Structure and process, legal regulation and consents

Structure

How are acquisitions and disposals of privately owned companies, businesses or assets structured in your jurisdiction? What might a typical transaction process involve and how long does it usually take?

Acquisitions of privately owned businesses are usually structured as share or asset deals.

Companies may also be acquired or combined by means of a statutory merger pursuant to the Federal Act on Mergers, Demergers, Transformations and Transfers of Assets (Merger Act). Statutory mergers are subject to a formal procedure and can involve two forms: either, one company is dissolved and merged into another company (merger by absorption), or the two combining companies are both dissolved and merged into a newly incorporated company (merger by combination). In both cases, the assets and liabilities of the dissolved company or companies are transferred to the surviving or newly incorporated company by operation of law. The merger consideration may consist of shares of the surviving or the newly incorporated company, shares of another company (for example, the parent company in a triangular merger), cash, or a combination thereof. The merger of two corporations requires approval by at least two-thirds of the votes represented and the absolute majority of the par value of the shares represented at the shareholders’ meeting. However, if the merger consideration comprises any compensation other than shares of the surviving or newly incorporated company, 90 per cent of all voting securities outstanding need to approve the merger.

Joint venture companies may be established by transferring certain assets (and liabilities) to a newly incorporated (or existing) company in exchange for shares in such company.

Divestments or spin-off transactions may be structured in various ways, including:

  • the transfer of the business (including the assets and liabilities) to be spun-off to the acquiring company, either by means of an asset deal or a business transfer pursuant to the Merger Act, against cash or shares;
  • a two-step demerger, in which the business (including the assets and liabilities) to be spun-off is first transferred to a (newly incorporated) subsidiary and the shares of such subsidiary are then distributed to the shareholders of the parent company (distribution in kind), who may sell the shares to an acquirer; and
  • a statutory demerger (hardly seen in practice due to the unlimited joint and several (subsidiary) liability and reduced flexibility).

The process and timing of a transaction depends, among other things, on whether the acquisition or disposal is structured as an auction process or in the form of a one-on-one negotiation.

Legal regulation

Which laws regulate private acquisitions and disposals in your jurisdiction? Must the acquisition of shares in a company, a business or assets be governed by local law?

Private acquisitions are normally a matter of negotiations between the involved parties, and no regulated offer process as in public acquisitions is applicable. While the Swiss Code of Obligations applies to most transaction structures, the majority of its relevant provisions are not mandatory and may be contracted out.

Statutory mergers and demergers are governed by the Merger Act, whose provisions are largely mandatory.

The Swiss Federal Act on Cartels and other Restraints of Competition and the Ordinance on Merger Control govern merger control aspects.

An acquisition is generally not required to be governed by Swiss law, except for certain aspects of a transaction (eg, corporate approvals, transfers of shares in a Swiss company, transfers of Swiss real estate) as well as certain transaction structures (eg, statutory merger or demerger), which are governed by mandatory Swiss statutory law.

Transaction agreements are typically drafted in an Anglo-American style and governed by Swiss law.

Legal title

What legal title to shares in a company, a business or assets does a buyer acquire? Is this legal title prescribed by law or can the level of assurance be negotiated by a buyer? Does legal title to shares in a company, a business or assets transfer automatically by operation of law? Is there a difference between legal and beneficial title?

The buyer becomes the legal owner of the acquired shares, assets or liabilities as a matter of contract and statutory law. The level of assurance cannot be negotiated by the parties; rather, the requirements for transfer of title under the applicable statutory law must be complied with. Usually, legal title is transferred automatically by operation of law if the statutory prerequisites are met (eg, the share transfer in a private company usually requires the transfer of the certificated shares with the seller’s endorsement; the approval of the company’s board; and the registration of the buyer in the share register of the company). For real estate, a registration in the land register is required. There is no distinction in Switzerland between legal and beneficial title as regards ownership in shares, assets and liabilities. However, the parties may agree that the transfer of the shares or business is effected with retroactive economic effect, although legal title will be transferred only later upon completion of the transaction.

Multiple sellers

Specifically in relation to the acquisition or disposal of shares in a company, where there are multiple sellers, must everyone agree to sell for the buyer to acquire all shares? If not, how can minority sellers that refuse to sell be squeezed out or dragged along by a buyer?

As a rule, every shareholder must agree to the sale of his, her or its shares. Shareholders’ agreements (if any) regularly provide for drag-along or tag-along rights, which are usually triggered by a contractually defined number of shareholders willing to sell or a minimum percentage of shares that are being sold. In this event, the minority shareholders are contractually required to sell their shares.

In a statutory merger, all shares of the absorbed company will cease to exist and the absorbed company will be dissolved. A statutory merger is resolved in a shareholders’ meeting by at least two-thirds of the votes represented and the absolute majority of the par value of the shares represented at the shareholders’ meeting. A squeeze-out merger (ie, if shareholders are forced to accept compensation other than shares of the surviving company) requires a 90 per cent majority of all voting securities outstanding.

Exclusion of assets or liabilities

Specifically in relation to the acquisition or disposal of a business, are there any assets or liabilities that cannot be excluded from the transaction by agreement between the parties? Are there any consents commonly required to be obtained or notifications to be made in order to effect the transfer of assets or liabilities in a business transfer?

As a general rule, the parties may contractually define the scope of assets, liabilities and contracts to be transferred in an asset deal. Other than in the case of a business transfer pursuant to the Merger Act, the counterparties of contracts must be notified of or consent to the transfer of the contract based on contractual change of control, no-assignment or no-merger clauses. Such clauses cannot prevent the closing of the asset deal as such, but the relevant contract can either be terminated or the contract transfer be prevented.

In the event of a transfer of a business, the transfer of the employment contracts relating to the business cannot be excluded. Such employment contracts transfer by operation of law to the buyer unless the employee terminates his or her employment contract within the statutory termination period.

Consents

Are there any legal, regulatory or governmental restrictions on the transfer of shares in a company, a business or assets in your jurisdiction? Do transactions in particular industries require consent from specific regulators or a governmental body? Are transactions commonly subject to any public or national interest considerations?

Under Swiss law, there are no foreign investment control mechanisms or other general legal instruments that would allow governmental agencies to influence or restrict the completion of business combinations or acquisitions.

There are also generally no restrictions on foreigners or foreign companies acquiring shares in Swiss companies, other than in specific sectors such as financial services, radio and television, telecommunications and transportation or with respect to real estate. Further, sanctions imposed against certain countries, groups or individuals may bar individuals and entities from investing in Switzerland.

The acquisition by a foreign person or a foreign-controlled company of rights in rem over real estate, or the acquisition of non-listed shares of a company owning such rights is subject to governmental approval if (rules of thumb):

  • one-third or more of the target company’s assets or consolidated assets (ie, including the assets of its subsidiaries), at market value, consists of real estate other than commercially used real estate;
  • the legal entity’s actual purpose is to acquire or trade in real estate; or
  • the legal entity possesses considerable land reserves suitable for residential buildings or industrial land reserves that will not be used within two to three years.

Governmental approval is granted only in exceptional cases. Agricultural properties may not be acquired by non-farmers (whether Swiss or foreign).

Are any other third-party consents commonly required?

In the case of a sale of a business including contracts, consents from counterparties to contracts may be required depending on the structure of the transaction (see question 5). In a share deal, usually the board of directors of the company must approve the share transfer and register the acquirer in the share register of the company.

Regulatory filings

Must regulatory filings be made or registration (or other official) fees paid to acquire shares in a company, a business or assets in your jurisdiction?

Certain transactions, such as mergers, demergers, transformations and business transfers pursuant to the Merger Act, have to be filed with the commercial register. The transfer of real estate requires a registration in the land register. If a transaction is subject to merger control, a merger control filing must be made.