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The most important changes to the new stock corporation law as of January 1st, 2023

Corporate Law | M&A

The new stock corporation law will come into force in Switzerland on January 1, 2023. More flexible organizational and capital regulations apply to corporations, such as the introduction of the capital band or the virtual General Meeting.

Introduction

After smaller revisions, the so-called major revision of the company law now comes into force. The starting signal for the revision of the company law was already given by the Federal Council in 2005. At the end of 2007, the Federal Council presented an explanatory report and a preliminary draft for a revision of the company law. In 2014, the revision of the company law was sent out for consultation. The aim of the major revision of company law is to modernise and adapt it to the economic needs of the coming years.

Below we provide you with an overview of some of the most significant changes in the area of share capital, shareholder rights and the organisation of the company:

Capital

In the new company law, the capital base shall generally be structured more flexibly. The following options are now available for this purpose:

  • Share capital in foreign currency: Share capital may now be denominated in a foreign currency if it is essential to the company’s business activities, has a value of at least CHF 100’000.00 at the time of incorporation (current daily exchange rate at the time of incorporation), bookkeeping and accounting are conducted in the foreign currency and the foreign currency is permissible according to the Federal Council. At present, the US dollar (USD), euro (EUR), British pound (GBP) and Japanese yen (JPY) are regarded as such. In the consultation process, there were isolated calls to also allow cryptocurrencies, for example. However, the Federal Council refrained from expanding the list of permissible foreign currencies.
  • Capital band: For a flexible adjustment of the capital structure, the capital band enables companies in particular to simplify the procurement of equity capital and its elimination in the event of overcapitalisation. The Articles of Association can authorise the board of directors to change the share capital upwards or downwards within a range (capital band) for a maximum period of five years (art. 653s para. 1 CO). The capital band is a new legal institution and as such replaces the previous authorised capital increase according to art. 651 ff. CO.
  • Interim dividends: The general meeting of shareholders may now decide on the payment of an interim dividend on the basis of interim financial statements (art. 675a par. 1 CO). This makes it easier, for example, to shift liquidity within a group of companies or to pay quarterly dividends to shareholders who are used to quarterly dividends due to their background.
  • Acquisition in kind rules: Under previous law, the (intended) acquisition of assets from shareholders or persons closely associated with them is considered a qualifying event. Under the new law, acquisitions in kind are no longer considered qualified facts, which means that the applicability of special provisions no longer applies.
  • Duty of restitution: As a “substitute” for the abolition of the provisions on acquisitions in kind, the duty of restitution was made more effective. If the company acquires assets from shareholders, members of the board of directors, persons involved in the management and members of the advisory board as well as persons close to them (as well as de facto bodies) or concludes other legal transactions with them, these persons become liable for restitution if there is an obvious disproportion between performance and consideration (cf. art. 678 para. 2 CO).
  • Offsetting: Up to now, it was disputed whether offsetting was possible with claims that were not or not fully covered by the company’s assets. Art. 634a para. 2 CO now provides clarity and stipulates the admissibility of offsetting clearing with receivables that are not recoverable. In return, the claim in question, the name of the shareholder and the shares to which he is entitled must be published in the Articles of Association.

In principle, amendments to the Articles of Association regarding the share capital in foreign currency or the capital band are only possible after the new company law has come into force. However, provisions in the Articles of Association may be adopted conditionally, i.e. subject to the condition precedent that the revision of the company law enters into force. The corresponding amendment to the Articles of Association can be filed with the commercial register as soon as the new share law has entered into force.

Strengthening Shareholder Rights

Although the new provisions differentiate between listed and unlisted companies, the requirements for convening a General Meeting (“GM”) and the inclusion of items on the agenda are generally simplified for shareholders. The thresholds of capital or voting rights participation for information outside the GM, inspection of the company’s books and requesting a special investigation or an action for dissolution are also lowered.

Conduct of the General Meeting

According to the current company law, GMs can only be held in the physical presence of the shareholders or through one of their representatives. The COVID pandemic at the latest showed that this regulation urgently needs to be made more flexible. Even during the COVID pandemic, GMs could be held virtually by means of emergency ordinances (Covid-19 Ordinance 2 and Covid-19 Ordinance 3). This form of implementation, among others, is now anchored in the law. Accordingly, in addition to the purely physical implementation, GMs can now also be carried out as follows:

  • Virtual conduct: This form of conduct requires a provision in the articles of association. In addition, some technical requirements must be met, e.g. the identity of the participants must be technically verifiable or the votes must be transmitted directly and undistorted.
  • Written procedure: Resolutions are passed in writing, either by means of a circular resolution, in which all shareholders give their express handwritten or qualified electronic consent, or by means of a ballot, in which those entitled to vote are sent ballot papers which they must complete and hand in within the specified period. The latter form of voting is also permissible without a statutory basis.
  • Hybrid implementation: Although a GM takes place on site, participants can now also take part virtually. In this way, GMs can also be held at several meeting locations. Although hybrid organisation is permissible without being mentioned in the statutes, the technical requirements for virtual organisation must be met in the same way.
  • Abroad: The statutes must provide that the GM can be held abroad. If several meeting locations in Switzerland and abroad are to be possible, the statutes should be adapted accordingly.

Conflicts of Interest and Financial Responsibility of the Board of Directors

Already today, the members of the Board of Directors (“BoD”) are required by their duty of care and loyalty to avoid conflicts of interest as far as possible. This duty is now anchored in the law in the sense of good corporate governance: Members of the BoD and the Executive Board must inform the full BoD immediately and completely about conflicts of interest affecting them. The BoD shall then take the measures necessary to safeguard the interests of the company (art. 717a par. 1 and 2 CO). The details, including clear procedures, are to be implemented in the organisational regulations.

The BoD now also has explicit duties to act to prevent the company’s insolvency and to monitor its future solvency. In the event of imminent insolvency, the BoD must take measures to ensure solvency. Here, the new provisions provide clear guidelines and thus legal certainty. For example, the notification of the court can be waived if there is a reasonable prospect that the over-indebtedness can be remedied no later than 90 days after the audited interim financial statements are available and that the over-indebtedness will not be significantly increased as a result (art. 725b para. 4 CO).

Recommendations for Action

It is already possible to benefit from the possibilities of the new company law. This means that companies that now have to amend their Articles of Association can also amend their Articles of Association for the period after 1 January 2023 in one go. In this way, amendments can be decided on a “scheduled” basis (so-called scheduled amendment of the Articles of Association), provided that the facts are not subject to publication.

The registration of all other amendments to the Articles of Association in connection with the revision of the company law is only possible after the new company law has come into force. However, if you wish to amend the Articles of Association in the area of facts subject to publication before the revision of the company law enters into force, you have the option of a conditional resolution to amend the Articles of Association. In this case, the provisions of the Articles of Association are adopted under the condition precedent that the revision of the company law enters into force.

However, the corresponding amendment to the Articles of Association can only be registered with the commercial register when the new company law enters into force. It is recommended that the Articles of Association and organisational regulations be reviewed to ensure that they are up to date. If they are not compatible with the new provisions of the company law, these provisions will cease to apply two years after the new company law comes into force, i.e. on 1 January 2025. Please do not hesitate to contact us if you have any questions regarding amendments to the Articles of Association or notarial services.

 

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