New Swiss corporate law: Minority Shareholders

The New Law entails strengthened information rights for shareholders:

• While any shareholder may still request some information to be provided by the board of directors during the shareholders’ general assembly (the General Assembly), shareholders of private companies holding at least 10% of the share capital or voting rights are entitled to request in writing information to the board of directors at any time.
• The board of directors shall provide the requested information within four months and make it available to all shareholders at the next General Assembly. In case the board of directors refuses to provide the requested information, it shall justify such refusal in writing.
• Shareholders holding at least 5% of the share capital or voting rights have the right to access books and records of the company.
• The board of directors shall give access to the books and records within four months. While consulting the documents, shareholders are authorized to take some notes. In case the board of directors refuses to give access to the books and records, it shall justify such refusal in writing.
• Shareholders that were denied access to information or books and records – even partially – may request from the judge within thirty days to force the company to provide the requested information and documents. The Current Law already provides the shareholders with the right to file a request with the judge. The New Law merely specifies the time frame within which the claim shall be filed.

What does not change with the New Law:

• Any shareholder may still request that information shall be provided by the board of directors during the General Assembly.
• Information which may be requested shall be linked to the company’s business and encompass inter alia the following: (i) information relating to the company’s management, (ii) company’s accounts, (iii) information relating to the board of directors and its remuneration.
• According to case law, within a group companies, shareholders of the mother company may request access to documents relating to a subsidiary as long as said documents are in the mother company’s possession.
• Information is provided and access to the books and records is granted to shareholders only if it is necessary to the shareholders to exercise their rights does not jeopardize company’s business secrecies or other corporate interests worthy of protection.

Under the Current Law, any shareholder has the right to propose to the General Assembly to initiate a special audit in order to clarify some facts if this is necessary for the share-holder to exercise his/her/it rights. The proceeding is complicated and depends on whether the General Assembly has accepted or refused the special audit:

• In case the General Assembly has accepted to initiate the special audit, the company or any shareholder has to demand from the judge within thirty days to appoint the special auditor;
• In case the General Assembly has refused to initiate the special audit, shareholders holding at least 10% of the share capital or holding shares of a nominal value of at least CHF 2 million, has to demand from the judge within a three months-period to appoint the special auditor. Shareholders have to demonstrate that (i) the founding members of the company or corporates bodies (e.g., board of directors and directors) have infringed the law or the company’s articles of association and that (ii) such violation had infringed the law or the company’s articles of association and that (ii) it had caused a damage to the company or to the shareholders. The above-mentioned thresholds apply regardless of whether the company is public or private.

The terminology used under the New Law has changed from special audit to special examination.

The change is not a mere change in the wording of the institution.

The New Law entails many substantive amendments aiming at facilitating the proceedings to initiate said special examination:

• The threshold for shareholders to demand from a judge within a three months-period to appoint the special examiner is lowered to (i) 5% of the share-capital or voting rights in a public company, (ii) 10% of share-capital or voting rights in other companies.
• The judge will admit the request to appoint a special examiner if shareholders demonstrate in a credible way that (i) the founding members or corporates bodies have infringed the law or the company’s articles of association and that (ii) such violation might cause a damage to the company or to the shareholders. The New Law does not require anymore that a damage already took place which shall allow shareholders to act and file a request with the judge in a preventive manner.
• The judge will admit the request to appoint a special examiner if shareholders demonstrate in a credible way that (i) the founding members or corporates bodies have infringed the law or the company’s articles of association and that (ii) such violation might cause a damage to the company or to the shareholders. The New Law does not require anymore that a damage already took place which shall allow shareholders to act and file a request with the judge in a preventive manner.

A. Right to Request an Extraordinary Shareholders’ General Assembly

The New Law has lowered the thresholds for shareholders who wish to request the convocation of an extraordinary General Assembly:

• For public companies: shareholders holding together 5% of the share-capital or voting rights;
• For other companies: shareholders holding together 10% of the share-capital or voting rights.

Under the Current Law, the threshold is set at 10% of the share-capital and no distinctions are made between public and other companies.

The shareholders shall request the convocation of the General Assembly in writing and shall submit (i) agenda items and (ii) motions for each agenda item. Otherwise, the convo-cation is not valid.

Agenda items are the objects on which the shareholders wish to vote. Motions are the propositions of the shareholders for each agenda item. See the below example which illustrates the distinction:

Agenda Item #1:  Election to the Board of Directors 

Motion:                   It is proposed to elect Mr. X as member of the board of directors.

Agenda Item #2:     Election of the Auditor

Motion:                   It is proposed to elect the company X Ltd as new auditor.

In case the board of directors does not convene the General Assembly within 60 days, the shareholders may demand from the judge to convene the General Assembly. This change is welcome in terms of efficiency since the Current Law requires the board of directors to convene the General Assembly within a “reasonable period”.

B. Right to Submit an Item on the Agenda and Motion Right

The New Law has also lowered the threshold for shareholders who wish to ask that an item be included in the invitation to a General Assembly. While the limit was previously set at shareholders holding shares with an aggregate nominal value of CHF 1 million, the New Law sets the threshold now as follow:

• For public companies: shareholders holding together 0,5% of the share-capital or voting rights;
• For other companies: shareholders holding together 5% of the share-capital or voting rights.

Under the same limits, the shareholders have the right to request that their proposals (motions) related to agenda items shall be included in the agenda to the General Assembly.

The New Law clearly specifies that, during the General Assembly, any shareholder may submit proposals regarding an agenda item (i.e., no threshold is required).

Other amendments were made to the existing provisions in the view of reinforcing the minority shareholders’ rights.

According the Federal Council’s message dated November 23, 2016 addressed to the Swiss parliament, the following amendments are – inter-alia – aimed at better protecting minority shareholders:

• Delisting of shares of a public company is now subject to (i) the vote of the General Assembly and (i) to at least two-thirds of the voting rights represented and an absolute majority of the nominal value of shares represented at the General Assembly;
• Dismissal of the auditors during their mandate is possible only in case of justified grounds;
• Conditions to file a claim for restitution have been amended. In particular, the New Law precises the scope of persons subject to the duty to return unduly received compensations (i.e., shareholders, board members, directors, advisory board members) and does not require anymore that such remunerations have been received in “bad faith”. In addition, any shareholder may request that the persons who transferred assets to the company in exchange of a counter-part, returns the latter when it is blatantly disproportionate with the value of the as-sets transferred to the company.
• Articles of association may contain arbitration clauses pursuant to which corporate disputes are subject to arbitration in Switzerland. Unless something else is provided in the articles of association, the arbitration clause is binding upon the company, its corporate bodies, members of said corporate bodies and shareholders.

With the news amendments of Swiss corporate law, minority shareholder’s rights are reinforced albeit not to a great extent. For companies willing to offer a better protection to minority shareholders, the articles of association may go further and provide additional rights.

For a full overview of the minority shareholders’ rights, please refer to the enclosed chart.