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22 October 2019

A Requiem to Bearer Shares

Bearer shares, a relic from a bygone era when it was ok to be anonymous, and the reason why the French name for Swiss stock corporations still is "société anonyme", are – with a few exceptions – to be abolished by 1 November 2019.

What does this mean?

From 1 November 2019 onwards, existing bearer shares may only be maintained and new bearer shares may only be created if some or all of the respective company's equity securities (but not necessarily the bearer shares) are listed on a stock exchange or if the bearer shares are issued as intermediated securities (book entry securities).

In other words, the registration of newly incorporated companies with bearer shares would be refused by the commercial register from 1 November 2019 onwards if these companies are not listed or if the bearer shares are not issued as book entry securities.

Existing listed companies or companies with intermediated bearer shares will have to notify the commercial register of the fact that they are listed or that their bearer shares are intermediated securities within 18 months of the new law coming into effect, i.e. by end of April 2021. The new law also applies to existing and new participation certificates issued as bearer certificates.

But what happens with all those privately held stock corporations with "regular" outstanding bearer shares?

Fear not, there is still time to act. The right thing to do is to convoke a shareholders' meeting anytime soon and to enact a resolution to convert the bearer shares into registered shares. As this requires a change in the articles of association, a notary public needs to attend this shareholders' meeting and record the resolution in a public deed which subsequently has to be filed with the commercial register.

For all those companies that do not convert their bearer shares into registered shares, the conversion will take place by operation of law on 1 May 2021.

Why should you convert the bearer shares of your company prior to 1 May 2021 if they will be converted "for you" anyway on that date?

A conversion by "operation of law" will cause a notification in the commercial register that your company is not compliant and the commercial register will not register any further modifications regarding your company until the articles of association are properly amended.

If, on 1 May 2021, there are still shareholders of bearer shares that have been converted into registered shares who have not notified the company of their identity, their shares will become void on 1 November 2024 unless they have filed a claim with the competent court by that date requesting to be registered in the share register, such request being subject to prior approval by the company.

However, this drastic measure should not apply to many shareholders as holders of bearer shares have been required to notify their identity and, as the case may be, beneficial owner, since 1 July 2015 and should have done so by now anyway.

New criminal sanctions and other new obligations

Speaking of beneficial owners: Those shareholders who wilfully (negligence is not sufficient) omit to notify their beneficial owners as required under art. 697j CO and those persons who wilfully omit to maintain a share register and beneficial owner register for a company will, under the new law, be liable to criminal fines of up to CHF 10,000.

Lastly, the new act requires legal entities headquartered abroad with effective administration in Switzerland to keep a register of their owners at the effective place of administration. This new obligation is driven by tax transparency considerations.

If you have any questions with regard to the conversion of bearer shares, please reach out to our corporate law experts.


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Photocredit: istockphoto/ tupungato

Topics: Corporate & M&A 

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