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A Requiem to Bearer Shares

Posted by on 22 October 2019

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.

A-requiem-to-bearer-shares-FRORIEPWhat 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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Topics: Corporate & Commercial | M&A & Transactions | Notarial Services

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L. Mattias Johnson

Mattias Johnson is the managing partner of the Zug office. In addition to being a civil law notary in the Canton of Zug with many years of experience, Mattias Johnson deals principally with questions of transactional and corporate law, often in a cross-border context. Mattias Johnson joined our firm in 2001 and became a partner in 2010. Besides his notarial work, he advises companies on the structural aspects of their internal organisation, supports international firms in general commercial law matters, and advises them on immigration and employment law issues. Mattias Johnson obtained his law degree from the University of Fribourg (lic. iur.) in 1996 and from King’s College at the University of London (LLM) in 2000. He was admitted to the Bar in 2003 and qualified as a civil law notary the same year. His working languages are German, English, Swedish and French. Mattias Johnson is recommended in The Legal 500, 2018 (commercial, corporate and M&A), being described as “very professional and responsive”. Mattias Johnson is a member of the Zug Bar Association, the Swiss Bar Association, the International Bar Association, the German-Nordic Lawyers’ Association and the Swedish-Swiss Chamber of Commerce.

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Benjamin Dürig

Benjamin is an experienced transaction lawyer with a focus on M&A and corporate finance transactions, and corporate law. Benjamin advises clients in M&A and corporate finance transactions and is an experienced team leader in complex transactions. He advises listed and non-listed entities, including regulated financial institutions. He has in-depth expertise on the legal issues relating to real estate in and outside of transactions, including regulatory aspects, environmental issues (polluted sites), and complex commercial lease agreements. Benjamin is a regular speaker to various audiences on topics relating to his practice, including international lawyers' conferences, commercial chambers and industry organisations. He joined our firm as an associate in 2009 and became counsel in 2017. Before that, he worked at a Zurich district court and a French-speaking law firm for a number of years. Benjamin’s law degree is from the University of Zurich (2003) and he was admitted to the Zurich Bar in 2007. He is a member of the Swiss Bar Association, the Zurich Bar Association, the Franco-Swiss Chamber for Trade and Industry, and of the International Association of Young Lawyers (AIJA). His working languages are German, French and English.

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Dr. Mark Montanari

Mark Montanari’s practice focuses on capital and financial markets, corporate law, start-ups as well as M&A and financing transactions. He regularly advises international and domestic clients in these fields, including public takeover and stock exchange laws and regulations. Mark Montanari joined our firm in 2010 and became counsel in 2017. Prior to that, he worked as a clerk at the District Court Emmental-Oberaargau and with a business law firm in Berne. Thereafter he worked as research and teaching assistant at the University of Berne (Institute of Business Law). After having graduated in law from the University of Berne in 2005, he was admitted to the Bar in 2008 and went on to complete a PhD (summa cum laude) in 2011 in the field of financial markets. His working languages are German and English. Mark Montanari is a member of the Zurich Bar Association, the Swiss Bar Association and the International Association of Young Lawyers (AIJA).

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Rinon Memeti

Rinon joined Froriep as an Associate in June 2017. His practice focuses on corporate law, M&A, capital markets, banking and finance and sports law. He studied law at the University of Zurich and graduated in October 2011 with a Master of Law (Business Law). Shortly thereafter, he completed a further education program at the University of Zurich regarding sports law for which he received a "Certificate of Advanced Studies in International Sports Law". Currently Rinon Memeti is a Ph.D. candidate at the University of Zurich. Following his studies, between 2011 and 2012, Rinon was engaged as a legal trainee for a law firm with offices in both Zurich and St. Gallen. After beeing admitted to the Bar for the Canton of St. Gallen in 2013 he worked as a research assistant to Prof. Dr. Peter Nobel and as a lawyer for a business law firm in Zurich. Rinon is a member of the Zurich Bar Association and the Swiss Bar Association. His working languages are German and English. He also has a good command of Albanian.

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