Corporate Law Zurich In This Issue: Equity holders of Swiss companies have new disclosure obligations and Swiss companies must keep a register of all equity holders as well as of their beneficial owners. Actions to be taken should be evaluated before 1 July 2015. Client Alert May 2015 New Disclosure and Transparency Obligations for Swiss Companies and Equity Holders On 1 July 2015, a new transparency and disclosure regime provided for in the Swiss Act on the Implementation of the Recommendations of the Financial Action Task Force (FATF, also known as GAFI) will enter into force. These rules provide for new disclosure obligations of shareholders of a Swiss corporation (AG) as well as quota holders of a Swiss limited liability company (GmbH). In addition, such companies must keep a register of their beneficial owners and the holders of bearer shares. The new provisions apply to almost all Swiss companies. The pertinent measures will fundamentally impact Swiss corporate law and significantly increase the administrative burdens in connection with the corporate housekeeping. Moreover, the sanctions for noncompliance are very harsh. Disclosure of Beneficial Owners Every person that acquires (registered or bearer) shares or participation certificates of an AG or quotas of a GmbH, and thereby reaches or exceeds 25 per cent of the nominal capital or the voting rights of such company, must notify the company and disclose the beneficial owner. The beneficial owner is the natural person for whom the acquirer is ultimately acting (art. 697j para. 1 and art. 790a para. 1 revCO). If the acquirer is a legal entity, the beneficial owner is the natural person acting as ultimate shareholder. The acquirer must report the name and the address of the beneficial owner to the company within one month after the acquisition of the shares or quotas. Furthermore, any future change in the name and/or the address of the beneficial owner must be disclosed (art. 697j para. 2 and art. 790a para. 2 revCO). Persons, who hold bearer (but not registered) shares or participation certificates as of 1 July 2015 and thereby reach or exceed the relevant threshold, must disclose the beneficial owner within six months (art. 3 of the transitional provisions). Disclosure of Holders of Bearer Shares Even more rigid than the disclosure obligation with regard to beneficial owners is the disclosure obligation in relation to the acquisition of bearer shares of an AG. An acquirer of any such bearer share must inform the AG of the acquisition as well as its (company) name and address within one month from the date of the acquisition (art. 697i para. 1 revCO). As part of such notification, the acquirer must prove the possession of the relevant bearer shares and identify itself by submitting certain identification documentation (official ID document with regard to natural persons or excerpt from the commercial register or equivalent for legal entities). Finally, the relevant acquirer is obliged to notify the company about any future change of its (company) name and/or address (art. 697i para. 3 revCO). Persons holding bearer shares as of 1 July 2015 must disclose their shareholding within six months (art. 3 of the transitional provisions). These disclosure obligations apply equally to acquirers and holders of bearer participation certificates. www.bakermckenzie.com For further information please contact Prof. Dr. Lukas Glanzmann Partner email@example.com +41 44 384 13 55 Philip Spoerlé Associate firstname.lastname@example.org +41 44 384 14 96 Baker & McKenzie Zurich Holbeinstrasse 30 P.O. Box 8034 Zurich Switzerland 2 Client Alert May 2015 Exemptions The described disclosure regime does not apply in relation to the acquisition of shares of an AG listed at a stock exchange (art. 697i para. 1 and art. 697j para. 1 revCO) or if the relevant securities exist as intermediated securities (Bucheffekten) for which the issuing company has appointed a Swiss custodian (art. 697i para. 4 and art. 697j para. 3 revCO). Furthermore, no disclosure is necessary in relation to profit certificates, bonds or derivatives. Register of Beneficial Owners and Holders of Bearer Shares Mirroring the mentioned reporting obligations, each AG and GmbH must keep a register of the beneficial owners notified to it and, if applicable, the holders of bearer shares (art. 697l para. 1 and art. 790a para. 3 revCO). Such registers contain the names and addresses of the beneficial owners or the holders of bearer shares (as the case may be). With regard to bearer shares, the register must also include the nationality and the date of birth of the respective shareholder (art. 697l para. 2 revCO). The register of the beneficial owners may be combined with the register of the holders of bearer shares or, in case of registered shares or quotas, with the existing share or quota register (Aktien- bzw. Anteilsbuch). The company must retain the documents based on which the beneficial owners and holders of bearer shares have been recorded for ten years after the deletion of the relevant person from the register (art. 697l para. 3 revCO). The same retention requirement applies to the share and quota register (Aktien- bzw. Anteilsbuch) (art. 686 para. 5 and art. 790 para. 5 revCO). The registers of the beneficial owners and holders of bearer shares as well as the share and quota register (Aktien- bzw. Anteilsbuch) must be kept in a way that they may be accessed in Switzerland at any time (art. 686 para. 1, art. 697l para. 5 and art. 790 para. 1 revCO). If the register is not kept by a financial intermediary (cf. below), such access must at least be granted to those persons who are able to represent the company in Switzerland: the current statutory regime requires an AG and a GmbH to be able to be represented by a member of the board of directors/managing director or an executive officer/manager who is a resident in Switzerland (art. 718 para. 4 and art. 814 para. 3 revCO). Delegation to a Financial Intermediary In order to preserve the confidentiality of the holder of bearer shares vis-à-vis the AG, the general meeting may decide that the notifications according to art. 697i and 697j revCO with regard to bearer shares shall not be made to the company but to a financial intermediary (art. 697k para. 1 revCO). The respective financial intermediary has to be designated by the board of directors, which also has to announce such designation to the company’s shareholders (art. 697k para. 2 revCO). In the case of such delegation, the financial intermediary is responsible for the keeping and maintenance of the register according to art. 697l revCO and the retention of the underlying documentation (art. 697l para. 4 revCO). Although the financial intermediary has the obligation to inform the AG about the holders of bearer shares (on a no-name basis), it will be necessary that the financial intermediary participates in the general meeting in order to enable the holders of bearer shares to exercise their voting rights on a confidential basis. 3 Client Alert May 2015 Sanctions Non-compliance with the disclosure obligations according to art. 697i and 697j revCO will result in the following sanctions: The participation rights (in particular, the voting right) as well as the pecuniary rights (in particular, the dividend right and the right to a portion of the liquidation proceeds) attached to the pertinent securities are suspended until the disclosure obligations are fulfilled (art. 697m para. 1 and 2 revCO). The pecuniary rights attached to the pertinent securities will be forfeited if the disclosure obligations are not fulfilled within one month after the acquisition or, with regard to current holders of bearer shares or bearer participation certificates, within six months after the entry into force of the new provisions (i.e., until 1 January 2016). If the required notification is made later, the acquirer or holder may claim the pecuniary rights that had come into existence as from the date of the notification (art. 697m para. 3 revCO). Resolutions of the general meeting that have been taken with the participation of shares whose voting rights are suspended may be challenged according to art. 691 para. 3 CO. Furthermore, any dividends or portions of liquidation proceeds paid to a shareholder or quota holder whose pecuniary rights are suspended qualify as an unjustified distribution of profit and are subject to a repayment obligation, according to art. 678 CO. The individual members of the board of directors and the managing directors can be held personally liable for the exercise of rights by nondisclosing shareholders or quota holders (art. 697m para. 4 revCO in conjunction with art. 754 CO). Actions to Be Taken Each holder of equity in a Swiss AG or GmbH must check whether such person has an obligation to disclose a beneficial ownership or a holding of bearer shares. This obligation exists regardless whether such person is a natural person or a legal entity. On the other hand, each AG and GmbH must check whether it has to implement a register of beneficial owners and/or a register of bearer shares. In addition, the companies must ensure that signatories resident in Switzerland have access to such registers as well as to the share and quota register (Aktien- bzw. Anteilsbuch). Furthermore, each such entity must ensure that no shareholder or quota holder exercises any of such person’s rights as long as such person has not complied with such person’s disclosure obligations. As many details of this new regime are still unclear, particularly in relation to the reporting of the beneficial owners of subsidiaries of (listed) groups, companies will face considerable challenges in implementing these new rules. It may even be advisable to transform bearer shares into registered shares before 1 July 2015 because, in relation to registered shares, there are no formal requirements as to their notification and there is no suspension of voting rights or forfeiture of pecuniary rights as long as a shareholder does not reach or exceed the threshold of 25 per cent. As there is no one-size-fits-all solution to the implementation of the new rules, each case must be assessed diligently. Baker & McKenzie Zurich will be happy to support you in resolving these challenges. ©2015 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.