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Impacts of the new public limited company law: Main changes and practices of the Federal Commercial Registry Office
The recent legislative changes under the new law on public limited companies have had a significant impact on the practice of the Federal Commercial Registry Officer, and on the way Swiss companies operate. Following on from our previous article (Revision of the law on public limited companies: New regulations (rsm.global)), we set out below the main practical changes that have occurred since the amendments to the Swiss Code of Obligations (CO) and the Ordinance on the Commercial Register (ORC) came into force on 1 January 2023.
Changes in capital
1. New capital fluctuation band
The old law on authorized capital increases has been replaced by the capital fluctuation band, which also allows reductions in share capital. The capital fluctuation band is limited to one and a half times the share capital entered in the Commercial Register in the case of an increase, and to half the share capital entered in the Commercial Register in the case of a reduction. The relevant share capital is the share capital entered in the commercial register (principle of the applicable reference date).
In other words, subsequent changes in capital do not affect the limit. A pending capital increase or capital decrease that has not yet been entered in the Commercial Register is not considered. The same applies to authorized capital or a capital fluctuation band that has not yet been used.
However, it is interesting to note the following exception: “If, at the same General Meeting, a resolution is passed to increase the ordinary share capital prior to the resolution to create conditional capital, the increased share capital may be taken into account, provided that the ordinary capital increase and the amendment to the Articles of Association relating to the conditional capital are the subject of an application for registration in the Commercial Register at the same time.” This practice, which already existed in the past, remains applicable, in accordance with OFRC communication 1/23.
2. The old authorized capital
Although the old provisions are repealed, it is important to note that the old law continues to apply to authorized capital increases decided before the new law comes into force ("grandfathering" clause). However, the combination of the authorized capital increase article and the new capital fluctuation band is not permitted. Indeed, a company could double its share capital in fine. Consequently, the introduction of a capital fluctuation band with an authorization to (also) increase the capital is only possible if the General Meeting simultaneously removes the provision relating to authorized capital.
General meetings
General Meeting abroad
The possibility of holding a meeting abroad requires a statutory provision (adopted by a qualified majority) and the appointment of an independent representative by the Board of Directors via the convening notice. In the case of unlisted companies, this appointment can be avoided if all the shareholders agree (to be renewed at each General Meeting, in particular because of potential changes in shareholding from one General Meeting to the next). If the arrangements for obtaining consent are not set out in the Articles of Association, they are determined by the Board of Directors (it is not permitted to make a general waiver in the Articles of Association for the appointment of an independent representative for all future General Meetings).
The independent representative enables absent shareholders to exercise their voting rights. For listed companies, this is already the law.
Virtual General Meeting
Substantially identical to the conditions in the previous point, the General Meeting may be held virtually (electronically) without a physical meeting place, if the Articles of Association so provide (decision taken by a simple majority) and if an independent representative is appointed. Unlisted companies may waive this appointment with the agreement of the shareholders at each general meeting. Furthermore, in contrast to the previous point, the articles of association of non-listed companies may only provide for the possibility of waiving the appointment of an independent representative on a general basis. However, such a clause must be adopted by a qualified majority. If there is a clause in the articles of association, it is up to the Board of Directors to decide, when convening the General Meeting, whether it is appropriate to waive the right to an independent representative.
The independent proxy guarantees the voting rights of shareholders who do not have the technical means to participate in the discussions. In the case of a clause in the Articles of Association, it is not necessary to renew the approval of the waiver of the appointment of the independent representative.
Written General Meeting
Resolutions of the General Meeting may be adopted in writing or by electronic means unless a discussion is requested by a shareholder.
In this respect, it is important to distinguish between two decisions:
a. The choice of decision-making method (in our case, written): in this case, unanimity is required.
b. The written decision itself: simple majority.
The minutes of the meeting are submitted to the Commercial Register as evidence of the resolution. The Commercial Register does not require written ballots or a circular letter.
Non-cash contribution with other consideration
A few minor changes have been made to the existing provisions on contributions in kind and consideration. The contribution of assets is no longer a qualifying event, and it is now possible to combine a contribution in kind with another consideration (mixed contribution in kind/assumption of assets). However, this "other consideration" must be mentioned in the articles of association but is not subject to publication in the Commercial Register.
The description of the purpose of the contribution in kind may contain specific terms, but the Commercial Register has limited knowledge of the other consideration referred to in the Articles of Association. No fundamental changes have been made to the transfer of assets and liabilities. The full consideration must always be stated in the entry in the Commercial Register.
The way public limited companies operate has been profoundly affected by these legal and practical changes.
Please feel free to read the full article (Revision of the law on public limited companies: New regulations (rsm.global)) below for a more in-depth understanding of the issues involved, and contact us if you have any further questions about these legislative changes.
