Change is coming – and it’s time to ensure your organisation complies fully with Switzerland’s corporate law reforms, says Claudio Fanger, business unit director, and Jurgen Borgt, managing director, Intertrust Switzerland.
At the heart of the long-awaited Swiss corporate law reforms is a range of legal simplifications. The new corporation rules will facilitate the increase or decrease of share capital and the management of interim dividends. They will also provide greater clarity around insolvency and directors’ financial obligations.
The amendments come into force on 1 January 2023. While there is no obligation to make any changes immediately (as there is a two-year adjustment period), to stay-up to-date companies may wish to incorporate adjustments into their articles of association now.
The changes thoroughly modernise corporate law in Switzerland and confirm if not enhance the country’s attractive position as a place to do business in Europe.
Corporations’ abilities to increase share capital when needed is likely to be particularly useful for companies in the start-up stage. It will also help those that need extra financing during lean periods and those that are looking to capitalise on opportunities to expand.
The law also sets out greater guidance on the steps that boards of directors should take if their entity reaches a position of over-indebtedness.
What are the new corporation rules regarding capital decrease and increase?
Switzerland’s corporate law reforms simplify the process by which Swiss companies can raise or reduce their share capital. To do so they will need to change their articles of association to include the facility of a “capital band”.
This option means that the board of directors of a Swiss limited company can increase or decrease share capital depending on need. There are a number of caveats: the capital band needs to be agreed upon in advance during a shareholder meeting and the facility can last for a maximum of five years. The change must be approved by shareholders at an annual general meeting (AGM) or extraordinary general meeting (EGM). Share capital must not, after a capital reduction, be lower than CHF 100,000, which is the legal minimum for a limited company.
There are also Swiss corporate legislative changes that clarify the options around paying interim dividends based on interim financial statements. The new corporate law stipulates that interim dividends may be distributed.
To avoid the risk of withdrawing funds from the company, interim financial statements must be prepared in advance. And when determining interim dividends, corresponding allocations to the statutory and voluntary reserves must be made in accordance.
The interim financial statements must be audited by the appointed auditor prior to the shareholders’ meeting. If the company is exempt from an audit obligation (opting out), the audit obligation of the interim financial statements does not apply.
However, under the new corporate law and the special focus on liquidity, the board of directors may not propose the issuance of an interim dividend if it would jeopardise the liquidity of the company.
Clearer rules around insolvency and over-indebtedness
Under the legislative changes, there is now a legal obligation for the board of directors to monitor the solvency of their company. If, via analysis, the board discovers that the company is in imminent danger of becoming insolvent, they must take action to prevent this.
This could involve corporate restructuring. The options should be presented to shareholders as quickly as possible. As well as monitoring balance sheets for a potential loss of capital, the new corporate law requires managers to monitor the solvency and cash liquidity of the company.
How do I prepare my entity for the changes to Swiss corporate law?
Directors may find that the new legislative flexibility and innovations will be useful for them and could enhance the competitiveness of their Swiss entity. As a result, they may wish to prepare in advance for the changes.
To benefit from the changes, directors can start preparing to amend those sections of their company articles of association that are not compliant with the new legislation. In doing so, they will be ready to take advantage of the changes as soon as they’re introduced.
Bearing in mind that changes to articles of association must take place either at company AGMs or an EGM of shareholders in the presence of a public notary, it’s clear that early planning can be helpful.
How Intertrust Group can help you in Switzerland
Our team in Switzerland includes experts who specialise in corporate services and are dedicated to servicing multinational, private equity and fund clients. We can help corporate clients looking to expand into this exciting economy with a full suite of services.
In Switzerland, our multilingual teams in Geneva, Zug and Zurich can help manage structures for companies and partnerships on a global and national basis.
We provide services that ensure compliance with the requirements of local and global laws and regulations.
Why Intertrust Group?
- Intertrust Group is a publicly listed company with more than 70 years’ experience in providing world-class trust and corporate services to clients around the world.
- Our 4,000 professionals work together across 30 jurisdictions to offer undisputed global reach, deep local knowledge and an extensive international network to help clients achieve their strategic goals.
- Intertrust Group provides a wide range of financial and administrative services to clients operating and investing in the international business environment. We help companies to expand globally, offering support with restructuring, outsourcing and further developments.
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