Changes effective January 1, 2023
The law governing public limited companies, as amended on January 1, 2023, has both advantages and some potential pitfalls for financial institutions.
The share capital may be denominated in EUR, GBP, USD or JPY provided that it is the most important currency in relation to the company's activities.
Adopted by Parliament in June 2020, the reform of the law of the public limited company (SA) came into force on January 1, 2023. The new provisions aim in particular to relax the rules on capital and foundation and to allow the formation of share capital in foreign currency.
In accordance with the timetable set by the Federal Council, the revision of the law of the public limited company, made concrete through the amendments to the Code of Obligations (CO) and the Ordinance on the Commercial Register (ORC), has been effective since January 1, 2023.
As part of the relaxation of capital and foundation rules, the reform introduces a new tool : the capital fluctuation margin.
Set in advance, this margin will allow the board of directors to increase or decrease the company's capital for a period of up to five years.
In addition, it will now be possible to establish the share capital of a company in certain approved foreign currencies.
Cryptocurrencies are excluded, however.
The reform also enshrined provisions concerning excessive compensation in law. Consequently, the Federal Council's ordinance against excessive compensation in publicly traded companies became obsolete and was repealed.
In addition to these new features, the reform also contains provisions concerning gender representation thresholds in the management of large companies and an increase in transparency in the raw materials sector.
Companies have two years (until January 1, 2025) to bring their articles of association into compliance with the new law. They will need to make these changes in order to benefit from the capital fluctuation margin.
Four legal changes that may be of practical interest to unlisted companies:
1. FOREIGN CURRENCIES
The share capital may be denominated in EUR, GBP, USD, or JPY, provided that this is the most important currency for the company's activities. If the share capital is denominated in one of these currencies , the accounts must be presented in that same currency, and in this case, the equivalent values in Swiss francs must also be shown.
The law governing public limited companies does not oblige the company to increase its share capital.
The share capital must be at least 100,000 francs, or its equivalent in foreign currency , at the time of incorporation of the company .
Assuming that a company is founded with capital in EUR and that this currency devalues, the company will, in fact, have a share capital of less than 100,000 francs.
The law governing public limited companies (SA) does not require them to increase their share capital. However, this situation can raise regulatory issues.
For asset managers , Article 22 of the Financial Institutions Act (LEFin) stipulates that a minimum capital of CHF 100,000 "must be maintained at all times." FINMA could require a capital increase under penalty of administrative measures.
2. INTERMEDIATE DIVIDENDS
A public limited company can distribute dividends to its shareholders during the financial year.
To do this, the company must prepare interim accounts and, if necessary, have these accounts reviewed according to the regime applicable to annual accounts (opting-out, limited or ordinary audit).
The payment of interim dividends is particularly important when the company is sold by its shareholders and is supposed to be free of retained earnings on the day of the sale.
3. INFORMATION FOR SHAREHOLDERS
In unlisted companies, shareholders representing together at least 10% of the share capital or voting rights may request information in writing from the board of directors at any time regarding the company's affairs.
The board of directors is required to provide the information within four months. This new law thus allows shareholders to obtain information on the company's operations without having to wait for a general meeting.
4. GENERAL ASSEMBLY
The practical arrangements for holding the general assembly are expanded.
meetings can now be held (i) at several sites simultaneously with live streaming between sites, (ii) without a physical meeting place (video conference only) if the statutes provide for it, or (iii) abroad if the statutes provide for it.
The Commercial Register rejects articles of association that do not comply with the law in force at the time of the registration application. In conclusion, the adoption of new articles of association has presented particular challenges since January 1, 2023; professional advice may prove useful in this context.
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