal entity must request the relevant supporting documents.

In a simple group structure, it may be advisable to bundle the inquiries through the immediate parent company, for example by obtaining an up-to-date group chart showing the interests at each level, commercial register extracts for the intermediary legal entities and a confirmation regarding atypical control relationships – such as fiduciary arrangements, usufruct, voting agreements, rights to appoint members of governing bodies and veto rights. The standard remains the diligence required by the circumstances. More in-depth inquiries are warranted in particular if documents are contradictory or clearly outdated, if an intermediate level holds exactly 50 percent, if an intermediary legal entity is domiciled in a jurisdiction without comparable transparency, or if fiduciary arrangements or trusts become apparent. Trusts and fiduciary arrangements also independently trigger the obligation to obtain information under Art. 15 para. 1 lit. b TLEO, regardless of the number of levels.

Foreign Register Extracts: Evidence, Not a Determination

The question arises for every Swiss subsidiary of a foreign group: what is the effect of a foreign transparency register extract? Neither the TLEA nor the TLEO attaches any legal effect to it. Even entries in the Swiss transparency register have only declaratory, not constitutive, effect under Art. 23 para. 1 TLEA. The foreign extract is therefore one piece of evidence among others: it reflects the content of the foreign register, not beneficial ownership under Swiss law. Moreover, it answers a different question – namely, who is the beneficial owner of the parent company under the law of the jurisdiction in which it has its registered office, not who controls the Swiss legal entity under Art. 4 TLEA in conjunction with Arts. 1–4 TLEO.

The foreign “deemed beneficial owner” is particularly prone to error. Several legal systems provide for a fallback rule under which legal representatives are deemed beneficial owners if no natural person can be identified. If, for this reason, the managing director of the parent company appears in the foreign register, the Swiss legal entity must not adopt this information without scrutiny. It must examine independently whether a natural person controls it through an interest or by other means. If this examination yields no result, the most senior member of the managing body of the Swiss legal entity itself must be reported on a subsidiary basis (Art. 4 para. 2 TLEA in conjunction with Art. 20 paras. 2 and 3 TLEO) – not that of the foreign parent company. Adopting the information without scrutiny would lead to an entry that is wrong twice over: as to the person and as to the legal basis.

A Look at Anti-Money Laundering Law and the EU

Compared with anti-money laundering law, there is no methodological divergence with regard to indirect interests: the threshold of more than 50 percent from the second level onward was set following the consultation expressly in order to align with anti-money laundering practice. The differences lie elsewhere. Unlike the cascade under Art. 2a para. 3 of the Anti-Money Laundering Act (AMLA), the TLEA requires control through an interest and control by other means to be assessed in parallel; moreover, Art. 4 TLEA does not provide for a special rule for domiciliary companies. Under Art. 56 lit. a TLEO, differences resulting from divergent provisions of anti-money laundering legislation – in particular from the definition of the beneficial owner of a domiciliary company – are exempt from the financial intermediaries’ obligation to report discrepancies.

The divergence from the EU Anti-Money Laundering Regulation (Regulation (EU) 2024/1624, AMLR), applicable from 10 July 2027, is, by contrast, significant. In the ownership test, the AMLR generally calculates interests through multi-tier chains and aggregates interests held through different chains; in addition, it must be examined independently whether there is control through an ownership interest of 50 percent plus a fraction, or by other means. Art. 2 TLEO, by contrast, requires an interest of more than 50 percent at the intermediate levels, without multiplying the interests at the individual levels. Differences arise in particular where the threshold is reached only by calculating through or aggregating several chains. For example, a 30 percent interest in an intermediary holding company that holds 90 percent of the target company results in 27 percent under the AMLR; under Swiss law, by contrast, the chain breaks at the intermediate level. The same applies to two parallel chains, each with 40 percent at both levels, which under the AMLR result in 32 percent when calculated through and aggregated. In addition, the AMLR’s ownership test covers not only shares and voting rights but also other ownership interests, such as the right to a share of profits or of the liquidation proceeds. For groups with an EU nexus, this means that the assessment must be carried out independently under Swiss law; adopting foreign register or compliance findings may, depending on the circumstances, lead to over- or under-reporting.

What Must Be Reported

If there is indirect control, it must be stated under Art. 12 lit. b TLEO that control is exercised indirectly. Under Art. 13 para. 3 TLEO, the size of the interest is determined solely by the direct interest in the legal entity subject to the reporting obligation – i.e. the percentage at the first level – and must be stated within the applicable range under Art. 13 para. 1 TLEO, not as a calculated figure. Information on the chain of control itself must be obtained under Art. 15 para. 1 TLEO only if the chain includes at least two intermediary natural persons, legal entities or trusts, if a trust or a fiduciary arrangement is involved, or if measures blocking funds and economic resources have been imposed on a beneficial owner under the Embargo Act or the Foreign Illicit Assets Act (FIAA). If no one meets the criteria, the most senior member of the managing body must be reported on a subsidiary basis (Art. 4 para. 2 TLEA). This must be distinguished from the case where a beneficial owner exists but cannot be identified or verified: in that case, the available relevant information – including information on the chain of control – must be reported, together with the most senior member of the managing body as contact person (Art. 21 TLEO).

Finally, the special rules for certain links in the chain of control must be observed. If 25 to 75 percent of the legal entity is held by an exempt listed legal entity, it need only obtain the information under Art. 11 TLEO on that legal entity and information on the stock exchange. If it is held by an exempt pension fund, or if interests are controlled by the fund management company of a contractual investment fund, the special information obligations under Art. 17 and Art. 18 TLEO, respectively, apply. Subsidiaries of which more than 75 percent is held directly or indirectly by one or more listed companies are, by contrast, excluded from the scope under Art. 3 lit. a TLEA. For legal entities controlled by a foundation or an association under Swiss law, Arts. 7 and 8 TLEO contain special rules. If a foreign foundation or association is part of the chain of control, there is no express provision; the general control rules apply, although Arts. 7 and 8 TLEO may serve as guidance for interpretation. This question has not been conclusively resolved.

Conclusion and Recommendations

Art. 2 TLEO does not require complex calculations, but it does require a structured approach. In practice, the following is recommended:

1. Map the structure in a group chart showing the interests at each level and capture all intermediate levels completely.
2. Trace the chain upward from the legal entity subject to the reporting obligation – at least 25 percent at the first level, more than 50 percent at each subsequent level – and do not multiply the interests.
3. Determine whether interests of several intermediary legal entities controlled by the same person must be aggregated.
4. Wherever the chain breaks, in particular at exactly 50 percent, examine whether there is control by other means under Art. 3 TLEO or acting in concert under Art. 4 TLEO.
5. Document the inquiries, responses, supporting documents and the legal entity’s own assessment in accordance with Art. 8 TLEA, keep them up to date and retain them for ten years after the person concerned ceases to be a beneficial owner.

Careful documentation is key. It enables the legal entity to demonstrate the diligence of its inquiries to the supervisory body, which reviews the entries on a risk-based and random-sample basis. The consequences of non-compliance should not be underestimated: intentional breaches of the reporting obligations – including those of shareholders and beneficial owners under Arts. 13 and 14 TLEA – are punishable by a fine of up to CHF 500,000 (Art. 43 TLEA). If the reporting obligations are breached repeatedly or a breach is not remedied despite several requests, the supervisory body may also suspend the participation and financial rights of the shareholder concerned (Art. 38 para. 2 TLEA). As the transitional periods under Art. 51 TLEA are already running, companies with multi-tiered ownership structures should initiate the necessary inquiries along the chain of control now. We would be pleased to assist you in analysing your ownership structures and filing reports with the transparency register.

This article is part of our series on the new Transparency Act. Control through a direct interest (Art. 1 TLEO) was discussed in the article “Direct interest under Art. 1 TLEO: When 25 Percent is sufficient – and when it is not”. Subsequent articles will address control by other means (Art. 3 TLEO) and acting in concert (Art. 4 TLEO). For further reading: Vogel, Orell Füssli Commentary on the TLEA and the TLEO.