The Corporate Governance Review: Switzerland

Overview of governance regime

The statutory corporate law set out in the Swiss Code of Obligations (CO) is the main source of Swiss corporate governance regulation, and applies to both private and public companies. As regards corporate governance, the provisions of the CO focus on transparency, shareholder rights and the principle of parity between a company's corporate bodies. The current governance rules of the CO are rather liberal and provide companies with considerable flexibility as regards the set-up of their governance structure. The Swiss Parliament adopted the text of a general corporate law reform in June 2020. The revisions of the CO whose entry into force is still to be determined (except for certain limited areas that entered into force on 1 January 2021, namely gender quotas at the board and executive management level and reporting obligations for major companies in the natural resources industry) will increase governance regulation, mainly by increasing shareholder rights.2 In this context, the Swiss Ordinance against Excessive Compensation in Listed Companies (OaEC), which came into force in 2014, will be incorporated into the revised CO. The OaEC introduced restrictions on several remuneration practices and gives shareholders a binding say on pay and the right to elect the chair of the board of directors, the members of the compensation committee and the independent proxy. The stock market law incorporated in the Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (FMIA) and its accompanying ordinances also contain governance rules, in particular the shareholders' duty to disclose significant participations, and general rules on public takeovers.

The SIX Swiss Exchange3 (SIX) has issued its Listing Rules (SIX-LR)4 and various implementing directives and circulars. These regulations set the ground for good governance with binding rules on periodic financial reporting and, in particular, ad hoc disclosure rules applicable to all SIX-listed companies. The SIX-LR are complemented by the Directive on Information in relation to Corporate Governance (SIX-DCG)5 and the Directive on the Disclosure of Management Transactions (SIX-DMT).6 The SIX-DCG requires listed companies to include a chapter on corporate governance in their annual report. The SIX Exchange Regulation AG, the independent regulatory body within the SIX organisation, issues focus review letters indicating the topics on which SIX's assessment will focus in the relevant reporting period.7 The SIX-DMT requires companies to disclose transactions in its shares and related instruments by members of the board of directors or the management board. SIX is empowered to enforce its regulation through SIX Exchange Regulation and the Sanctions Commission, which investigate violations and may impose sanctions. Their decisions and sanctions can be appealed to the independent Appeals Panel and, ultimately, to the SIX Arbitration Court.

Further, economiesuisse8 issued a Swiss Code of Best Practice for Corporate Governance (the Code)9 primarily for public corporations. The Code contains non-binding recommendations and guidelines with a special focus on the rights and duties of shareholders and the board of directors. The core objectives are ensuring transparency and checks and balances between management and control by the means of comply or explain approach.

Independent proxy advisers (such as Ethos and zRating) regularly issue voting guidelines and corporate governance principles on which they base their proxy voting services and recommendations. Corporate governance is a key focus area of those regulations. Despite these regulations being non-binding, they have a significant influence on shareholder voting and public perception.

Besides the regulations applicable to listed companies in general, there are specific rules on corporate governance applicable to banks, investment companies and insurance companies. The circulars on corporate governance, risk management and internal controls at banks and insurance companies, respectively, and the circular on remuneration schemes of financial institutions issued by the Swiss Financial Market Supervisory Authority (FINMA), are most relevant in this context.

Corporate leadership

i Board structure and practices

Swiss companies limited by shares are governed by the general meeting of shareholders and the board of directors. The board of directors and the shareholders' meeting each have their respective duties and competences. This reflects the principle of parity. The board of directors represents the company in relation to third parties and conducts day-to-day business within the limits of the corporate purpose. The board of directors is thus the company's responsible executive body that may represent the company and manage any matter not reserved to the shareholders' meeting by law or the articles of incorporation. However, Swiss company law allows flexible, individual governance structures. In reality, the management of the day-to-day business (except for the non-transferable and inalienable duties of the board) is regularly delegated. In listed companies, the management is usually delegated to the chief executive officer (CEO) or an executive board, resulting in a two-tier structure. This two-tier structure is mandatory for banks and security dealers.

Any matters that have not been allocated to the shareholders' meeting by law or the articles of incorporation are the responsibility of the board of directors. Except for the non-transferable duties, the board of directors may delegate its responsibilities to individual members of the board of directors or to third parties (the executive board). The non-transferable responsibilities of the board are:

  1. overall management of the company and the issuing of all necessary directives;
  2. the determination of the company's organisation;
  3. the organisation of the accounting, financial control and financial planning systems as required for the management of the company;
  4. the appointment and dismissal of persons entrusted with managing and representing the company;
  5. overall supervision of the persons entrusted with managing the company, in particular with regard to compliance with the law, articles of association, operational regulations and directives;
  6. compilation of the annual report, preparation for the general meetings and the implementation of its resolutions;
  7. notifying the court in the event that the company is over-indebted; and
  8. for listed companies, the preparation of the compensation report as requested by the OaEC.

The board of directors may establish special committees; the Code recommends the establishment of an audit committee and a compensation and nomination committee. The audit committee's members should have specific expertise in the area of finance and audit. Moreover, the OaEC requires listed companies to establish a compensation committee whose members must also be members of the board of directors and who are elected by the general meeting of shareholders.10 The articles of incorporation must set out the basic rules of the activities of the compensation committee. Further, the audit committee and the nomination and compensation committee should be composed mainly of independent, non-executive members. Although the board of directors is ultimately responsible for the succession of the CEO and its members, the nomination committee establishes principles for and prepares the succession process.

The main rules regarding the remuneration of the board of directors and the management board of listed companies are set out in the OaEC and will be transferred to and reflected in the CO once the revised CO provisions enter into force.11 (For more information about this revision, see Section VI.) The shareholders' meeting has a binding vote on the remuneration of the board of directors and the executive board. The basis for this is the compensation report, which must be prepared by the board of directors and which is subject to a consultative vote by the general meeting of shareholders. Moreover, pursuant to the OaEC, certain forms of remuneration are prohibited, such as severance and similar payments (golden parachutes), advance compensation payments, and payments linked to the purchase or sale of companies.

ii Directors

The board of directors may consist of one or several members. If a company has issued different share classes, each share class may elect at least one representative to the board of directors. In practice, a board of directors consists of several members. The Code recommends that the composition of the board be diverse as regards expertise and gender. The revised CO provides for a gender quota for listed companies exceeding certain thresholds.12 In contrast to other jurisdictions, the Swiss approach is rather soft. The aim is that each gender shall make up at least 30 per cent of the board of directors and at least 20 per cent of the executive board. The gender quota in accordance with the revised CO entered into force on 1 January 2021. Companies have five years (i.e., until 1 January 2026) to establish the 30 per cent quota in the board of directors and 10 years (i.e., until 1 January 2031) to establish the 20 per cent quota in the executive board. If companies do not achieve the target quotas within the transition period, they must explain in the compensation report the reason for the under-representation and the measures being taken to promote gender diversity in their corporate bodies.

Further, the Code stresses the importance of having a majority of independent, non-executive members in the board of directors. All board members have the same rights and duties. To ensure efficiency, the Code recommends that the board of directors shall not be too big. Pursuant to the revised CO, the appointment of a secretary by the board of directors is longer be required.13 Pursuant to the CO, the term of office is generally three years unless the articles of incorporation state differently. However, for listed companies, the OaEC limits the term to one year. Re-election is possible. The members of the board of directors are elected by the shareholders' meeting. In listed companies, the chair must also be elected by the shareholders' meeting. In addition, the OaEC requires that the company's articles of incorporation limit the maximum number of activities that a member of the board of directors, the executive board or an advisory board may carry out in other legal entities or other organisations registered in the Commercial Register (or a similar register abroad).

Any member of the board of directors may request information about all matters concerning the company. Any member of the board of directors and the executive board is required to provide information during a board meeting. Outside board meetings, members of the board of directors may ask members of the executive board about the general business performance and, upon special request, about individual transactions. Inspection of files and records is only possible as far as it is necessary for a member of the board of directors to fulfil his or her duties.

Under the CO, unless the articles of incorporation state otherwise, each member of the board of directors can represent the corporation towards third parties. In practice, signing authority is regularly limited to joint signing authority. Moreover, at least one representative with individual signing power, or two representatives with joint signing power, must reside in Switzerland.

In a two-tier structure, the relationship between the board of directors and the management board must be governed in the organisational regulations. The Code recommends having a two-tier structure with a majority of non-executive board members, and a separation of the functions of chair and CEO. If the company decides that the same person shall act as chair and CEO, the board of directors should establish certain control mechanisms to ensure appropriate checks and balances. For instance, an independent lead director who can independently convene and lead a board meeting should be appointed.

The board of directors must act in the best interests of the company as mandated by the duty of care and loyalty. Shareholders must be treated equally in like circumstances. According to the general view, a company's interest encompasses the interests of the shareholders as well as the other stakeholders, with the sustainable growth of the company being the underlying principle and goal. There are no (strict) rules as to how the board should weigh the interests of the different stakeholders against each other: ultimately, this weighing and other business decisions are a matter for the board's own diligent judgement. In various decisions of the Federal Supreme Court, the applicability of the business judgement rule has been confirmed. The prerequisites for the applicability of the business judgement rule are a diligent review or assessment process that is based on adequate information and documents and that is free of conflicts of interest. If these prerequisites are met, a court will only assess whether the board's decision was justifiable. If any of the prerequisites are not met, a court will conduct a full assessment. However, a board decision based on a conflict of interest is not per se a violation of the board's duty of care.

Under Swiss corporate law, a conflict of interest is deemed to exist if a board member has individual interests that are opposed to the interests of the company or, more frequently, if he or she has a duty (based on law, contract or otherwise) to pursue third-party interests that are opposed to the company's interests. If a board member suffers from a potential conflict, he or she has an obligation to disclose the information to the chair or the entire board. It is then up to the board, without the potentially conflicted member, to assess the situation and resolve on and implement appropriate measures as required to ensure that the conflict does not negatively affect the company. These measures include an abstention of the conflicted member from the decision and, depending on the circumstances, also from the deliberations, or the establishment of an independent committee consisting of the disinterested board members. If required to address a more serious and detrimental conflict, the board may also decide to shield the conflicted member from any critical information.

Disclosure

SIX requires listed companies to publish audited annual financial statements and non-audited half-year accounts in accordance with common reporting standards, such as the International Financial Reporting Standards or the US Generally Accepted Accounting Practice. Listed companies must include a corporate governance report in their annual reports. The information to be published in the corporate governance report is set out in the SIX-DCG and includes, among other things, information about the group and its capital structure, shareholders, change of control provisions and defence measures, and information about the members of the board of directors and executive board, basic rules of compensation and share and option plans. Pursuant to the OaEC, the board of directors is required to prepare a compensation report. The remuneration paid directly or indirectly to current or former members of the board of directors or the executive board must be listed in the compensation report. For the board of directors, the compensation of each individual must be disclosed, whereas for the executive board only the aggregate amount and the highest salary paid have to be disclosed. Other than in the European Union, non-listed companies in Switzerland are not required to publish their annual reports.

External auditors must audit the annual financial statements and the compensation report. Auditors must comply with strict independence requirements. They must be independent of the board of directors, the executive board and major shareholders. Auditors may not conduct business for or engage in other ways with the company outside the audit work if those activities were to endanger their independence. Auditors cannot audit their own work or the work of persons close to them. Moreover, auditors are not allowed to audit companies in which they hold a direct or significant indirect participation or against which they have a substantial claim or debt. The lead auditor of an audit mandate must be changed every seven years. In addition, auditors must meet the qualification requirements of the Federal Act on the Admission and Supervision of Auditors. The qualification requirements concern professional education and an auditor's good standing.

Listed companies have to publish price-sensitive information occurring in the sphere of the company (under ad hoc publicity rules) as well as management transactions. The Code recommends publishing the articles of incorporation on the company's website and making the organisational regulations available to shareholders.14

Furthermore, the revised CO contains new transparency provisions for natural resources companies, which came into force on 1 January 2021 and apply for the first time for the financial year beginning one year after the new law comes into force.15 According to these transparency regulations, companies that are active in the extraction of certain natural resources are subject to disclosure obligations in connection with payments to government bodies, whereby the disclosures are to be made by means of an annual report.

Shareholders have disclosure duties, too. If a person (acting alone or in concert with others) directly or indirectly acquires or disposes of shares of a listed company, and reaches or crosses any of the thresholds of 3, 5, 10, 15, 20, 25, 33.33, 50 or 66.66 per cent of the voting rights of the company, that person is obliged to make a disclosure to the company and SIX. Separate disclosure duties exist for long positions (shares, long call, short put, etc.) and short positions (short call, long put, etc.). Netting of long and short positions is not permitted. These disclosures are published on the website of SIX.

As regards non-listed companies, an acquirer of bearer shares must report his or her name, date of birth, nationality and address to the company.16 In addition, an acquirer or a group of acquirers of registered or bearer shares representing 25 per cent or more of the share capital or voting rights must report the name and address of its ultimate beneficial owner to the company.17 Any change to the notified information must be reported within three months. Note that this notification duty does not apply to listed companies. Further, if a company is controlled by a listed company, then the shareholder has to notify only its name and seat and the fact that it is a listed company or controlled by a listed company. The company is required to keep a register of the holders of bearer shares and the ultimate beneficial owners of shareholders holding 25 per cent or more of the share capital or voting rights. The notifications must be stored for 10 years. The register is not open to the public. Further, pursuant to a change of the CO that entered into force on 1 November 2019, as of 30 April 2021, Swiss companies are no longer allowed to issue bearer shares (except for listed companies and companies that have issued bearer shares in the form of certificated securities) (Bucheffekten). Any existing bearer shares will have to be converted into registered shares.

Corporate responsibility

A board of directors is responsible for the executive management of the company and must act in the company's best interests. Establishing adequate risk and compliance management is considered to be inherent to this duty and part of good corporate governance. A requirement of the board to establish a risk committee, however, is only mandatory for certain financial institutions. Most Swiss companies allocate the responsibility at board level to the audit committee or determine risk owners for different risk categories. The CO and the Code oblige the board of directors to establish an internal control system. To complement the Code, economiesuisse issued the Principles on Effective Compliance Management (the Compliance Principles).18 The core of these Principles is that the board of directors and the executive board must set the tone from the top to implement effective compliance structures.

The Swiss perspective on whistle-blowing is rather cautious. The Compliance Principles state that a whistle-blowing system forms part of effective compliance management.19 Although the European Union has voted for a specific directive on whistle-blowing,20 Swiss company law does not yet address whistle-blowing explicitly. However, a board of directors has an inalienable duty to ensure effective supervision over the company, wherein whistle-blowing structures should be included. In addition, Swiss employment law implicitly protects whistle-blowers from being dismissed or otherwise discriminated against as long as the act of blowing the whistle was proportionate. There was an effort to implement these implicit protective measures in Swiss employment law by explicitly determining when and how a whistle-blower can report misconduct under any laws or regulations in a legally protected and authorised way. However, the bill was rejected by the National Council.21

A board of directors' duty of care also covers aspects of corporate social responsibility, as acts against societal values may harm the company and may pose financial, operational and reputational risks. The Code specifically states that a board of directors must avoid these risks. Swiss company law allows the board of directors and the executive board to take into account the interests of stakeholders other than the shareholders. Employment law, the Gender Equality Act, and any legislation regarding environmental protection, cover certain aspects of corporate social responsibility that must be observed by companies in general.

Under the SIX-DCG, companies may opt in to the duty to publish a sustainability report. If a company chooses to do so, SIX will publish the opting in on its website. Companies that have opted in are required to prepare a sustainability report in accordance with internationally recognised standards selected by SIX.22

In 2016, a popular initiative by the Swiss Coalition for Corporate Justice had the aim of increasing corporations' efforts in respect of human rights and environmental protection. The submitted initiative was put to a Swiss people's vote on 19 November 2020 and, although a majority of 50.73 per cent voted in favour, it was rejected by the majority of cantons and therefore became void. The initiative had proposed that companies should be required to conduct due diligence on human rights and environmental sustainability for their businesses in Switzerland and abroad. Otherwise, they should become liable for violations of national and international human rights and environmental standards taking place in their business activities in Switzerland and abroad.23 The Federal Council responded with a counter-proposal that requires companies to report on respect for human rights and the environment, but does not provide for direct liability of companies in the event of violations. Following the rejection of the SCCJ initiative, the counter-proposal will enter into force unless a referendum is successfully taken against it.

Shareholders

i Shareholder rights and powers

Shareholders of Swiss companies have both financial and non-financial rights. Financial rights entail the right to receive dividends that have been resolved by the shareholders' meeting. Dividends can only be distributed from free reserves. Free reserves include disposable balance sheet profits and specifically dedicated reserves. In the event of the liquidation of a company, shareholders have a right to receive liquidation proceeds.

Non-financial rights include protection and participation rights. The main aspect of shareholders' protection rights is the relative requirement of the equal treatment of shareholders. In principle, one share means one vote, and every shareholder has at least one vote. Swiss law does not grant any special rights (super-voting or special dividend rights) to long-term shareholders. A company may issue different share classes and allocate different voting powers to those shares. This special voting power does not apply to a number of resolutions, such as the election of the auditors or a special audit. Certain resolutions of the shareholders' meeting require a higher quorum than the regular majority vote (e.g., a change of corporate purpose, limitation or exclusion of subscription rights, or limitation of transferability of shares). Another protective right is the subscription right of existing shareholders in the event of a capital increase. The subscription right may be limited or excluded for important reasons by a qualified shareholders' resolution. The action for liability, and the right to challenge shareholder resolutions that violate the law or the articles of incorporation, or to claim their annulment, are further mechanisms to protect shareholders' rights.

Participation rights entail certain information and supervision rights. Shareholders must be provided with the annual financial statements and, if applicable, the auditor's report. In addition, shareholders may demand further information regarding the business of the company and the audit process. Shareholders may also request to inspect the company's books and correspondence as far as that inspection does not harm business secrets or other shareholders' interests. Shareholders may demand that a special audit be carried out.

Shareholders who, alone or as a group, hold 10 per cent or more of the share capital or a participation of at least 1 million Swiss francs have the right to request that a shareholders' meeting be convened. In addition, shareholders holding, alone or as a group, 10 per cent or more of the share capital or a participation of at least 1 million Swiss francs can request that additional items are put on the agenda of a shareholders' meeting. Any shareholder, regardless of the size of his or her shareholding, can bring a proposal to any agenda item of a shareholders' meeting.

The revised CO will contain lower thresholds to facilitate the performance of these rights. Under the revised CO, for listed companies, shareholders holding at least 5 per cent of the share capital will be permitted to request that a shareholders' meeting be convened, and shareholders holding at least 0.5 per cent of the share capital will be permitted to request that an item be put on the agenda of a shareholders' meeting.

The convocation to a general meeting of shareholders (including agenda items and proposals of the board of directors) must be made public at least 20 calendar days prior to the meeting. At the meeting, any shareholder has the right to express his or her view on any agenda item.

ii Shareholder duties and responsibilities

Under Swiss corporate law, shareholders of a company traditionally have only the duty to pay the issue price of the subscribed shares. It is the general prevailing view that shareholders of a company do not have a duty of loyalty in relation to the company, and that they are not liable for the company's obligations. In listed companies, shareholders must disclose their participation when crossing the thresholds of 3, 5, 10, 15, 20, 25, 33.33, 50 or 66.66 per cent of the voting rights (see Section III).

There is no general code of best practice or guidelines for shareholders in Switzerland. However, in 2013, economiesuisse issued its 'Guidelines for institutional investors governing the exercising of participation rights in public limited companies' (the Investors' Code).24 The Investors' Code sets out five principles governing how institutional investors should exercise their participation rights in public companies. The main goal is that institutional investors take seriously their responsibility towards clients with regard to ensuring long-term, effective corporate governance of the companies in which they are invested. According to the Investors' Code, institutional investors should systematically exercise their participation rights, and do so in the best interests of their clients. Furthermore, institutional investors shall communicate how they exercise their participation rights, including the underlying reasoning. Following the comply or explain approach, all investors who have agreed to implement the Investors' Code have to publish a statement of accountability wherein they explain any deviation from the Investors' Code.

The binding OaEC requires pension funds to exercise their voting rights in the election of board members, the chair, the members of the compensation committee and the independent proxy, and regarding further items such as compensation. Pension funds must additionally disclose annually to their clients how they have exercised their voting rights.

iii Shareholder activism and proxy advisers

Shareholder activism and proxy fights in Switzerland have increased considerably during the past few years. One of most recent activist campaigns was that by Veraison Capital against the leadership of Aryzta, a Swiss-Irish bakery group. With long-term investor COBAS, Veraison requested the holding of an extraordinary general meeting of shareholders and proposed the removal of certain directors (including the chairman) and the election of new directors. After a public battle, the activist was able to win support from other shareholders and achieved the suggested change in Aryzta's leadership team.

Veraison also conducted a campaign against the board of directors of SIX-listed Implenia (Switzerland's leading construction and real estate services company). Veraison's request included a change in the corporate strategy and changes to the composition of the board. The campaign was not successful.

During 2020, probably because of the covid-19 pandemic, the number of activist campaigns decreased considerably. However, we expect the number of campaigns and proxy fights to pick up during the next 12 to 18 months.

The demands of most activists in Switzerland target the composition of the board of directors (including the chairman) and executive board (in particular, the CEO) and their compensation, a review of and change in strategy, or corporate restructurings. Proxy advisers such as ISS, Glass Lewis and Ethos are also active in the Swiss market.

Parliament adopted a motion requiring the government to propose new legislation addressing conflicts of proxy advisers on 3 June 2020, thereby instructing the Federal Council to submit an amendment to the law to disclose and avoid conflicts of interest of proxy advisers for listed companies and to take into account international developments in doing so. However, in the absence of a physical presence of these proxy advisers in Switzerland, namely of ISS and Glass Lewis, it remains unclear how the required legislation would effectively be enacted.

Swiss law does not provide for special provisions applicable to shareholder activists. In particular, shareholders are not allowed to inspect the share register. Moreover, a board of directors is not required to distribute to the company's shareholders any statements made by activist shareholders. As a consequence, the board of directors entertains private conversations and settlement discussions with the activist and, if those discussions are not successful, a public proxy fight between the board and the activist is started. In proxy fights, it is not uncommon for a company (and the activist shareholder) to engage a proxy solicitor to identify shareholders, to explain the board's (or shareholder's) position and arguments, and to convince shareholders to exercise their voting rights at the shareholders' meeting. Activist shareholders may challenge shareholder resolutions. Up to the end of 2020, as an interim measure, activists could request the blocking of the commercial register to prevent, or at least delay, the registration of a merger or capital increase. The register blocking was a simple and effective way of temporarily preventing entries in the commercial register. However, owing to its considerable potential for abuse, the register block has been criticised. With the abolition of the register blocking as of 1 January 2021, an entry in the commercial register can in future only be prevented by means of (superprovisional) precautionary measures.

iv Takeover defences

The Swiss takeover rules prevent a board of directors and management of a target company from taking frustrating actions without shareholders' approval after a tender offer has been formally announced. 'Frustrating actions' are defined as those that significantly alter the assets or liabilities of the target company (e.g., the sale or acquisition of any target company's assets at a value or price representing more than 10 per cent of the total consolidated balance sheet or contributing more than 10 per cent to the profitability of the target company; the conclusion of contracts with members of the board of directors or senior management providing for unusually high severance payments). The target board is also prohibited from acquiring or disposing of treasury shares or respective derivatives, and from issuing any conversion or option rights, unless those transactions are made in the context of pre-existing employee share programmes or obligations under pre-existing instruments (such as pre-existing convertible bonds). In addition, the Swiss Takeover Board has the authority to object to defensive measures that manifestly violate company law.

However, the board may still take other steps to counter an unsolicited informal approach or formal offer, including seeking a white knight, running a public relations campaign or bringing legal action against the bidder, especially on the basis that the bidder has not complied with its disclosure obligations, or if the terms of its offer are not in line with the takeover rules. The board could also call an extraordinary shareholders' meeting and propose more effective defence measures, such as the sale of a material part of the business or the issuance of new shares. Apart from specific defence measures in response to a specific bid, the articles of a number of listed Swiss companies contain preventive clauses, particularly transfer and voting rights restrictions, which an offeror will normally seek to have removed from the articles as a condition to closing. Under these circumstances, the board is generally perceived to have more leverage in discussions with a bidder, especially in relation to the financial terms of a proposed offer. Since the OaEC came into effect, listed companies are no longer permitted to have staggered boards, as board members may be elected only for one year.

v Contact with shareholders

The main means of contact between a company and its shareholders is the annual general meeting of shareholders. In addition, shareholders may request special information from the company. Listed companies are required to make ad hoc notifications of price-sensitive facts arising within the sphere of the company.

It is quite common for listed companies to entertain regular contact with its major shareholders and proxy advisers to explain the company's long-term strategy and to better understand shareholder concerns. However, the principle of equal treatment of shareholders, ad hoc publicity and insider regulations, in principle, require the board to not disclose non-public price-sensitive information to selected shareholders. Any such contacts must be in the interest of the company. These contacts are often entertained by the chair, the lead director and investor relations.

The revision of the CO will also improve communication with shareholders by facilitating the use of technology. For instance, the board may provide that it is possible for the shareholders to have access to electronic remote voting.25 Under the OaEC, listed companies are already required to provide shareholders with the opportunity to grant electronic proxies to the independent proxy.

Institutional investors and proxy advisers have gained relevance during the past few years. In this context, the Investors' Code introduced the duty for institutional investors to inform their shareholders about how they exercise their voting rights. The OaEC follows the same principle and requires pension funds to actually exercise their voting rights as regards certain agenda items, such as the election and compensation of board members. In addition, pension funds must disclose annually to their clients how they have exercised their voting rights.

Outlook

As stated in previous sections, Swiss corporate law is about to undergo a significant revision. Amendments on gender quotas and transparency provisions for companies active in the natural resources industry, similar to the newly adopted EU regulations, entered into force on 1 January 2021. In addition, the revised CO includes the following key amendments, the entry into force of which is yet to be determined but is expected to be on 1 January 2022:

    1. the incorporation of most rules of the OaEC into the CO;
    2. numerous changes to traditional corporate law, such as:
      • permitting a share capital denominated in a foreign currency;
      • a minimum par value below 1 cent;
      • a 'capital band' to give companies more flexibility to increase and reduce their share capital;
      • clarification of the requirements for distributions out of capital reserves and interim dividends; and
      • the enhancement of shareholders' rights in terms of better corporate governance.

There will be a two-year transition period for companies to adapt their articles of incorporation and regulations to the revised law.

Footnotes

1 Hans-Jakob Diem and Tino Gaberthüel are partners at Lenz & Staehelin. The authors thank Rebecca Schmid for her contribution to this chapter.

2 See Section VI. At the time of writing, entry into force of the revised Swiss Code of Obligations [CO] is expected on 1 January 2022.

3 SIX Swiss Exchange is the main stock exchange in Switzerland.

5 Available, with the Guideline on the Corporate Governance Directive, at https://www.ser-ag.com/en/topics/corporate-reporting.html.

8 economiesuisse is the largest umbrella organisation representing the Swiss economy.

10 Revised CO, Article 733.

11 See footnote 2, above.

12 Revised CO, at Article 734f.

13 In essence, this is because the function of the secretary was rarely used in practice and, therefore, could be disposed of in the view of the Federal Council (Dispatch of the Federal Council on the partial revision of the CO, BBl 2017 399, 567). The revised CO does not deviate from this proposed amendment.

14 See also Section V.i for more details about the shareholders' right of inspection.

15 Revise CO, Articles 964a to 964f.

16 This notification duty does not apply if the bearer shares are issued in the form of certificated securities (Bucheffekten).

17 This notification duty does not apply if the bearer shares are issued in the form of certificated securities.

19 Compliance Principles, p. 10.

20 See European Parliament legislative resolution of 16 April 2019 on the proposal for a directive of the European Parliament and of the Council on the protection of persons reporting on breaches of Union law (COM(2018)0218-C8-0159/2018-2018/0106(COD)).

21 In this regard, the Federal Council published an additional dispatch and a revised draft bill on 21 September 2018, which was a reaction to the fact that Parliament, owing to its lack of comprehensibility and structure, had rejected the original draft in 2015. Nevertheless, the Bill was finally rejected by the National Council by 147 to 42 votes on 2 March 2020 because of the continuing criticism of its lack of comprehensibility.

22 A list of companies that opted in and a list of accepted international standards are available at www.six-swiss-exchange.com/shares/companies/sustainability_reporting_en.html.

23 The Swiss Coalition for Corporate Justice's arguments and the submitted initiative are available at http://konzern-initiative.ch/?lang=en.

25 Revised CO, Article 701c et seq.

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