Rights and equitable treatment of shareholders

Shareholder powers

What powers do shareholders have to appoint or remove directors or require the board to pursue a particular course of action? What shareholder vote is required to elect or remove directors?

One of the fundamental and non-transferable competences of the shareholders’ meeting is to vote on the appointment or removal of the members of the board. Therefore, any shareholder may vote on this in a shareholders’ meeting if the agenda of such meeting provides for the appointment and removal of directors, as the case may be. The shareholders’ meeting of listed companies is required by the OaEC to re-elect annually the members and the chairman of the board as well as the members of the compensation committee. Regardless of whether the board convenes a general meeting, a general meeting may also be convened at any time by one or more shareholders together representing at least 10 per cent of the share capital. Such shareholders or shareholders together representing shares with a nominal value of 1 million Swiss francs may demand that an item be placed on the agenda (see question 7).

The decision is made by an absolute majority of the voting rights represented at the respective meeting, unless otherwise provided for by the articles of association.

The shareholders do not have a direct possibility to require the board to pursue a particular course of action. However, certain matters require a shareholders’ decision (see question 4).

Shareholder decisions

What decisions must be reserved to the shareholders? What matters are required to be subject to a non-binding shareholder vote?

The following decisions have to be adopted by the general meeting of shareholders (article 698 of the CO):

  • adoption and amendment of the articles of association;
  • appointment or removal of the members of the board and the auditors;
  • approval or rejection of the management report, including, if applicable, the consolidated financial statements;
  • approval or rejection of the use of the balance sheet profit and, in particular, the declaration of dividends;
  • discharge of the members of the board from liability; and
  • matters that are by law or by the articles of association reserved to the shareholders’ meeting.

Non-binding shareholders’ votes are not provided for under Swiss law and the legal effects of such votes are unclear. However, non-binding shareholders’ votes may be used to limit the liability of the board towards approving shareholders, provided that the shareholders were fully informed about the matter regarding their vote.

Disproportionate voting rights

To what extent are disproportionate voting rights or limits on the exercise of voting rights allowed?

Subject to a corresponding provision in the articles of association, companies are entitled to introduce shares with privileged voting rights. Such shares grant the right of one vote per share despite their par value being a fraction of the par value of the ordinary shares. The maximum ratio allowed between the par value of a voting share and an ordinary share is 1:10. Shares with privileged voting rights can only be issued as registered shares and must be fully paid up. Moreover, disproportionate voting rights do not apply for the following decisions of the shareholders’ meeting:

  • the election of the auditors;
  • the appointment of experts to audit the company’s business management or parts thereof;
  • any resolution concerning the instigation of a special audit; and
  • any resolution concerning the initiation of a liability action.
Shareholders’ meetings and voting

Are there any special requirements for shareholders to participate in general meetings of shareholders or to vote? Can shareholders act by written consent without a meeting? Are virtual meetings of shareholders permitted?

It is each shareholder’s right to participate in the shareholders’ meeting and to exercise its voting rights. The shareholder may have its shares represented by a third party who, unless provided otherwise in the articles of association, does not need to be a shareholder. A shareholder of bearer shares is authorised to exercise its membership rights (which include the voting rights) at the shareholders’ meeting by presenting the bearer share. A shareholder of registered shares is authorised to exercise its membership rights at the shareholders’ meeting if he or she is entered in the share register.

However, the membership rights are suspended until the shareholder complies with its obligation to give notice of the beneficial owner of the shares of a non-listed company. This applies if he or she holds 25 per cent or more of the share capital or votes. In addition, shareholders of bearer shares of a non-listed company must give notice of the acquisition of bearer shares. A failure to comply with this requirement results again in a suspension of the membership rights (see also question 8).

Under the applicable law it is not permissible to pass a shareholders’ resolution without a physical meeting. This also applies for direct electronic voting. However, listed companies are obliged to ensure that powers of attorney and instructions for the independent proxy may also be given electronically (indirect electronic voting).

Shareholders and the board

Are shareholders able to require meetings of shareholders to be convened, resolutions and director nominations to be put to a shareholder vote against the wishes of the board, or the board to circulate statements by dissident shareholders?

One or more shareholders representing (together) at least 10 per cent of the issued share capital may request the convention of a shareholders’ meeting. Shareholders representing shares with a nominal value of 1 million francs or at least 10 per cent of the issued share capital (if that amount is lower) may demand that an item be placed on the agenda. A demand for the convention of a shareholders’ meeting or the request that an item be placed on the agenda must be made in writing to the board. If the board does not comply with such request within a reasonable time frame, a judge may order the convention upon request of the relevant shareholders.

Dissident shareholders are not entitled to request the board to circulate their statements among the shareholders. However, shareholders are allowed to make statements and bring forward motions at the general meeting of shareholders. A dissident opinion may be expressed on this occasion within the agenda item concerned.

Controlling shareholders’ duties

Do controlling shareholders owe duties to the company or to non-controlling shareholders? If so, can an enforcement action be brought against controlling shareholders for breach of these duties?

The only duty of a shareholder of a Swiss company - whether controlling or non-controlling - is to pay the issue price for the shares. However, significant shareholders may have certain disclosure obligations with regard to the company and, with regard to listed companies, the SIX (see question 36). Any shareholder who directly, indirectly or in concert with other shareholders acquires equity securities representing more than one-third of the voting rights of a listed Swiss company is obliged to make a takeover offer to the remaining shareholders for all listed equity securities of the company. The articles of association of a company may provide for an ‘opting up’, meaning that a takeover offer must only be made by shareholders owning more than 49 per cent of the voting rights, or an ‘opting out’, dispensing shareholders to make a takeover offer regardless of the stake held. The disclosure obligations and the obligation to make a takeover offer can be enforced by the TOB and the FINMA.

Any person who acquires bearer shares in a company whose shares are not listed on a stock exchange must give notice of the acquisition within one month. Furthermore, any person who alone or by agreement with third parties acquires shares in a company whose shares - irrespective of whether they are bearer shares or registered shares - are not listed on a stock exchange, and thus reaches or exceeds the threshold of 25 per cent of the share capital or votes must give notice to the company of the first name, the surname and the address of the natural person for whom it is ultimately acting (the beneficial owner) within one month of the acquisition. There is an exemption from these reporting obligations if the indirect owner is a stock-listed company. If the shareholder fails to do so, the membership rights conferred by the shares in respect of which notice of acquisition must be given are suspended and the property rights lapse. If the shareholder gives notice at a later date, they may exercise the property rights arising as from that date. These reporting obligations do not apply if the bearer shares are organised as intermediated securities in accordance with the Swiss Federal Act on Intermediated Securities.

In regard to listed companies, the FINMA has recently modified reporting requirements for the discretionary power to exercise the voting rights set out in the FINMA Financial Market Infrastructure Ordinance. In the case of delegated voting rights, the person deciding how voting rights are exercised is now subject to the reporting requirements. Alternatively, the reporting requirements can be met on a consolidated basis by a controlling person for the units controlled by them.

Shareholder responsibility

Can shareholders ever be held responsible for the acts or omissions of the company?

Without being (de jure or de facto) a body of the company, a shareholder does not act for and is independent from the company, and therefore cannot be held responsible for acts or omissions of the company. Only in exceptional abuse-of-right situations, the corporate veil may be pierced and an individual shareholder could be held accountable.