Background
Under international pressure, the Swiss Parliament adopted the Federal Act implementing the Revised Financial Action Task Force (FATF) Recommendations in 2014. The FATF introduced new reporting obligations of acquirer of bearer shares: any acquirer must give notice of the acquisition to the company, including name and address, within one month. In addition, any person exceeding the threshold of 25 percent of the share capital or votes has the duty to report the ultimate beneficial owner of the acquirer to the company.
These changes were found to be insufficient. The Global Forum on Transparency and Exchange of Information for Tax Purposes (the “Global Forum”) published a phase 2 peer review on Switzerland in 2016. The report contains recommendations regarding the transparency of legal entities.
The Swiss Federal Council launched a consultation on the recommendation of the Global Forum on 17 January 2018. The Swiss Parliament adopted the implementing act on 21 June 2019.
On 27 September 2019, the Swiss Federal Council decided that the new rules would enter into force on 1 November 2019.
The referendum period ran until 10 October 2019 and has not been used, therefore the rules are now effective
Key points of the new rules
Abolition of bearer shares
The new rules provide that bearer shares are only authorized for companies with listed equity securities or if they are issued in the form of intermediated securities. A company with bearer shares has the duty to register in the commercial register that it holds listed equity securities or that it has issued its bearer shares in the form of intermediated securities.
Regarding other companies, they will have to amend the articles of association to reflect the conversion of bearer shares into registered shares within 18 months upon entry into force of the new rules (i.e. 1 May 2021). If they fail to do so, bearer shares will be converted into registered shares automatically by operation of law.
Shareholders failing to identify themselves to the company within five years (i.e. 1 November 2024) will lose their rights without compensation. The shares will be deemed void and the company will have to issue new shares as treasury shares.
Introduction of criminal fines
The new rules introduce criminal fines for shareholders or companies that fail to disclose beneficial owners, or which fail to maintain the share register and the list of beneficial owners. The maximum fine amounts to CHF 10,000.
Liquidation of the company
Failure to comply with the above- mentioned obligations would qualify as an organizational deficiency of the company entitling shareholders, creditors and the commercial register to request the court to take the required measures, including ordering the liquidation of the company.
Please contact us if you would like to discuss the implications in more detail.
