On 19 June 2020, the Swiss parliament finally approved a general corporate law reform. The Act amending the Swiss Code of Obligations (Corporate Law Reform) originates from a draft bill the Swiss government published for consultation some thirteen years ago. The project was revised several times, including as a result of the adoption of the Minder initiative, resulting in a draft bill in 2014 and a bill in 2016 which was further amended following the debate in parliament. The Corporate Law Reform seeks to modernise corporate governance by strengthening shareholder rights and promoting gender equality in boards of directors and in senior management. It also replaces the provisions of the Ordinance on Excessive Compensation (MinderOrdinance) with only a few changes. Furthermore, it aims to facilitate company formation, makes capital rules more flexible and reforms the rules on corporate restructurings. Finally, it introduces certain disclosure requirements for commodity firms. The effective date of the Corporate Law Reform has not yet been
The effective date of the Corporate Law Reform has not yet been determined. However, we expect that the Corporate Law Reform will enter into force in 2022 (unless submitted to a vote of the people as a result of an optional referendum, which we believe to be unlikely).
At the same time, the Swiss parliament has adopted a counterproposal to the popular initiative on corporate responsibility. This counterproposal has been adopted in a separate act and is subject to the outcome of the vote on the Corporate Responsibility Initiative, which is likely to be scheduled in November 2020.
Executive Pay ('Minder')
The Corporate Law Reform replaces the provisions of the Ordinance Against Excessive Compensation (Minder-Ordinance), which were issued by executive order. The core of the Minder-Ordinance remains unchanged. Contrary to the draft bill of 2014, the Corporate Law Reform makes only minor changes to the Minder-Ordinance. This means that Swiss companies do not have to make substantial changes to their existing corporate arrangements on executive compensation.
Compared with the Minder-Ordinance, the following amendments should be noted:
- Compensation for post-contractual non-compete undertakings may only amount to the average annual compensation over the last three years. This provides guidance on the maximum amount of compensation that may be agreed with respect to non-competes, although the Corporate Law Reform also requires that the non-compete must be commercially justified.
- The Corporate Law Reform clarifies that sign-on bonuses may be paid only if they compensate for actual losses.
- Companies choosing a prospective vote on compensation (approving compensation for a future period) must have an advisory vote on the compensation report. This corresponds to the current practice of most listed companies.
- The compensation report must disclose details of which other companies the members of the board and executive management hold office in (including the name of the member, the function and the company).
- Contrary to the current regime, the articles need not restrict the number of offices of members of the board and executive management in non-profit organisations without an economic purpose (e.g. charitable foundations or associations).
- Non-listed companies may decide to opt in partially or fully to the provisions of the Corporate Law Reform on executive compensation.
Corporate Governance
Shareholders' Rights
The Corporate Law Reform contains new provisions regarding shareholders' meetings and shareholders' rights in general, including the following:
- The percentage of share capital or share votes that shareholders must represent to be able to request that the board of directors calls a general meeting is lowered for listed companies from 10% to 5%. If the request is properly made, the board of directors must call the meeting within due time, but no later than within 60 days.
- The threshold that must be reached to give shareholders the right to ask for an item or motion be put on the agenda is lowered for listed companies from CHF 1 million par value to 0.5% of the share capital or the voting rights. For non-listed companies, the relevant threshold is 5%.
- The invitation to the meeting of listed companies must also include a brief explanation of each motion of the board. All companies must include, if so requested, a brief explanation of each motion of the relevant shareholders.
- The Corporate Law Reform further provides that shareholders holding at least 10% of the share capital or the voting rights of a non-listed company have a right to request information from the board of directors at any time during the year to the extent necessary for the exercise of their shareholders' rights. The board of directors must respond to each legitimate information request within four months.
- The independent proxy must keep the instructions received from individual shareholders confidential until the shareholders' meeting. It may only inform the company on the instructions received on an aggregated basis not earlier than three working days before the shareholders' meeting and has to report to the shareholders at the meeting about the information given to the company
- The Act will enable companies to hold shareholder meetings on a purely electronic basis. However, this will, among other things, require that shareholders may participate in the meeting "real-time", and electronic meetings will need to be repeated if they cannot be conducted properly. Electronic meetings will thus only be advisable in special situations.
- The Corporate Law Reform requires shareholders' approval for the delisting of shares with a supermajority of two thirds of the voting rights (and more than half of the capital), departing from current practice which considered this to be a matter falling within the competence of the board of directors.
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