New Swiss Corporate Law – Swiss Federal Council Releases New Pre-Draft
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Corporate & Business
Back in 2007 and 2008, the Swiss Parliament was debating changes to Swiss corporate law. On 1 January 2014, the CompO was put into force, temporarily governing the subject matter of the Minder initiative. Now, the Swiss Federal Council released the Pre-Draft which would, however, not only integrate most of the provisions of the CompO into the Swiss corporate law, but in addition to several fundamental changes to certain features of Swiss corporate law strengthen corporate governance.
Capital, Reserves, Dividends, Purchase of Own Shares
Current Swiss corporate law provides that the articles of association must indicate the nature of an acquisition of assets (Sachübernahme) or an intended acquisition of assets (beabsichtigte Sachübernahme), the name of the person providing them and the consideration given by the company. This feature shall be abolished. Shareholders and creditors shall be protected by strengthening respective rights in connection with the so-called claim on return of benefits (Rückerstattungsklage).
As per the Pre-Draft, it is further suggested to combine the provisions governing the capital decrease with the provisions governing capital increases. It is envisaged to introduce a «capital band» (Kapitalband)
The provisions governing the creation and dissolution of legal reserves as well as the declaration of dividends will offer more flexibility. Subject to certain creditor protection rules, the paid-in capital surplus may be repaid to the shareholders and declaration of interim dividends shall become permissible. As per the Pre-Draft, the articles of association may provide that shareholders attending or being represented at the shareholders’ meeting may get up to 20% higher dividends.
Finally, the Pre-Draft proposes facilitations in connection with the purchase of own shares, aligning these with already effective accounting provisions.
Implementation of CompO/Minder Initiative
Although the CompO left discretion on how to vote on the approval of variable compensation, the Pre-Draft revisits one particular point by prohibiting prospective approvals of variable compensation.
It might be reasonable to provide that payment for non-compete undertakings of managers must be justified by business reasons and correspond to market standard. However, taking into consideration that the average compensation for non-compete undertakings stands at a 20-months’ salary, we doubt that 12 months can be claimed to be market standard.
Restructuring and Insolvency
As concerns the notification of the court in case of over-indebtedness, the Pre-Draft introduces a 90-day tolerance period to do so if there is a positive Outlook that the company can be financially restructured during such period.
Further, it shall be clarified that claims against a distressed company may be set-off by the creditor in the course of a debt-equity-swap.
Conclusions – Further Proceedings
The Walder Wyss Newsletter provides comments on new developments and significant issues of Swiss law. These comments are not intended to provide legal advice. Before taking action or relying on the comments and the Information given, addressees of this Newsletter should seek specific advice on the matters which concern them.
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