Abolition of bearer shares: Adjustment of the shareholding structure as an opportunity

Partial abolition of bearer shares. Companies must act now.

The abolition of bearer shares in Switzerland is in full swing. Non-listed companies with bearer shares must act now. What the law requires, how companies should react, and what solutions Credit Suisse offers.

Switzerland is implementing the partial abolition of bearer shares

On November 1, 2019, the Federal Act for the Implementation of the Recommendations of the Global Forum on Transparency and the Exchange of Information for Tax Purposes entered into effect. The new law includes the following provisions:

  • New issuance of bearer shares is prohibited as of November 1, 2019.
  • Existing bearer shares must be converted.
  • Exceptions exist for public companies and for bearer shares in the form of intermediated securities.

What does the new legal situation mean for companies with bearer shares?

For joint-stock companies and their boards of directors, this leads to an urgent need for action. By no later than April 30, 2021, the affected companies must convert existing bearer shares that do not fall under the regime of exception into registered shares or reissue them in the form of intermediated securities.

The key is for joint-stock companies to address the conversion in a timely manner – if this has not yet been done, those responsible should immediately take action. This is because the necessary steps, such as collecting existing certificates or changing the articles of incorporation at a duly convened Annual General Meeting, are very time consuming. For these reasons, in order to be able to make the required changes to the Commercial Register in time, those responsible must plan a lead time of up to six months.

Step by step: This is how the conversion of existing bearer shares takes place

The most important steps in the conversion of bearer shares

This is how non-listed joint-stock companies should address the conversion of bearer shares.

Sources: Credit Suisse

Preparation is half the battle

In order to carry out the implementation of new provisions efficiently and correctly, good preparation is crucial. Only then can the company find its ideal solution meeting the requirements of the law. Important questions that entrepreneurs should ask themselves:

  • What is the initial situation of my company?
  • How is my shareholder base designed?
  • Who can help me?
  • How do I lead my shareholder base in the future?

Waiting for the conversion of bearer shares by law is not an option.

Those who take the required action too late and miss the legal deadline will likely have to face unpleasant consequences: bearer shares will automatically be converted into registered shares. However, the corresponding amendments to the articles of incorporation still need to be carried out. By then, the commercial register will be closed for changes. The adjustment can therefore only be carried out in court. Hence, more than ever, arriving on time means starting on time.

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