Modernizing company law - Federal Council opens committee hearings on revision of company and accounting legislation

Federal Department of Justice and Police

Bern, 05.12.2005 - Swiss company law is to be comprehensively modernized and brought into line with the needs of the economy. Corporate governance, in particular, is to be improved, new rules on capital structures and accounting and reporting requirements will be introduced, and the provisions governing annual general meetings will be updated. With this purpose in mind, on Friday the Federal Council opened committee hearings on the revision of company and accounting legislation.

Corporate governance is intended to achieve a balance between the various governing and executive bodies of a company, sufficient transparency with regard to internal company procedures, and a secure legal position for the shareholders. The initial draft bill specifically strengthens the position of shareholders as the owners of the company. Their rights to information are set out in clearer terms, and in the case of private limited companies, they will be given the right to information on the remuneration packages paid to top management.

Furthermore, the thresholds for the exercise of a variety of shareholders' rights – such as special audits and the rights to convene meetings and have items included on the agenda – are to be lowered. Legal proceedings concerning the reimbursement of unjustified payments will be improved. In addition, the right of banks to exercise the voting rights attached to stock they hold in safekeeping, as well as the practice of shareholders being represented at annual general meetings by the company's own governing and executive bodies, will be abolished. In future, it will be possible to appoint only independent persons as proxies.

More flexible capital structure

A second area of revision concerns the rules governing capital structures, which will take account of changing needs. The procedure for increasing and reducing share capital will be made more flexible. By adopting a "capital band", the annual general meeting will be able to authorize the board of directors to increase or reduce share capital as it wishes within a given bandwidth.

The present requirement for a certain minimum par value will also be relaxed, meaning that a company can lower the par value of its stock as close to zero as it wishes. The importance of bearer shares has declined steadily in recent years. They are therefore to be abolished, in line with the international trend. It will still be possible to issue bearer participation certificates, however. Furthermore, the present rules restricting participation capital to twice the level of share capital will cease to apply.

The regulations governing the holding of annual general meetings are another area that will be revised. In the future, companies will be able to use electronic tools when preparing for and holding their annual general meetings. The bill also contains rules on holding annual general meetings at several venues and abroad.

Accounting and reporting legislation to be standardized

The initial draft also provides for a comprehensive revision of Switzerland's outdated accounting and reporting legislation. It will create standard rules for all forms of company, although requirements will differ depending on the economic significance of the company in question. The new rules will not impact on the amount of tax paid by the corporate sector and thus abide by the principle of authoritative law. Under certain circumstances, a company may have to produce an additional set of financial statements in accordance with recognized accounting and reporting requirements. This will significantly improve transparency and better protect those with minority holdings.

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