In its 26 July 2016 report on Switzerland, the Global Forum on Transparency and Exchange of Information for Tax Purposes made a number of recommendations to further align Swiss legislation with international standards, particularly in regard to the transparency of legal entities.(1) Among other things, the system to establish and register the ultimate beneficial owners of qualified interests in legal entities, as introduced in 2015, was considered insufficient. The respective recommendations of the Global Forum broadly overlapped with the Financial Action Task Force (FATF) Mutual Evaluation Report on Switzerland of 7 December 2016.(2)

In one comprehensive bill, the Federal Council addressed the concerns of the FATF and the Global Forum with regard to the transparency of legal entities. The respective consultation process was closed on 24 April 2018 and the feedback of the leading political parties shows that the proposed measures meet more than just scepticism.

Measures proposed by Federal Council

Abolition of bearer shares

A core element of the proposed package of measures is the abolition of bearer shares. The government's bill provides that unlisted companies will henceforth no longer be allowed to issue bearer shares and that outstanding bearer shares of unlisted companies must be abolished or converted into registered shares. Shareholders who fail to identify themselves to the company within 18 months of entry into force of the new law will definitively lose their rights to the shares without compensation – the respective shares will become void and the company will have to replace them by issuing new shares as treasury shares.

The Federal Council portrays the proposed abolition of bearer shares as a measure of moderate significance by arguing that the provisions of the Code of Obligations on reporting and registration of the ultimate beneficial owner of bearer shares (which came into force in 2015 (in particular, Article 697 (i to m) of the Code of Obligations)) had led to a de facto approximation of bearer and registered shares anyway. The essential characteristics of bearer shares (ie, anonymity and easy transferability) were considerably reduced as an acquirer is now obliged to report to the company the acquisition (even of one single bearer share), his or her name and address, and the company must enter this information into a register.(3)(4)

The government also considers a correction of the rules on the revival of shareholders' rights in case of late reporting as indispensable (particularly Article 697m of the Code of Obligations). The Global Forum criticised the reactivation of shareholders' rights in the event of a subsequent notification (ie, following the expiry of the statutory one-month period after the acquisition of the shares) as overly lenient. The provision could encourage shareholders to remain anonymous until the moment that they wish to exercise voting or (future) dividend rights, as they would not run the risk of finally losing any such rights in case of non-compliance.(5)

Penalty system

In order to further incentivise compliance with the transparency rules, the Federal Council has proposed a system of penalties covering violations at both company and shareholders level.

Intentional breaches of the shareholders' duty to report the acquisition of an interest in the company, as well as the company's duty to maintain a register of ultimate beneficial owners, will be subject to a maximum fine of Sfr10,000. Further, failure to properly maintain the share register and the register of ultimate beneficial owners would qualify as an organisational deficiency of the company (Article 731b of the Code of Obligations), which may entail forced liquidation as the most severe consequence.

Obligation to maintain a Swiss bank account

Companies, corporations, Swiss branch offices of foreign entities and individual entrepreneurs (the latter only if annual turnover exceeds Sfr100,000) will be obliged to maintain a Swiss bank account in order to ascertain that they will be subject to the Swiss banks' duties to identify the ultimate beneficial owners in accordance with Swiss anti-money laundering laws and know-your-customer (KYC) rules, which includes verifying the existence of pertinent records on ultimate beneficial ownership of the legal entity.

According to the government's proposals, the Swiss banks would thus be assigned the role of supervisors of legal entities and other commercial undertakings with regard to compliance with the new transparency and registration rules. It is in the same context that that financial intermediaries (as well as authorities) are proposed to have a right to inspect companies' registers of shareholders and ultimate beneficial owners, insofar as this is necessary to fulfil statutory duties.

Results of consultation process

Among the four most influential political parties in Switzerland, only the Social Democrats largely support the government's proposals.(6)(7)(8)(9)

A main point of resistance is the so-called 'Swiss finish', meaning that measures proposed by the government go beyond what is being demanded by the FATF or the Global Forum. In particular, the abolition of bearer shares is not a measure necessary to align with international standards. The rules on transparency of legal entities (enacted in 2015), which confirmed the feasibility of bearer shares, were at the time recognised as compliant with the FATF's respective recommendations. Moreover, those rules have proven to be effective.

Further, the proposed expropriation of recalcitrant holders of bearer shares conflicts with the constitutional guarantee of ownership, and the obligation to maintain a Swiss bank account is widely seen as an inappropriate encroachment on economic freedom.

Concerns have also been raised that the obligation for legal entities to open and maintain a Swiss bank account might eventually evolve into a right of legal entities to be accepted as customers by Swiss banks and, if so, fundamentally conflict with the banks' obligations and duties under anti-money laundering and regulatory laws – among other things, the duty to decline the opening of an account respectively to terminate a relationship in the event of KYC issues.


It is no surprise that the Federal Council bill for the abolition of bearer shares has met with significant criticism. The proposed measures would not only replace a system that was introduced merely three years ago and has proven to be effective, but it would also entail severe consequences for approximately 60,000 companies in Switzerland. The number of shareholders and creditors affected is likely to be many times higher.

In its present form, it is unlikely that this proposal will find the requisite support in Parliament. Bearer shares are not yet doomed to disappear in Switzerland.

For further information on this topic please contact Bernhard Loetscher or Flavia Widmer at CMS von Erlach Poncet Ltd by telephone (+41 44 285 11 11) or email ( or The CMS von Erlach Poncet website can be accessed at


(1) The Global Forum's Country Report on Switzerland (Phase 2).

(2) The FATF's Mutual Evaluation Report on Switzerland.

(3) Explanatory Report on the Implementation of the Recommendations of the Global Forum on Transparency of Legal Entities and the Exchange of Information in the Report on Phase 2 of Switzerland, page 5 (in German).

(4) Id, page 7.

(5) Id, page 6.

(6) The Liberal Party's consultation paper (17 April 2018) (in German).

(7) The Christian Democrat's consultation paper (24 April 2018) (in German).

(8) The Swiss People's Party consultation paper (23 April 2018).

(9) The Social Democrat's consultation paper (24 April 2018).

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