Switzerland Update: New Stock Corporation Law: End of the Transitional Period on 31 December 2024

Transitional provisions and deadline

On 1 January 2023, the revised stock corporation law came into force, which also applies to limited liability companies (GmbH). In addition to the entry into force of the new stock corporation law almost two years ago, transitional provisions have also been included in the law. These provide that the new law will also apply to companies existing before 1 January 2023 on the date of entry into force. However, as a transitional solution, companies that do not comply with the new regulations have been granted a transitional period of two years to adapt their articles of association and regulations (i.e. in particular the organisational regulations issued by the board of directors to the new law). Until the expiry of this period, provisions of the Articles of Association under the old law will continue to be in force. In view of the deadline that is about to expire, the question now arises as to whether there is a need for action and, in particular, what will happen to provisions of the articles of association that will not be adapted even after 31 December 2024 and what precautions may need to be taken. While listed companies have generally already made the necessary adjustments to the articles of association and regulations to the new stock corporation law in the last two years, this is now also becoming virulent for all other Swiss companies.

General implications

If, as of 1 January 2025, the articles of association of a company still contain provisions under the old law that contradict the new law, they will become invalid, i.e. they will cease to be in force and will no longer be applicable. They will be replaced by the regulations as provided for in the new law. Thus, there is basically no need for action in the case of non-listed companies, which was also the aim of the legislator. If, for example, the articles of association still state that a company must make the annual report available for inspection in advance of the ordinary general meeting at the company’s registered office, this provision of the articles of association now applies by law that it can only be made available electronically.

Nevertheless, it makes sense to revise the provisions that are not congruent with the new law before 1 January 2025, but at the latest if an amendment to the Articles of Association is made anyway for other reasons (since every amendment to the Articles of Association requires public notarization, a combined amendment to the Articles of Association can not only save costs, but also provide clarity). A deviation of the Articles of Association from the applicable law is not only unpleasant, but can also lead to legal uncertainty and misunderstandings (e.g. among shareholders) or procedural errors, e.g. if the Board of Directors, based on an old provision of the Articles of Association, rejects the proposal of shareholders to include an item on the agenda at the Annual General Meeting on the grounds that they do not represent shares with a nominal value of at least one million Swiss francs. Since under the new law, shareholders of a non-listed company who together hold at least five percent of the share capital or voting rights can demand that items be put on the agenda, the Board of Directors would have rejected the motion at best wrongly. These and other stumbling blocks can be avoided with a clean update of the statutes (and regulations).

When adapting the organisational regulations (if any), the main focus will be on the regulations on meetings and the (e.g. electronic) decision-making of the Board of Directors (generally the adaptation of legal references).

Impact on existing authorized capital

Under the old stock corporation law, the Annual General Meeting could authorise the Board of Directors to increase the company’s capital by a maximum of 50% for a maximum period of two years. For this purpose, a corresponding provision would have to be included in the statutes. If an authorized capital was approved by the Annual General Meeting before January 1, 2023, it will remain valid during the transition period, but can no longer be extended or amended. Thus, any remaining authorized capital will cease to exist at the latest after the expiry of the two-year term. If a company wants to continue to give the board of directors the opportunity to increase capital, the general meeting must include a capital band in the articles of association.

However, the Federal Office of the Commercial Register (EHRA) has clarified in its Practice Notice 1/23 that a coexistence of authorized capital under old law and a new legal capital band is not permitted. Even if a capital band were introduced before 1 January 2025, statutory provisions on authorised capital would therefore have to be deleted. Companies that still have authorized capital and still want to make use of it would have to use it before the reservoirs are adjusted to the new law, but no later than December 31, 2024.

New features of the revised stock corporation law

Irrespective of the transitional provisions, an amendment to the Articles of Association is always necessary if the innovations of the revised stock corporation law are to be used. In addition to the above-mentioned capital band, the virtual Annual General Meeting should be considered in particular, which requires a statutory basis. The same applies to the possibility of holding a general meeting abroad, to the adjustment of the nominal value of the shares below one centime, to the management of the share capital in a foreign currency, to the exclusion of the transferability of the management from the board of directors to individual members of the board of directors or to a management board, or to the inclusion of a statutory arbitration clause.

Result

In principle, it is not necessary to amend the articles of association of a stock corporation or limited liability company even after the expiry of the two-year transition period. However, if you want to have clear articles of association that do not contradict the new law and are therefore less susceptible to procedural errors, we recommend that they be updated at the latest on the occasion of another imminent amendment to the articles of association. This can also be seen as an expression of appropriate corporate governance and compliance, for example when the articles of association and regulations are reviewed as part of the legal due diligence when buying shares. In any case, an amendment to the articles of association is pending if the new possibilities of stock corporation law, such as the capital band or the virtual general meeting, are to be used.

By Vischer, Switzerland, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact switzerland@transatlanticlaw.com

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