On February 1, 2021, the first part of the new "Federal Law on the Adaptation of Federal Law to Developments in Distributed Ledger Technology" came into force. This introduced the so-called ledger-based security as a new form of security into the Swiss Code of Obligations (Art. 973d et seq. CO).
This article provides an overview of how you, as an SME, can easily and efficiently manage your shareholders in various areas if your company issues shares in the form of ledger-based securities.
I. What is a ledger-based security?
A ledger-based security is a security that is entered into a securities ledger in accordance with an agreement between the parties and can only be asserted and transferred to others via this securities ledger (Art. 973d para. 1 CO). Thus, it represents a novel, completely electronic form of a security that is digitally transferred by means of blockchain or distributed ledger technology. In this way, all claim or membership rights can be issued digitally that could also be issued as classic securities or simple uncertificated securities. One example of this is the share token.
The creation of ledger-based securities requires the conclusion of a so-called registration agreement or the issuance of registration conditions and a corresponding amendment of the company's articles of association, which provide for the issuance of (ledger-based) securities. Furthermore, it must be ensured that the underlying securities ledger meets the legal requirements for technical implementation. The transfer of ledger-based securities is subject to the rules agreed in the respective registration agreement and, in contrast to simple uncertificated securities, does not require the written form.
But what are the advantages for a stock corporation of issuing shares in the form of ledger-based securities? How is the shareholder management carried out and what does this mean for "corporate housekeeping"?
II. Increased efficiency in shareholder management
1. Automatic share register update
The issuance of registered shares requires the company to maintain a share register (Art. 686 CO), which can be maintained directly on the blockchain for ledger-based securities.
If registered shares are issued as ledger-based securities and transferred via the securities ledger, a new entry is automatically recorded in the blockchain-based share register with each transfer. As a result, the share register is always up to date and kept clean and correct from the outset. This mechanism allows extremely simple management of shareholders, e.g. in the event of communication to the shareholder base, and ensures that an unbroken chain of ownership can always be proven, which is of key importance in particular in the event of an exit.
If the articles of association of the relevant stock corporation contain restrictions on transferability, the board of directors must check the transfer for correctness (in particular compatibility with restrictions on transferability) and confirm it. After confirmation of the share transfer by the board of directors, a new entry is automatically made in the securities ledger and thus also in the share register. The recipient of the share token or ledger-based security thus becomes the new shareholder as well as the holder of the corresponding shareholder rights.
The start-up daura AG (www.daura.com) offers a platform for issuing ledger-based securities. The underlying DLT infrastructure "Swiss Trust Chain", which is operated by Swisscom and the Swiss Post, acts as a securities ledger within the meaning of Art. 973d para. 2 CO. The chain code on this blockchain serves at the same time as a share register and register of uncertificated securities for the individual stock corporations.
2. Virtual general meetings
The shareholder whose entry is recorded in the securities ledger and thus in the share register and proves ownership of the corresponding share(s) is deemed to be entitled to vote at the general meeting. In the future, the general meeting of shareholders will be convened quite simply via a smart contract functionality, which will send the invitation with the agenda to all holders of ledger-based securities - i.e. shareholders.
In order to hold a virtual general meeting, the stock corporation must inform all existing shareholders about the possibility of virtual participation and invite them to register on a corresponding platform.
In the case of the daura solution, the user receives login data in the process for the virtual general meeting, with which he can generate a voting right token in order to use it to cast his vote on resolutions at virtual general meetings or to issue instructions to an independent proxy appointed by the corporation or another authorized representative – if permitted under the articles of association.
After a virtual general meeting has been successfully held, all resolutions and the associated voting results are automatically logged and stored. In the future, it will also be technically possible to offer correct and efficient alignment of dividends on the basis of automated share register tracking.
3. Simplified processing of capital increases
As with the holding of general meetings, capital increases can also be carried out or processed quickly and easily digitally. This way of raising new capital is particularly interesting for SMEs, as it reaches a wider audience of new shareholders and thus offers simplified access to the capital market.
In order to be able to subscribe to shares via the daura platform in the event of such a capital increase, for example, users must agree to the stock corporation's subscription conditions. Via platforms such as that of the start-up daura, the subscription of shares can be completed very easily via a digital process. After successful registration of the capital increase in the commercial register, the newly created ledger-based securities are finally allocated to the users who have subscribed to shares.
The digital management of shareholders brings many advantages to companies. In particular, it can ensure efficient and cost-saving share register management, virtual execution of general meetings and, in the future, simplified automated dividend payment.