krfacts March Edition 2022 New Stock Corporation Law - More Flexibility for Companies
On June 19, 2020, Parliament approved the new Stock Corporation Act and other amendments to the Code of Obligations (CO) after a long political process. Parts of them have already entered into force in the meantime. The Federal Council has now decided to bring the remaining amendments, and thus above all the remaining revised provisions of the Stock Corporation Act, into force on January 01, 2023. The new stock corporation law brings more flexible capital regulations, modernizes the general meeting and strengthens shareholder rights. Below you will find a selection of practice-relevant innovations and information on the need for action by companies.
Share capital and shares
Stock corporations and also limited liability companies can now declare their share capital in euros, US dollars, British pounds or Japanese yen, provided that this is the currency essential for the business activity. In this case, this capital must be at least CHF 100,000 for stock corporations (or CHF 20,000.00 for LLCs) at the time of incorporation and the bookkeeping and accounting must be done in the foreign currency. A currency change is possible prospectively and retrospectively at the beginning of a business year.
The par value of the shares and ordinary shares can now be less than 1 centime, but must be above zero.
New: Creation of a capital band
Stock corporations (but not LLCs) now have the option of creating a capital band within which the board of directors can increase or decrease the share capital by up to 50% for a maximum of five years. The general meeting of shareholders must include a corresponding article in the articles of in-corporation for this purpose. It should be noted that the minimum capital of stock corporations may not fall below CHF 100,000 and that a capital reduction under the title of the capital band is only permitted if the company has not waived the limited audit of the annual financial statements. The authorized capital increase is replaced by the capital band.
This is a significant flexibilization that may be of particular interest to companies that are experiencing strong growth.
So far, they have been controversial, the so-called interim dividends. Now, the distribution of profits during the current year is permissible for both the stock corporation and LLC under certain conditions.
Modernization of the General Assembly
The organization and conduct of general meetings have also been made more flexible. What was possible during the Corona pandemic on the basis of the Covid-19 Ordinance is now expressly codified in the Code of Obligations.
For example, the convocation of the General Meeting of Shareholders and the announcement of the Annual Report can now be made exclusively by electronic means. Resolutions of the General Meeting of Shareholders can now also be passed by circular letter if no shareholder requests an oral discussion. Previously, this was only permitted for resolutions of the Board of Directors.
Electronic means are now also permissible for holding the General Meeting. For example, the Board of Directors may provide that shareholders who are not present at the venue of the General Meeting may exercise their rights by electronic means. A General Meeting of Shareholders may also be held by purely electronic means ("virtually") if the articles of association so provide. In this context, the Board of Directors must ensure in particular that, when electronic means are used, the identity of the participants is clearly established, the votes in the meeting are transmitted directly, each participant can submit motions and take part in the discussion, and the voting result cannot be distorted.
It is also permissible for the General Meeting to be held at several locations at the same time or even abroad, although the latter requires a basis in the articles of association. The determination of the place of the meeting must not make it unreasonably difficult for any shareholder to exercise his rights.
These regulations apply to stock corporations, limited liability companies and also cooperatives. This flexibility is also a welcome relief for the companies and the adoption of which into the articles of incorporation should be examined in any case.
Strengthening shareholder rights
In the case of stock corporations, the new stock corporation law also entails a strengthening of shareholders' rights, especially those of minority shareholders. In unlisted companies, shareholders who together represent at least 10 % of the share capital or votes may request information from the board of directors on the company's affairs outside the general meeting. The books and records may be inspected at any time by shareholders who together represent at least 5 % of the share capital or votes. Both the right to information and the right to inspection are subject to the interests of the company that are worthy of protection.
In the case of listed companies, 5 % of the shareholders can now demand that an extraordinary general meeting be convened. The right to request an agenda item now requires a shareholding of 0.5 % for public companies and 5 % for private companies.
Agreement on an arbitration clause
Until now, it was controversial whether or not the articles of incorporation of stock corporations and limited liability companies could provide for arbitration clauses for the adjudication of corporate law disputes. Now, the articles of incorporation can provide that corporate disputes be adjudicated by an arbitral tribunal seated in Switzerland. 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 or partners.
Need for action by companies
The new stock corporation law brings more flexibility and opportunities. The current articles of association of companies regularly do not yet reflect these new possibilities. In addition, articles of association and regulations that do not comply with the new law must be amended by December 31, 2024 at the latest. We therefore recommend that you review your articles of association and regulations in good time and decide which options should be used. Articles of association can also be amended as early as this year. In the case of provisions that will only be permissible from the new year, it should be stated in the articles of association that these provisions will not come into force until January 01, 2023, or the application to the Commercial Register should be delayed.
Please contact us for a review of your statutes and regulations as well as for their adaptation.