New Swiss Company Law
On January 1, 2023, the new revision of the company law came into force. Here is an overview of the most important changes:
Various changes relate to corporate governance. The aim is to increase the legal status of shareholders and enhance transparency.
1. New Shareholder and Minority Rights
1.1. New Regulations regarding the Right to Information
The right to information and inspection is expandedand regulated in greater detail.
Previously, the shareholders’ right to information was limited to requesting information from the board of directors on the company's affairs and from the auditors on the execution and results of their audit during the general meeting. Now, shareholders of non-listed companies who together represent at least 10 percent of the share capital or votes may also request information in writing from the board of directors about the company's affairs outside the general meeting (Art. 697 para. 2 CO). The board of directors must respond within four months and the responses must be made available for inspection by all shareholders at the next general meeting at the latest (Art. 697 para. 3 CO).There is no such obligation to provide information for listed companies, as these are subject to the ad hoc publicity obligation.
1.2. New Regulations regarding the Right of Inspection
The right of inspection is regulated in more detail and the refusal of the right of inspection must now be justified in writing.
Under previous law, the right of inspection required an express authorization by the general meeting or a resolution by the board of directors. Both could previously be granted or refused relatively freely and did not have to be justified. The question of the justified or unjustified denial of the right of inspection to a shareholder could only be examined by a court called upon at a later date under the aspect of arbitrariness (BSK OR II-Weber, Art. 697 N 22). Now, the protection of shareholders' rights is at least increased in this respect, in that the denial of the right of inspection must be justified in writing (Art. 697a para. 3 second sentence CO). In addition, the law regulates the right of inspection in more detail by specifying that inspection must be granted if inspection is necessary for the exercise of shareholders' rights and if no business secrets or other interests of the company worthy of protection are jeopardized thereby (Art. 697a para. 3 first sentence CO). However, the law now also restricts the right of inspection inArt. 697a para. 1 CO to the extent that the right of inspection is only available to shareholders who represent at least 5 percent of the share capitalor votes.
Only the board of directors is now responsible for deciding on the granting of inspection (and no longer the general meeting of shareholders in parallel). The board of directors must grant inspection within four months of receipt of the request (Art. 697a para. 2 CO, first sentence). Another new provision is that shareholders may take notes during the inspection (Art. 697a para. 2 CO, second sentence). Certain voices in the doctrine already draw the conclusion from this that the making of copies could be refused (Forstmoser/Küchler, in: Schweizerisches Aktienrecht 2020, Bern 2022, Art. 697a OR N 8). Other voices consider this interpretation to be too strict and demand that with such a narrow interpretation – so that the shareholder is not left without evidence – the content of the shareholder's notes must be considered as findings of fact to the detriment of the company, which must be disproven by the company (Bertschinger, Auskunfts- undEinsichtsrecht des Aktionärs - Durchzogene Bilanz der Aktienrechtsrevision, SZW2022 pp. 187 ff., 197).
What all shareholders have had up to now and will continue to have in the future is the right to inspect the company's annual report and audit report, which had to be made available for inspection at the company's registered office no later than 20 days before the ordinary general meeting (previously Art. 696 para. 1 CO). This aspect is now regulated in Art.699a CO with the innovation that the annual report and the audit report must be "made available". Art. 696 para. 1 CO, second sentence, now specifiesthat the documents must either be accessible electronically or otherwise any shareholder may request the company to deliver these documents in due time.
1.3. New Regulations regarding the Right of Convocation and the Right to Table Agenda Items
The threshold for exercising the right to convene a meeting and the right to table agenda items has been lowered from 10% to 5% of the share capital and now also exists if 5% of the votes are represented.
With regard to the shareholders’ right to convene a meeting, the previous law mentioned the criterion that the convocation could only be requested by shareholders representing 10 percent of the share capital.
On the one hand, this threshold for exercising the right to convene meetings of listed companies has been lowered in that the convocation may now also be requested by shareholders holding at least 5% of the share capital or votes. On the other hand, in addition to the amount of participation in the share capital, the proportion of votes held is now also taken into account as an alternative. This improves the protection of holders of voting shares (Dispatch for Parliament of the Swiss Federal Council of November 23, 2016 on the amendment of the Code of Obligations (Stock Corporation Law), BBl 2017 399 et seq. [cit. Dispatch], p. 549 f.). As before ,it is possible to lower these thresholds in the articles of association. However, increasing the thresholds or prescribing further requirements is void(BSK OR II-Dubs/Truffer, Art. 699N 12).
The right to add items to the agenda was also amended. Previously, according to the wording of the law, only shareholders holding shares with a par value of CHF 1 million were entitled todo so. With regard to the right to convene meetings, this was interpreted by case law and the prevailing doctrine in such a way that shareholders with 10 percent of the share capital were generally entitled to request the inclusion of an item on the agenda.
Here, too, the thresholds are lowered, the proportion of votes held is taken into account and a distinction is again made between listed and unlisted companies:
In the case of listed companies, shareholders who hold more than 0.5 percent of the share capital or votes may request that items be included on the agenda. And in the case of non-listed companies, the entitled shareholders must hold more than 5 percent of the share capital or votes (Art. 699b para. 1 CO).
Previously, the Board of Directors was obliged to comply with the request of the entitled parties to convene a meeting "within a reasonable period of time" (previous wording of Art. 699para. 5 CO), after the expiry of which the applicants could request the court to convene the meeting. In the newly formulated para. 5 of Art. 699 CO, a maximum period of 60 days has now been introduced.
1.4. New Regulations regarding Special Investigation (previously referred to as "special audit")
The "special audit" is now referred to as a "special investigation", the right of action for this has been regulated more uniformly and exists when 10% of the share capital or 10% of the votes are represented.
In general, shareholders can apply to the annual general meeting to have certain matters clarified by a special audit if this is necessary to exercise their shareholder rights and they have already exercised the right to information or the right to inspection.
In the event of a refusal to conduct such an audit, the law previously provided for a right to sue for shareholders representing 10 percent of the share capital or shares with a nominal value of 2 million Swiss francs.
With regard to non-listed companies, the entitlement is also more clearly regulated here and the share of votes is also taken into account: Shareholders holding more than 10 percent of the share capital or votes are entitled to file a lawsuit.
The threshold for listed companies has been lowered. Shareholders holding more than 5 percent of the share capital or votes are now entitled to file a lawsuit (Art. 697d para. 1 CO).
1.5. Statutory Arbitration Clauses
The admissibility of arbitration clauses in company statutes is now expressly regulated by law.
Previously, the admissibility of arbitration clauses in company statutes was disputed. Now, this issue is expressly regulated by law in Art. 697n CO. However, the scope of the arbitration clause is locally limited to arbitral tribunals with their seat in Switzerland. Arbitrable claims are actions for rescission and nullity (Art. 706and 706b CO), actions for dissolution (Art. 736 No. 4 CO), actions for (subsequent)payment of share capital (Art. 634b), actions for restitution (Art. 678 CO) as well as liability and responsibility actions (Art. 752 et seq. CO). By contrast, statutory arbitration clauses do not cover disputes among shareholders – in particular arising from shareholders' agreements (Dispatch,547). Unless the articles of association provide otherwise, the arbitration clause binds the company, the company's governing bodies, the members of the governing bodies and the shareholders (Art. 697n para. 1 CO, second sentence).The company is free to define further details of the arbitration proceedings in its articles of association, but it must ensure in its articles of association that persons who may be directly affected by the legal effects of the arbitral ruling are informed of the initiation and conclusion of the proceedings and may participate in the appointment of the arbitral tribunal and act as intervenors in the proceedings (Art. 697n para. 3 CO). The proceedings before the arbitral tribunal are otherwise governed by the corresponding domestic provisions of the Code of Civil Procedure pursuant to Art. 353 et seq. CCP. The provisions of international arbitration of the 12th chapter of the Federal Act on Private International Law (PILA) do not apply. This also excludes the possibility of waiving an appeal pursuant to Art. 192 para 1 PILA (Dispatch, 548). Thus, there is always the possibility of an appeal against an arbitral decision to the Federal Supreme Court (or exceptionally to the competent cantonal court, Art.390 para. 1 CCP).
Because shareholders waive legal protection by the state courts with an arbitration clause in the articles of association, the introduction of such a provision in the articles of association requires a qualified majority pursuant to Art. 704 para. 1 no. 12 (Dispatch, 548). In order to ensure that newly joining shareholders are clearly informed in advance, the existence of such a statutory arbitration clause must be noted in the entry in the commercial register in the case of stock corporations (Art. 45para. 1 lit. u of the Commercial Register Ordinance, abbr. HRegV), limited partnerships (Art. 68 para. 1 lit. v HRegV) and also limited liability companies (Art. 73 para. 1 lit. v HRegV). Prior to the entry, the Commercial Registry Office checks whether the resolution of the general meeting of shareholders to introduce an arbitration clause was passed with the legally required qualified majority – i.e. with at least two thirds of the votes represented and the majority of the nominal share value represented pursuant to Art. 704 para.1 item 14 CO. (Meisterhans, Aktienrechtsrevision und Handelsregister, SZW 2022 pp. 430 et seq., 437).
1.6. Restriction on the Removability of the Statutory Auditors
The dismissal of the auditors is now only possible for important reasons.
Previously, the auditors could be dismissed by the general meeting at any time without giving reasons and with immediate effect. Now, dismissal is only possible for important reasons (Art.730a para. 4 CO). In addition, the reasons for early resignation or dismissal must be disclosed in the notes to the annual financial statements (Art. 959cpara. 2 item 14 CO). This amendment serves to strengthen the position of the auditors (Dispatch, 583).
1.7. Adjustment of the Legitimation Threshold with regard to Dissolution Suits
Shareholders representing at least 10 percent of the share capital or votes are now entitled to file suit.
The question of the legitimacy to sue for the dissolution of the company is now also based on the participation in the votes (and not only in the capital) in favor of shareholders with privileged right to vote. Shareholders representing at least 10 percent of the share capital or votes are entitled to file a lawsuit.
2. Organization of the Stock Company
The powers of the general meeting have been slightly expanded, decision-making has been simplified, new forms of implementation have been introduced, and selective improvements have been made to the board of directors and the executive board.
2.1. Extended General Meeting Competencies
The decision-making powers of the general meeting have been slightly expanded.
The decision-making powers of the general meeting of shareholders have been slightly expanded. The general meeting of shareholders now has the non-transferable power to set interim dividends and approve the interim financial statements required for this purpose (Art. 698 para. 2 no. 5 CO), to decide on the repayment of the statutory capital reserve (Art. 698 para. 2 no.6 CO) and to decide on the delisting of equity securities (shares as well as participation certificates). The content of the new paragraph 3 for companies listed on the stock exchange in Art. 698 CO is not new, but corresponds to the previous Art. 2 VegüV (Ordinance against Excessive Compensation in Listed Stock Corporations).
In this context, the list of items on the agenda requiring qualified quorums (at least two thirds of the votes represented and a majority of the par value of shares represented) has also been extended. As such new items of negotiation were added:
- the consolidation of shares – insofar as this does not require the consent of all shareholders concerned – pursuant to Art. 704 para. 1 item 2 CO;
- the conversion of participation certificates into shares pursuant to Art. 704 para.1 item 6 CO;
- the new possibility of determining the currency of the share capital or the possibility of changing the currency pursuant to Art. 704 para. 1 item 9CO;
- the new legal regulation of the introduction of a casting vote by the chairman pursuant to Art. 704 para. 1 item 10 CO;
- the new possibility of allowing general meetings to be held abroad (Art. 704 para.1 item 11);
- the delisting of equity securities (Art. 704 para. 1 item 12);
- the introduction of an arbitration clause in the Articles of Association (Art. 704para. 1 item 14); and
- the waiver of the appointment of an independent proxy for the holding of a virtual general meeting in the case of non-listed companies.
There has been a slight modification to item 3: the provision on offsetting has been supplemented here. The constellation of an acquisition in kind has been omitted. The qualified foundation and capital increase scenario of the acquisition in kind were generally abolished (the former Art. 628 CO was thus completely deleted). The abolition was made due to the uncertainty of the distinction (especially with regard to intended acquisitions of assets) and also due to the randomness of the capital protection achieved (Dispatch, 432 et seq.).
2.2. Convening of the General Meeting by the Board of Directors
Compared to the previous law, the form of convening the general meeting (Art. 700 para. 2 CO) is more precise and designed in the manner of a checklist (Forstmoser/Küchler, loc. cit., Art. 700 CO N 12).
Short reasons must now be attached to the motions of the board of directors in the case of listed companies (Art. 700 para. 2 no. 3CO). Shareholder proposals must be accompanied by a brief justification for all companies.
The principle of the unity of the subject matter already applied implicitly before, but is now expressly enshrined in law in the new Art. 700para. 3 CO. Accordingly, a subject of negotiation may only contain aspects that are closely related or mutually dependent (Dispatch, 554). However, there is a certain amount of discretion and it is not always necessary to vote on each item individually. Blocks of topics which are interdependent in terms of content may be put to the vote under the same item of business. Total revisions of the articles of association may also be voted on as a whole (loc. cit.).
If the unity of the matter is violated, the corresponding resolution maybe challenged (Art. 706 para. 2 items 1 and 2 CO). During the general meeting, every shareholder also has the right to demand that items on the agenda which do not belong together be dealt with separately within the meaning of Art. 699bpara. 5 CO (loc. cit.).
According to doctrine, the consequence of nullity in the event of a violation of the unity of the matter is conceivable only in extreme cases. Moreover, a resolution cannot be challenged in case of violation of this principle if the violation of unity demonstrably had no influence on the adoption of the resolution – for example because of unanimity or because the issue was raised in the meeting and it was decided without a dissenting vote to leave it as a single issue (Forstmoser/Küchler,loc. cit., Art. 700 OR N 19).
Art. 700 para. 3CO also newly introduced the duty of the board of directors to provide shareholders with all information necessary for their decision-making. The dispatch speaks of factual and neutral information (Dispatch, 555). Items for discussion may be presented in summary form in the notice of the meeting, provided that further information is made available to the shareholders by other means, e.g. by electronic means (Dispatch, 555).
2.3. Universal Assembly, Approval of Motions and New Forms of Procedure
The general meetings can now be held at different locations at the same time and the venue can be freely chosen (possibly also outside Switzerland). It is also possible to hold the general meeting purely virtually. And finally, general meetings can now also be held by correspondence.
Art. 701 regarding " Universal meeting and consent to a motion" has been slightly editorially adjusted in paras. 1and 2. "Universal meeting" means that the general meeting may be held without complying with the rules applicable to the convening of the meeting, provided that all shares are represented and no objection is raised to this method of holding the meeting. Paragraph 2 now refers to the "participation" of shareholders in the universal meeting instead of their presence. This expresses that the physical presence of the shareholders is not mandatory and that the universal meeting can also be held, for example, in the form of a virtual general meeting (Art. 701d CO).
A completely new option – in addition to the universal meeting at which all shares must be represented – is paragraph 3 of Art. 701 CO: According to this new provision, general meetings may be held in writing (“on paper or electronically”),unless a shareholder or a shareholder representative requests oral deliberation. This new way of passing resolutions is intended to provide more flexibility for companies with a small shareholder base and companies that are part of a group (Dispatch, 555).
Art. 701a CO is also new. Pursuant to para. 1 of this article, the board of directors shall determine the venue of the meeting of the company. Pursuant to Art. 701a para. 2 CO, the choice of the place of the meeting must not make it unreasonably difficult for any shareholder to exercise his rights. Within Switzerland, however, this will hardly ever be the case and practically any meeting place in Switzerland is to be considered reasonable (cf. Forstmoser/Küchler, loc. cit., Art. 701aN 7). However, with regard to foreign meeting places (due to the new Art. 701bCO), the restriction of Art. 701a para. 2 CO may become relevant.
Pursuant to para. 3 of the new provision, the general meeting may beheld simultaneously at various locations. In this case, the votes of the participants must be transmitted directly in picture and sound to all meeting locations.
As mentioned, the new Art. 701b CO also allows the general meeting to beheld abroad if the articles of association so provide and the board of directors designates an independent proxy in the notice convening the meeting (Art. 701bpara. 1 CO). In the case of unlisted companies, the appointment of an independent proxy may be waived with the consent of all shareholders (Art. 701bpara. 2 CO).
The board of directors may now provide for "direct voting" or a "hybrid general meeting", i.e. that shareholders who are not present at the venue of the general meeting may exercise their rights electronically (Art. 701c CO). A statutory basis is not required for this, as this form of voting is based directly on Art. 701 para. 3 CO (cf. Meisterhans, Aktienrechtsrevision und Handelsregister, SZW 2022 pp. 430 et seqq., 436).
Based on the new Art. 701d CO, it is also possible to hold the general meeting purely virtually, i.e. without a physical meeting place, if the articles of association provide for this. In the case of listed companies, the board of directors must also appoint an independent proxy (Art. 701d para. 1 CO). In the case of non-listed companies, the requirement to appoint a proxy may be waived in the articles of association for the virtual general meeting (Art. 701d para.2 CO). Corresponding provisions in the articles of association are therefore sufficient.
According to Art. 701e para. 1 CO, the board of directors must regulate the details of the use of electronic means – usually in a corresponding set of regulations (Dispatch, 557). In Art. 701e para. 2 CO, the basic requirements for the use of electronic means are prescribed by law.
The participants must be identified (Art. 701e para. 2 no. 1 CO), the votes must be transmitted directly (Art. 701e para. 2 no. 2 CO), the possibility to make motions and participate in the discussion must be guaranteed (Art. 701e para. 2 no. 3 CO) and the integrity of the voting result must be ensured (Art. 701e para. 2 no. 4 CO).
If technical problems occur during the general meeting, so that the general meeting cannot be held properly, it must be repeated (Art. 701f para. 1 CO). Resolutions passed by the general meeting before the occurrence of the technical problems remain valid (Art. 701f para. 2 CO). The occurrence of technical problems must also be recorded in the minutes of the general meeting in accordance with the new Art. 702 para. 2 no. 6 CO. Relevant in this respect are not only problems which impair the casting of votes, but also those which hinder the exchange of opinions (Forstmoser/Küchler, loc.cit., Art. 702 N 8).
2.4. Right of Participation of the Management, Casting Vote of the Chairperson, Minutes
Members of the company management now also have the right to attend the general meeting. They do not have the right to propose motions, but they do have the right to express an opinion. In addition, the articles of association can now grant the chairperson of the general meeting the casting vote in the event of a tie (Art. 703 para. 2 CO). The new Art. 702 para. 4 CO introduces a period of 30 days within which the minutes must be available (at the request of a shareholder).
According to Art. 691 para. 2 CO, every shareholder is still entitled to object to the participation of unauthorized persons with the board of directors or in the minutes of the general meeting. According to the previous wording of Art. 702a CO, members of the board of directors were and are entitled to participate in the general meeting and also have the right to propose motions. Art. 691 para. 2bis CO now adds a right of participation for members of the company management. Although the members of the company management do not have the right to propose motions, they do have the right to express opinions pursuant to para. 1 of the newly formulated Art. 702a CO.
These new provisions do not change the possibility for shareholders to pass valid resolutions by way of a universal meeting or by circular letter, even without the participation of the members of the board of directors and the company management (Dispatch, 562 f.).
The articles of association can now grant the chairperson of the general meeting the casting vote in the event of a tie (Art. 703 para. 2 CO). For the introduction, as mentioned, the double qualified quorum is required (Art. 704para. 1 item 10 CO).
The new Art. 702 para. 4 CO introduces a period of 30 days within which the minutes must be available (at the request of a shareholder).
An even shorter period of 15 days is introduced via Art. 702 para. 5 CO for listed companies. Within this period, the resolutions and election results must be made available electronically, stating the exact voting ratios.
In the case of listed companies, the representation of shareholders (among other things, no limitation of representation to other shareholders, Art. 689d para. 1 CO) and the voting secrecy of the independent proxy have also been newly regulated (admissibility for the proxy to provide general information on the instructions received three days before the company's general meeting, Art. 689c para. 5 CO).
2.5. Term of Office of the Board of Directors, Election and Delegation of the Management
The requirements of the popular initiative "against rip-offs" or Art. 95 para. 3 BV (the regulations that were thus far contained in the VegüV) have been implemented at the legislative level. Now, the election of a secretary of the board of directors is not necessary, and the permissibility of the transfer of the management is allowed by default (without a special provision in the articles of association).
Art. 710 CO implements the requirements of the popular initiative "against rip-offs" and Art. 95 para. 3 BV. Here, too, the provisions of the previously enacted VegüV (Ordinance against Excessive Compensation in Listed Stock Corporations) have been implemented at the statutory level. According to Art. 3 para. 2 VegüV, the term of office of the board of directors ends with the conclusion of the next ordinary general meeting of shareholders, which according to Art. 699 para. 2 CO must be held annually. The term of office of the board of directors of listed companies was therefore already limited to one year in the VegüV and an individual election was required, which is now regulated in Art. 710 para. 1 CO.
The term of office of the board of directors of non-listed companies remains unchanged: According to Art. 710 para. 2 CO, this is by default 3years, maximum 6 years. Re-election is possible – both for non-listed and listed companies (Art. 710 para. 3 CO).
By way of disposition, individual elections are also provided for in the case of non-listed companies, although the articles of association or the consent of all shareholders may deviate from this (Art. 710 para. 2 CO).
Art. 712 para. 1 CO (election of a member of the board of directors as chairperson for a period of one year in the case of listed companies) is not in itself a change but corresponds to Art. 4 para. 1 and 2 VegüV. Now no secretary of the board of directors has to be elected. The secretary mentioned in Art.713 para. 3 CO can therefore be appointed ad hoc (Forstmoser/Küchler, loc. cit., Art. 712 N 11).
In the new wording of Art. 716b para. 1 CO, the default rule regarding the delegation of the company's management is reversed: Whereas with the previous wording of the law, the delegation of management required that a corresponding authorization existed in the articles of association and a corresponding set of organizational regulations, the delegation is now permitted by default.
Art. 716b para.2 CO is also new. Whereas according to Art. 120 HRegV the principle applies that only natural persons can be entered in the commercial register as members of the supreme management or administrative body and as authorized signatories, the last sentence of Art. 716b para. 2 CO provides that the asset management of the company can now also be transferred to legal entities.
2.6. Regulation of Electronic Means for the Adoption of Resolutions by the Board of Directors
The Board of Directors can pass circular resolutions purely electronically.
The new Art. 713 para. 2 item 2 CO explicitly regulates the use of electronic means by the board of directors and specifies in Art. 713 para. 2 item 3 CO that no signature is required for passing resolutions by electronic means (not even a qualified electronic signature). This means that the board of directors can now pass circular resolutions purely electronically (whether by e-mail, SMS, WhatsApp, Telegram, Signal, Threema, Wire, etc.).
2.7. Dealing with Conflicts of Interest
The law introduces new rules on what must happen when a conflict of interest arises.
Already under previous law, members of the board of directors and the executive board were obliged to avoid the occurrence of conflicts of interest as far as possible. This already resulted from employment law (Art. 321a CO), contract law (Art. 398 para. 1 and 2 CO) and also from previous company law (Art. 717 CO). The new Art. 717a CO now introduces explicit rules in para. 1 on what must happen if a conflict of interest nevertheless arises: Members of the board of directors and – if separate – members of the company management must, in accordance with the law, immediately and fully inform the board of directors of such conflicts of interest. For this reporting obligation, it is irrelevant whether a potential conflict of interest exists or whether an irresolvable conflict has already arisen (Dispatch, 571). The term conflict of interest is to be defined broadly. It may include business or private relationships of board members with third parties who have or wish to have a business relationship with the company (loc. cit.). A lack of time can also constitute a conflict of interest if other activities of a member of a corporate body (whether internal or external to the group) are so work-intensive that there is no longer sufficient time for the diligent performance of duties at the own company (loc. cit.).
According to para. 2 of the new Art. 717a CO, the board of directors shall take the measures necessary to safeguard the interests of the company. These can be measures in individual cases as well as a general order in the scope of conflicts of interest in organizational regulations (loc. cit.). A mandatory duty to abstain is not prescribed, since often the knowledge of the member of the board of directors or the management affected by a conflict of interest can be important for the decision-making process. In practice, there is usually a two-stage vote in such a case: First, a vote is taken among all members of the board of directors and then again without the biased members. The decision is only considered to have been reached if it has been adopted in both formations (loc. cit.).
In the event of a permanent conflict of interest, a member of the board of directors or the company management ultimately has no choice but to resign from the relevant body. If members of the board of directors or the company management cause damage to the company due to an incorrect handling of a conflict of interest, they also become liable pursuant to Art. 754 CO (loc. cit.).
2.8. New Rules regarding Insolvency
The law introduces explicit duties for the board of directors to act in order to avoid the insolvency of the company.
The new Art. 725 CO deals with cases of imminent insolvency and was placed before the provisions regarding capital loss and over-indebtedness. Financial planning was already one of the non-transferable and inalienable duties of the board of directors (Art. 716apara. 1 item 3 CO). The new Art. 725 CO stipulates explicit duties of the board of directors to act in this respect in order to avoid the insolvency of the company.
Insolvency in this sense does not exist in the case of a mere one-time inability to pay on time (Dispatch, 574), but rather when the company can no longer meet its due liabilities and thus has neither the means to meet due liabilities nor the necessary credit to procure these means if necessary (BGE111 II 206, 206 f., E. 1). “If the indications of this become stronger” (Dispatch,574), the board of directors must take measures within the meaning of Art. 725para. 2 CO. The fixed observation period discussed in the legislative process(generally 6 months and 12 months for companies with a duty to conduct an ordinary audit) was ultimately deleted.
Para. 2 prescribes how the board of directors must proceed in the event of impending insolvency. First, there is mention of “measures to ensure solvency” (e.g. the procurement of liquid funds). If necessary, the next step is to take “further measures to restructure the company” (e.g. obtaining subordination statements) or to propose measures to the general meeting (e.g. a capital increase). And finally, if necessary, composition proceedings within the meaning of Art. 293 of the Swiss Federal Law on Debt Collection and Bankruptcy (abbr. SchKG) must be initiated.
Paragraph 3 stipulates that the board of directors shall “act with the required urgency”. This is in any case the logical consequence of the general duty of care under Art. 717 para. 1 CO. However, according to the Dispatch, in the event of subsequent over-indebtedness (Art. 725b), para. 3 is of particular importance in the question of the liability of the board of directors. The focus on the timeliness of action is thus increased.
2.9. New Rules in the Event of Capital Loss
The new wording of the law in Art. 725a para. 1 CO specifies what is meant by legal reserves. Only non-repayable, blocked legal reserves (statutory retained earnings and statutory capital reserves) are covered. Compared to the previous law, the board of directors does not have to convene a general meeting of shareholders for restructuring measures in every case, but only if necessary. Art. 725a para. 2 CO now stipulates that companies without an auditor must submit their last annual financial statements to a limited audit by a licensed auditor in the event of a capital loss.
In the case of an stock company with a normal course of business, the balance sheet looks as follows (based on von Büren/Stoffel/Weber, Grundriss des Aktienrechts, 3rd edition, Zurich/Basel/Geneva 2011, para. 685 ff.).
If the company enters an economic crisis and makes losses, not all liabilities are covered by assets. A loss is recorded on the assets side.
In the event of massive disturbances of the economic balance, the law obliges the board of directors to act, and this is the case when there is a loss of capital or over-indebtedness. A capital loss exists if the accumulated deficit is so high that half of the sum of the nominal capital (share capital and participation capital) and the legal reserves are no longer covered:
Over-indebtedness exists when the balance sheet loss is so high that the equity capital is no longer covered at all and now neither are the liabilities:
All this already applied under the previous law. The essential content of the new Art. 725a CO was contained in the previous Art. 725 CO. The new wording of the legal provisions in Art. 725a brings the following innovations:
Firstly, the new wording of the law in Art. 725a para. 1 CO specifies what is meant by legal reserves. This includes the statutory retained earnings and the statutory capital reserves not repayable to the shareholders. Thus, only the non-repayable, blocked legal reserves are relevant (cf. Art. 671 para.2 CO). Any excess can thus already be mentally offset against the losses without a resolution of the general meeting (Kleibold/Rüfenacht, Das revidierte Aktienrecht aus der Sicht der Wirtschaftsprüfung, EF 6/21 p. 248ff., 460). In the event of a capital loss as defined above, the board of directors shall take measures with due haste to eliminate the capital loss(Art. 725a para. 1 CO). It may take its own measures to reorganize the company(e.g. by reducing costs) or it may "propose such [measures] to the general meeting of shareholders to the extent that they fall within its competence". The latter measures may be, for example, a capital increase or a balance sheet adjustment by means of a capital reduction. Compared to the previous law, the board of directors does not have to convene a general meeting in every case, but only if necessary.
Another new provision in Art. 725a para. 2 CO is that, in the event of a loss of capital, companies without an auditor must submit their last annual financial statements to a limited audit by a licensed auditor. The auditor is appointed by the board of directors. “This is to ensure that the economic situation is not worse than it is presented by the board of directors, which will not infrequently be the case in practice” (Dispatch, 577).
According to the new Art. 725a para. 3 CO, the audit obligation does not apply if the board of directors files for bankruptcy protection.
Art. 725a para.4 again exhorts to act with due haste.
2.10. New Rules for Over-Indebtedness
It is now mandatory that a subordination statement is also accompanied by a deferral of interest. The new law creates clarity regarding the requirements and duration of the bankruptcy deferral (max. 90days after the audited interim financial statements are available).
As before (in the former Art. 725a para. 1 CO), in the event of over-indebtedness, an interim balance sheet must be prepared and this must be audited by a licensed auditor. Newly, the second sentence of the over-indebtedness provision in Art. 725b para. 1 CO clarifies that the interim financial statements at disposal values can be waived if the going concern assumption is given and the interim financial statements at going concern values do not show over-indebtedness (Dispatch, 578). If the going concern assumption is not given, interim financial statements at disposal values are sufficient (Art. 725b para. 1 CO, third sentence). The provision is further explained in Art. 958a para. 2 CO. As before, the bankruptcy court must be notified if there is over-indebtedness both at going concern values and at disposal values (BSK OR II-Wüstiner, Art.725a N 3).
Previously, the duties of the court were outlined in the former Art.725a CO, now the corresponding provision in the new Art. 725b para. 3 CO refers to the relevant provisions of the Federal Law on Debt Collection and Bankruptcy, SchKG (Forstmoser/Küchler, loc.cit., Art. 725b N 15).
Art. 725b para. 4 does not contain anything fundamentally new. As before, the notification of the bankruptcy court may be waived if (para. 1) the company's creditors rank behind all other creditors in the extent of the over-indebtedness or (para. 2) there is a reasonable prospect of reorganization. However, the new law specifies these two possibilities:
- Repara. 1: As was already the case under the previously applicable law (cf. BSKOR II-Wüstiner, Art. 725 N 46regarding capital deferral), a subordination requires a capital deferral. Now, however, the subordination is necessarily accompanied by a deferral of interest (loc. cit.). The interest claims accruing during the period of over-indebtedness must therefore also be covered by the subordination. However, the new law does not require subordination for other compensations, such as commitment commissions,closing fees, prepayment penalties, waiver fees or reimbursement of expenses (Druey/Druey/Glanzmann, Gesellschafts-und Handelsrecht, 12th ed., Zurich/Basel/Geneva 2021, p. 134).
- Re para. 2: The new law provides clarity regarding the requirements and duration of the bankruptcy moratorium (Forstmoser/Küchler, loc. cit., Art. 725b N 16). Thus, there must be a reasonable prospect that the over-indebtedness can be remedied within a reasonable period of time, but no later than 90 days after the audited interim financial statements are available, and provided that the claims of the creditors are not additionally jeopardized.
2.11. Appreciation of Real Estate and Investments
Art.725c CO replaces the rules contained in Art. 670 regarding the revaluation of real estate and participations to remedy a capital loss and now clarifies in particular that this is also permissible to remedy over-indebtedness.
In order to remedy a half capital loss or an over-indebtedness, according to the new Art. 725c CO (para. 1), “[...] immovable property and participations whose true value has exceeded their acquisition or production costs may be revalued at a maximum of the true value.” However, the revaluation is “[...] permitted only if the external auditor or, if there is no external auditor, a licensed auditor confirms in writing that the statutory provisions have been complied with” (Art. 725c para. 2 CO).
The revaluation amount must be shown separately under the statutory retained earnings as a revaluation reserve (Art. 725c para. 1 CO, second sentence).
The revaluation reserve can only be dissolved by conversion into share or participation capital and by value adjustment or sale of the revalued assets (Art. 725c para. 3 CO).
3. Changes regarding Responsibility
3.1. Extension of Suits for Restitution and Filing of Suits by Resolution of the General Meeting
The restitution suit has been improved in certain respects (expansion of the group of persons liable for restitution; waiver of the requirement of bad faith; possibility for shareholders to initiate a suit forpayment to the company without having to bear the litigation risk themselves).
In the case of restitution suits pursuant to Art. 678CO, the group of beneficiaries covered has been expanded. Now, in Art. 678para. 1 CO, the persons involved in the management of the company and the members of the advisory board are also expressly mentioned as persons subject to restitution. This wording is intended to clarify that actual and de facto executives are also covered by the obligation to make restitution (Dispatch, 528).
Furthermore, the former requirement of bad faith on the part of the party liable for restitution is now waived. The action for restitution is a lex specialis to the general norms on unjust enrichment (which is now also clarified in Art. 678 para. 3 CO). According to these general principles, badfaith of the unjustly enriched party is not required, so that Art. 678 COis harmonized with Art. 62 ff. OR.
Art. 678 para. 5 CO now clarifies the right of the general meeting of shareholders to decide to file an action for restitution. The general meeting may entrust the board of directors or an external representative with the pursuit of legal action (Art. 678 para. 5 CO, second sentence).
The same provision is now also found in Art. 756 para. 2 CO. Accordingly, the general meeting may also compel the company to bring an action for liability at the company's expense. Here too, either the board of directors or a representative may be entrusted with conducting the lawsuit (Art. 756 para. 2 CO, second sentence). In both cases (in the case of an action for restitution and in the case of a liability action), the shareholders thus have the opportunity to initiate an action for payment to the company without having to bear the litigation risk themselves (Dispatch, p. 530 and p. 600).
3.2. Treatment of Subordinated Claims in Liability Litigation
The new Art. 757 para. 4 CO makes it clear that claims arising from subordination cannot be brought in liability actions.
In the case of subordination, a creditor of an over-indebted company declares that he will waive payment of his claim until the other creditors have been satisfied. If the restructuring subsequently fails and the company is declared bankrupt, the board of directors is liable under certain conditions for the loss incurred by the company. According to the previous case law of the Federal Supreme Court (BGer 4A_277/2010 of September2, 2010, E. 2.3), the claims encumbered with subordination rights are to be included in the calculation of this damage. Thus, on the one hand, the law encouraged the board of directors to obtain subordination statements for the purpose of restructuring, while the Federal Supreme Court threatened to impute the amount of these subordinations to the board of directors as damages (Camponovo/Baumgartner, Wird der Rangrücktritt unbrauchbar?, ST 12/11 p. 1036 et seq., 1038).
The new Art. 757para. 4 CO now corrects this and makes it clear that such claims from subordinations cannot be sued for in liability actions. These are not to be included in the calculation of damages – whereby the correct formulation is that the corresponding part of the damage is not to be included in the calculation of the liability for damages (Forstmoser/Küchler, loc. cit., Art. 757 OR N 8).
3.3. Extension of the Right to Sue in Case of Release of the Board of Liability
The right to sue for shareholders who did not approve the release of the board of liability, abstained from voting or did not attend the general meeting now expires twelve months (instead of six months previously) after the release resolution. The time limit is also suspended during the proceedings for ordering a special investigation and during the conduct of such investigation.
The possibility of a “décharge”, i.e. releasing the board of liability, has already been anchored in stock corporation law since 1883 (Hasler, Die Bedeutung der Décharge für Verwaltungsräte, RR-VR 1/2019 pp. 2 et seq., 2). In order to limit unnecessary liability litigation and also to live up to the principle of consistent action, the principle applies that the company and the consenting shareholders waive liability claims against company executives if they grant a “décharge” on the occasion of the general meeting by a valid resolution (von Büren/Stoffel/Weber, Grundriss des Aktienrechts, 3rd ed., Zurich/Basel/Geneva 2011, para. 1264). However, this liability release only relates to those facts which have become known on the occasion of the general meeting (BGer 4C.107/2005 of June 29, 2005, E. 3.2). The waiver of liability claims expressed by the release only applies to the company and the approving shareholders. Under previous law, shareholders who did not consent to the release or who abstained from voting or did not attend the general meeting at all were able to file a claim within six months of the general meeting (Hasler, loc. cit., p. 3). This was a forfeiture period.
Now, this period is extended from six to twelve months in Art. 758 para.2 CO, first sentence, since in practice the period of six months had proven to be far too short (Dispatch, 601).
Furthermore, the time limit was also adjusted to the special investigation. Pursuant to Art. 758para. 2 CO, second sentence, the time limit of twelve months is suspended during the proceedings for ordering a special investigation and during its execution. This allows the results of the special investigation to be used in substantiating claims, which was not previously effective due to the far too short forfeiture period (Forstmoser/Küchler, loc. cit., Art. 758 OR N 5).
3.4. Shortening of the Statute of Limitations
The relative statute of limitations has been reduced from five to three years. During the proceedings for ordering a special investigation and while it is being conducted, it stands still.
In Art. 760 para. 1 CO, for reasons of standardization and simplification, the statute of limitations period was adapted to the general provisions of the CO and the relative limitation period was reduced from five to three years (Dispatch, 605) – from the date on which the person suffering damage learned of the damage and of the person liable for it. The absolute limitation period is, as before, 10 years “after the date on which the harmful conduct took place or ceased” (Art. 760 para. 1 CO, first sentence).
A second sentence has been added here: “This period shall be suspended during the procedure to order a special investigation and during the conduct of the investigation.” This coincides with the above-mentioned new provision in Art. 758 para. 2 CO, second sentence.
4. Shares, Share Capital and Payment for Subscribed Shares
4.1. Share Capital in Foreign Currency
It is now possible to use a foreign currency for the share capital (currently British Pounds, Euros, US Dollars or Yen).
Art. 621 CO is now newly divided into three paragraphs, with paragraphs 2 and 3 dealing with the new possibility of using a foreign currency for the share capital.
Accordingly, the use of a foreign currency is permissible if:
- it is essential for the business activity (Art. 621 para. 2 first sentence CO, meaning the "currency of the primary economic environment of the company", see Dispatch, 428);
- the share capital in foreign currency is at least equal to CHF 100,000 at the time of incorporation (Art. 621 para. 2 second sentence CO);
- accounting and financial reporting is carried out in the same foreign currency (Art. 621para. 2 third sentence CO);
- the use of the specific foreign currency has been approved by the Federal Council (Art.621 para. 2 fourth sentence CO; the permissible currencies are listed in Annex3 to the Commercial Register Ordinance, HRegV, and are currently: British Pound, Euro, US Dollar and Yen).
When changing the currency of the share capital of an existing company:
- the general meeting of shareholders must adopt the change to the beginning of a financial year (Art. 621 para. 3 first sentence CO);
- the resolution must be passed with the required quorum, i.e. the approval of at least two thirds of the votes represented and the majority of the par value of the shares represented is required (Art. 704 para. 1 item 9 CO);
- the change must be reviewed by the board of directors and the articles of association must of course be amended as well, whereby the board of directors must determine compliance with the requirements of Art. 621 para. 2 CO and record the conversion rate applied (Art. 621 para. 3 second and third sentences CO);and
- the resolutions of the general meeting of shareholders and the board of directors must be notarized (Art. 621 para. 3 last sentence CO).
The chosen foreign currency applies to all capital-related aspects of the company, such as the formation of reserves and distributions (Fischer, Neues Aktienrecht - Ready for Take-off?, AJP 2023 pp. 3 ff., 4). For tax purposes, however, the valuation in CHF continues to be relevant. The taxable equity (Art.31 para. 5 of the Federal Law on the Harmonization of Direct Taxes of the Cantons and Municipalities, StHG) and the taxable net profit (Art. 80 para. 1bis ofthe Federal Law on Direct Federal Tax, DBG, and Art. 31 para. 3bis StHG) are to be converted into Swiss Francs.
The new possibility of currency exchange also applies to LLCs (Art. 773 para. 2 CO).
4.2. More Flexibility for Changes in Nominal Value and Offsetting
Now the par value of each share simply has to be greater than zero (and no longer at least one centime). The law now clarifies that claims that are to be offset against the company's payment claim do not necessarily have to be covered by the company's assets.
Company law always prescribed a legal par value for each share, which could not be fallen short of. The 1936 Company Law provided for a par value of CHF 100, the 1991 revision of the Company Law reduced this to CHF 10, and in 2001 there was a further reduction to one centime. Now it is sufficient if the par value is simply greater than zero (Art. 622 para. 4 CO).
The legislator thus intends to increase flexibility with regard to the new denominations of shares (Dispatch, 431). The same new regulation also applies to LLCs (Art. 774 para. 1 CO).
The new Art. 634a CO deals with offsetting liberation and clarifies disputed issues. For example, it is clarified that claims which are to be offset against the company's payment claim do not necessarily have to be covered by the company's assets (Dispatch, 493).
In addition, according to Art. 634a para. 3 CO, offsetting items must be set out in the articles of association in order to improve transparency for the benefit of creditors and investors (Dispatch, 492). The articles of incorporation must state the amounts of the claims brought for offsetting, the names of the corresponding shareholders and the shares to which they are entitled. After a period of ten years, these provisions of the Articles of Association may be repealed by the general meeting of shareholders.
This so-called statutory publicity (in addition to the previous register publicity) now also applies to the payment from freely usable equity capital pursuant to Art. 652d para. 3 CO.
4.3. Abolition of the (Intended) Acquisition in Kind
The rules regarding acquisition in kind and intended acquisition in kind have been abolished (see also above).
The question as to when a transaction qualified as a takeover of assets and until when, in the case of a takeover of assets after the formation or capital increase, there was a relevant connection with the formation or capital increase, was often difficult to answer (Dispatch, 432). The wording of the law was in great need of interpretation and the protective mechanisms only applied selectively. In addition, protection was considered sufficient from, among other things, the restitution provision of Art. 678 CO, the prohibition of restitution of deposits (Art. 680 para. 2 CO), liability under Art. 754 CO – e.g.in the event of an overvaluation of assets taken over – and the provisions of accounting law, which have been more precise since 2013 (Dispatch, 433 f.). In addition, there is protection under reorganization law, bankruptcy law and debt enforcement law (such as the Paulian rescission action) as well as under the criminal liability consequences – Art. 152 of the Swiss Criminal Code (StGB) regarding untrue statements about commercial trades, Art. 158 StGB regarding unfaithful business management, Art. 163 StGB regarding fraudulent bankruptcy and seizure fraud, Art. 164 StGB regarding damage to creditors through reduction of assets and Art. 165 StGB regarding mismanagement (loc. cit.).
4.4. More Flexibility for Capital Changes
The new capital provisions of the revision create more flexibility for companies. The centerpiece is the new instrument of the capital band (for specific details, see next point). In addition, there are selective adjustments to the ordinary capital increase, the capital increase from conditional capital and the capital reduction, which are intended to facilitate capital adjustments.
In the case of an ordinary capital increase, the deadline for the implementation and registration of the capital increase is extended from the previous three months to six months (Art. 650 para. 3 CO).According to the previous wording of Art. 650 para. 3 CO, the date of entry in the commercial register was decisive for compliance with the old three-month period, which the notifying parties had no influence on. Now, the law declares the date of registration as relevant.
Similarly, Art. 652b para. 4 CO now expressly states that no one may be unfairly favored or disadvantaged not only by the cancellation of the subscription right but also by the determination of the issue amount. Thus, in order to protect the property of the shareholders, the possibility is excluded that the net asset value of their shares is diluted by an increase in capital if they cannot or do not wish to participate in the increase (Dispatch, 498).This right already applied in the past, but is now better secured by the explicit anchoring in the law (Forstmoser/Küchler,loc. cit., Art. 652b OR N 11).
In the case of a conditional capital increase, the group of possible recipients of options or convertible bonds is expanded: Previously, the law mentioned in Art. 653 para. 1 CO "creditors of new bonds or similar debt instruments ... as well as ... employees". The new wording of Art. 653 para. 1 CO now also mentions shareholders, members of the board of directors, members of the board of directors of other group companies and “third parties” - e.g. universities in the context of a technology transfer (Fischer, Neues Aktienrecht - Ready for Take-off?, AJP 2023 pp. 3 et seq., 6, fn 43).
Art. 653c para. 3 CO codifies the previous practice, according to which a restriction or cancellation of the preferential subscription right is not only permissible for important reasons, but also if shares are listed on the stock exchange and the bonds to be issued are ”issued subject to appropriate conditions”, i.e. in such a way that an interested shareholder can buy on the stock exchange at comparable conditions (Forstmoser/Küchler, loc. cit., Art. 653c CO N 7). According to prevailing doctrine on the previous law, further requirements had to be met (broadly diversified circle of shareholders and no unilateral preferential treatment of individual groups of shareholders or third parties and in the allocation of the bonds). These aspects could remain relevant in individual cases in view of the requirement of objectivity of Art. 653c para. 4 CO (loc. cit.).
The previous wording of Art. 653e para. 1 CO required that the exercise of conversion or option rights must be made by a written declaration. Now this is possible without any form. Nevertheless, the law stipulates that the exercise (even if it were to be made orally, for example) must refer to the provisions of the articles of association regarding the conditional capital and to the prospectus, if any.
With Art. 653 para. 3 CO, a new provision was inserted which takes into account a special type of convertible bond, the mandatory convertible bonds. These are bonds which must be mandatorily converted into shares at a certain point in time or under certain conditions (Forstmoser/Küchler, loc. cit., Art. 653 OR N 6). The provisions on the increase of the share capital from conditional capital are applicable here mutatis mutandis (Art. 653para. 3 CO).
The previous wording of Art. 653i para. 1 CO provided for the cancellation of the provisions of the articles of association regarding the conditional capital increase only if the conversion or option rights have expired. The wording of Art. 653i para. 1 CO extends the possibilities in this respect. The cancellation or adjustment of the corresponding provisions of the articles of association is possible if:
- the conversion or option rights have lapsed (Art. 653i para. 1 item 1 CO);
- no conversion or option rights have been granted at all (Art. 653i para. 1 item 2CO); or
- all or some of the beneficiaries have waived their right to exercise them (Art.653i para. 1 item 3 CO).
With regard to capital reductions, a new forfeiture period has been introduced within which the capital reduction must be notified to the Commercial Register, namely within six months, otherwise the reduction resolution lapses. The deadline can be shortened by the general meeting, but not extended (Dispatch, 506).
Art. 653n No. 1 CO now regulates the possibility of a capital reduction up to a maximum amount in analogy to the capital increase up to a maximum amount (Art. 650 para. 2 No. 1 and 2 CO). In part, this procedure was already considered permissible in the past. There is a practical need for such a capital reduction up to a maximum amount, in particular in connection with share buyback programs where it is not clear at the outset to what extent shares will be bought back (Dispatch, 509).
According to Art. 653k para. 1 CO, only one publication (instead of three SOGC publications) is now required for a debt call in the Swiss Official Gazette of Commerce (SOGC). In addition, the period for filing a request for the securing of claims has been shortened from previously two months to 30 days(Art. 653k para. 2 CO). The company now only has to secure the claims of creditors to the extent that the previous coverage is reduced by the capital reduction (Art. 653k para. 2 CO). If the company fulfills the claim or proves that the fulfillment of the claim is not jeopardized by the reduction of the share capital, the obligation to provide security does not apply (Art. 653kpara. 3 CO, first sentence). And if there is an audit confirmation, this establishes the presumption that the fulfillment of the claim will not be jeopardized by the reduction (Art. 653k para. 3 second sentence CO). This is therefore considered sufficient evidence of the absence of a threat to the claims of creditors.
The provisions regarding capital reductions apply mutatis mutandis to capital reductions within the framework of a capital band (Art. 653u para. 5CO).
In the case of the reorganization measure of "capital reduction" (also called "harmonica", i.e. capital reduction with simultaneous capital increase), the protective provisions of the capital reduction procedure are not applicable (Art. 653q para. 1 CO). This reorganization measure is now regulated in detail in Art. 653q CO and Art. 653rCO.
It is now no longer required that the newly created capital be fully paid up, but only that the existing degree of payment be maintained (Forstmoser/Küchler, loc. cit., Art. 653q OR N 6).
4.5. The Capital Band
The revision introduces the new instrument of the capital band (a combination of an authorized capital increase with an authorized capital reduction).
A central innovation of the revision of the Company Law is the introduction of a capital band. The capital band combines the previous authorized capital increase with a mirror-image “authorized capital reduction” that was not previously provided for (von der Crone/Dazio: Das Kapitalband im neuen Aktienrecht, SZW / RSDA 5/2020, 505 et seq., 506). The previous instrument of the authorized capital increase was also made obsolete and deleted.
The articles of association may authorize the board of directors to change the share capital within a range (capital band) for a maximum period of five years (Art. 653s para. 1 CO, first sentence). They specify the limits within which the board of directors may increase and decrease the share capital(Art. 653s para. 1 CO, second sentence).
The upper limit of the capital band may not exceed the share capital entered in the commercial register by more than half. The lower limit of the capital band may not be more than half of the share capital entered in the commercial register (Art. 653s para. 2 CO).
The general meeting of shareholders may limit the discretionary powers of the board of directors. For example, it may determine that the board of directors may only increase the share capital, but not reduce it (Art. 653s para.3 CO). However, if a company has waived the limited audit of the annual financial statements, the articles of incorporation may only authorize the board of directors to increase the capital (Art. 653s para. 4 CO). Art. 653tpara. 1 prescribes the necessary provisions of the articles of association, which the board of directors must delete again after the period specified for the authorization has expired (Art. 653t para. 2 CO).
If details are not regulated in the resolution of the general meeting(e.g. with regard to the exclusion of subscription rights), the board of directors may issue such regulations in accordance with Art. 653u para. 2 CO. With regard to subscription rights, however, the articles of association must state “the good cause for which the board of directors may restrict or cancel the subscription right” (Art. 653tpara. 1 no. 7 CO). In the event of a reduction of the share capital within the capital band, the creditor protection provisions of the ordinary capital reduction shall apply mutatis mutandis (Art. 653u para. 3 CO).
After each increase or reduction of the share capital, the board of directors shall make the necessary findings and amend the articles of association accordingly (Art. 653u para. 4 first sentence CO). The resolution on the amendment of the articles of association and the findings of the board of directors must be notarized (Art. 653u para. 4 second sentence CO). In all other respects, the provisions on ordinary or capital increases from conditional capital and on capital reductions apply mutatis mutandis (Art. 653u para. 5 CO). In addition, if the general meeting of shareholders resolves to increase or decrease the share capital or to change the currency of the share capital during the term of the authorization of the board of directors, the resolution on the capital band lapses (Art. 653v para. 1 first sentence CO). The articles of association must then be amended accordingly (Art. 653v para. 1 CO, second sentence).
A conditional capital, on the other hand, can be provided for outside the capital band as well as within the capital band. Art. 653v para. 2 CO deals with the relationship between the two processes. If the conditional capital is provided for outside the capital band, it forms additional share capital, which is why the band is shifted accordingly (Forstmoser/Küchler, loc. cit., Art. 653v OR N 8). On the basis of an authorization of the board of directors for the corresponding use of the capital band, the conditional capital can, however, also be introduced within the framework of the existing capital band (loc. cit.). The latter variant offers the advantage that no amendment to the articles of association is required with regard to the capital band. However, it also has the disadvantage that the basis for the creation of new shares could cease to exist when the capital band expires (loc. cit.).
4.6. Changes Relating to Participation Capital
Listed participation capital may amount to ten times the share capital. Unlisted participation capital may not exceed twice the share capital (as before). Various limits and thresholds in connection with any participation capital have been adjusted.
Newly, participation capital consisting of listed participation certificates may not exceed ten times the share capital (Art.656b para. 1 CO, first sentence). For non-listed participation capital, the previous upper limit of twice the share capital applies (Art. 656b para. 1 CO, second sentence).
There are also changes in the calculation of various limit and threshold values in connection with participation capital. According to Art. 656b para. 4 CO, the thresholds are to be calculated separately for shareholders and participants in the case of (1.) the initiation of a special investigation; (2.) an action for dissolution; and (3.) the notification of the beneficial owner pursuant to Article 697j CO. The separate calculation is intended to ensure that shareholders can exercise their minority protection rights even if the share capital is relatively low compared to the participation capital (cf. Dispatch, 519). For companies with comparatively low participation capital, however, this can lead to absurd results, particularly with regard to reporting obligations (Gericke/Müller/Häusermann/Hagmann, Neues Aktienrecht: Tour d'Horizon, GesKR2020 pp. 323 ff., 329 f.).
5. Amendments Relating to Capital Maintenance Requirements
5.1. Acquisition of Treasury Shares
If the acquisition of treasury shares by the company is in connection with a dissolution action, the maximum limit is now 20 percent. This upper limit also applies – as before – to an acquisition in connection with a transferability restriction.
A stock corporation may only acquire its own shares if freely usable equity capital in the amount of the funds required for this purpose is available and the total nominal value of these shares does not exceed 10 percent of the share capital (Art. 659 para. 1 and 2 CO). This upper limit was previously increased to 20 percent in the event of an acquisition in connection with a transferability restriction. Now, this upper limit of 20percent is also extended to the case of an action for dissolution (Art. 659 para. 3 CO).
The purpose of this amendment is to more frequently allow the alternative solution of a takeover of the shares by the company to be realized in the event of an action for dissolution of the company. The withdrawal of individuals with minority shareholdings in a private stock company is thus facilitated (Dispatch, 520).Shares acquired in excess of ten percent must be sold within two years or cancelled by means of a capital reduction (Art. 659 para. 3 CO).
In Art. 671 to 673 CO, the provisions on reserves have been restructured, and the order in which they are to be offset against losses has been specified in Art. 674 CO (Forstmoser/Küchler, loc. cit., Vorbemerkungen zu Art. 671-674 CO N 3). The law now divides the reserves into statutory capital reserves (Art. 671 CO), statutory retained earnings (Art. 672 CO) and voluntary retained earnings (Art. 673 CO).
The aim of the new regulations is to a) simplify the provisions of the current law and to bring them into line with international practice; b) bring the provisions of company law into line with the new accounting law, which came into force on January 1,2013; and c) implement the capital contribution principle of the corporate tax reform legislation of March 23, 2007. The capital contribution principle has been in force since January 1, 2011 and enables the tax-free repayment of reserves from capital contributions. Prior to this, the nominal value principle applied and the repayment of reserves from capital contributions was subject to offset and income tax.
5.3. Statutory Capital Reserve (Art. 671CO)
The new Art. 671para. 1 CO requires the formation of statutory capital reserves in three different cases (in the event of a paid-in share premium; in the event of profits consisting of forfeited contributions due to default by shareholders, i.e. so called “caducation profits”; and in the event of further contributions and grants on shares or participation certificates).
The new Art. 671 para. 1 CO provides for three case constellations in which statutory capital reserves are formed:
- According to Art. 671 para. 1 item 1 CO, the share premium, i.e. the difference between the nominal value of newly issued shares or participation certificates below the issue price less the issue costs, is to be allocated to the statutory capital reserve (von der Crone, Aktienrecht, 2nd edition, Berne 2020, para. 514).
- Pursuant to Art. 671 para. 1 item 2 CO, the so-called “caducation profit” (i.e. profit consisting of forfeited contributions due to default by shareholders) is also to be allocated to the legal capital reserve, i.e. the retained partial payments on shares of which the share subscriber was declared to have lost as a consequence of his/her default (loc. cit.).
- Pursuant to Art. 671 para. 1 item 3 CO, any further contributions and grants on shares or participation certificates must also be allocated to the statutory capital reserve (loc. cit.). These are then treated for tax purposes in accordance with the capital contribution principle as the repayment of share or participation capital.
5.4. Statutory Retained Earnings (Art. 672 CO)
Retained earnings comprise “all reserves formed from retained earnings of the company”(Dispatch, 524). Compared to the previous law, various changes have been made that lead to a simplification as well as a strengthening of the reserves (Forstmoser/Küchler, loc. cit., Art. 672OR N 4).
The statutory retained earnings reserve is formed by allocations from the annual profit. Pursuant to Art. 672 para. 1 CO (first sentence), 5% of the annual profit is to be allocated to the statutory retained earnings reserve in each case. If there is a loss carried forward, this must be eliminated before allocation to the reserve in accordance with Art. 672 para. 1 CO, second sentence. The obligation to allocate to the legal profit reserve exists until the legal profit reserve together with the legal capital reserve reaches half of the share capital registered in the commercial register (Art. 672 para. 2 first sentence CO). In the case of holding companies, the obligation to allocate to the statutory profit reserve exists until the latter, together with the legal capital reserve, reaches 20% of the share capital entered in the Commercial Register (Art. 672para. 2 second sentence CO). Any profit carried forward is not to be included in the calculation of the reserve obligation, as reserves have already been formed in the previous years (von der Crone Hans Caspar, Aktienrecht, 2nd ed., Bern 2020, para. 515 ).
The new regulation leads to a tightening, but also toa simplification of the previous order:
- The reference value for the formation of reserves is now the total registered capital and not, as previously, only the paid-in capital.
- The limit to be reached is 50%, but must only be reached by the statutory retained earnings reserve and the statutory capital reserve together. Under previous law, by contrast, the statutory reserve alone had to amount to 20% of the paid-in capital (Forstmoser/Küchler,loc. cit., Art. 672 OR N 9).
- The previously envisaged obligation to make a second allocation after distribution of a 5% dividend has been dropped (loc. cit.).
5.5. Voluntary Retained Earnings (Art.673 CO) and Offsetting Against Losses (Art. 674 CO)
According to the revised Art. 673 CO, the general meeting of shareholders may provide for the formation of additional voluntary retained earnings in the articles of association or by means of individual resolutions. However, these may only be formed if the long-term prosperity of the company permits it. Art. 674 CO then stipulates the order in which annual losses are to be offset.
The former Art. 673 CO provided for the formation of reserves “for the establishment and support of welfare institutions for employees of the company”. Since welfare provision for employees of the company is already covered by the staff pension fund according to the law on foundations (Art. 89bis ZGB), the obligation of employees and employers to contribute (Art. 331 et seq. OR) and other protective provisions of the Federal Pension Fund Act, this provision was no longer significant (BSK OR II-Neuhaus/Balkanyi, Art. 673 N 6 and Art. 674 N 20).
According to para. 1 of the new Art. 673 CO, the general meeting of shareholders may provide for the formation of additional voluntary retained earnings in the articles of association or by means of individual resolutions.
However, according to paragraph 2 of Art. 673 CO, such voluntary retained earnings may only be formed if the long-term prosperity of the company justifies this, taking into account the interests of all shareholders(Dispatch, 524). The formation of additional reserves is therefore not permitted without restriction, and especially not if it serves noncorporate purposes, the “starvation” of individuals with minority interests or an abusive keeping down of the share price through low dividend distributions (loc. cit.).
Art. 674 CO then stipulates in a binding manner that annual losses are to be offset in the following order: against the profit carried forward (item 1), the voluntary retained earnings (item 2), the statutory retained earnings (item 3) and finally against the statutory capital reserve (item 4).
Instead of offsetting against the statutory retained earnings or against the statutory capital reserve, any remaining annual losses pursuant to paragraph 2 may also be carried forward in part or in full to the new annual financial statements.
The offsetting serves the principle of clarity and comprehensibility of the financial statements (Art. 958c para. 1 item 1 CO). For example, an annual loss should not be reported simultaneously with a profit carried forward in the opening balance sheet of the new financial year (Dispatch, 525).
5.6. Distribution of Interim Dividends (Art. 675a CO)
Art. 675a CO now regulates the permissibility of paying interim dividends and the conditions to be met for this.
Until now, company law did not contain any provision on the distribution of interim dividends. In practice, there was an increased need for the payment of interim dividends, in particular for the redistribution of liquidity within a group and for companies whose shareholders are accustomed to quarterly dividends due to their background (Dispatch, 526). Whether and in what form the payment of interim dividends was permissible under the previous law was disputed (loc. cit.). The new law now provides clarity in this respect.
Pursuant to Art.675a para. 1 CO, a corresponding resolution of the general meeting of shareholders and the existence of interim financial statements for the adoption of the resolution are required. Art. 675a para. 2 CO then stipulates that the interim financial statements must be audited by the auditors before the resolution is passed, with two exceptions: a) the company does not have auditors or has made use of the option to waive a limited audit of its financial statements (i.e. has decided and implemented a so called "opting-out"); or b) all shareholders approve the payment of the interim dividend and the claims of creditors are not jeopardized as a result.
The new Swiss company law introduces various new possibilities and instruments. For existing stock corporations (as well as for LLCs), it is necessary to examine which of these new possibilities can and should be used (share capital in a foreign currency, introduction of a capital band, introduction of statutory arbitration clauses, holding virtual general meetings, holding general meetings abroad, introduction of a casting vote by the chairperson at the general meeting, etc.).