Switzerland abolishes bearer shares

24 July 2019

Switzerland’s government adopted a Federal Act on 21st June 2019 (“The Act”) which will see the country put an end to Swiss entities being able to issue bearer shares.

The abolishment of bearer shares is all encompassing, and from the 1st January 2020, no Swiss company will be able to issue bearer shares – even if they are able to do so currently.

There will be an intermittent ‘period of grace’ from the beginning of 2020 until the 1st July 2020, after which time it will no longer be possible for a Swiss entity to issue bearer shares. Per the 1st July 2022 any entity that was in the past able to issue bearer shares must redraft their articles of association to figuratively strike out an ability to issue bearer shares. In such a case that the articles of association have not been redrafted by the aforementioned deadline, the commercial register will not allow any other changes to the articles of association thereafter.

When the articles of association are redrafted, any bearer shares should also be formally converted into registered shares. If this condition has not been met, they will, in any case, be lawfully be transformed to registered shares by a Swiss ruling designed to close the loophole of bearer shares still in existence on the 1st July 2022.Any Swiss company converting bearer shares into registered shares will also be required to record the names of the registered shareholders in the entity’s shareholder register.

If holders of bearer shares have not fulfilled the requirements to ensure that their details are available in the company’s shareholder register before the bearer shares automatically become registered shares in July 2022, they will be penalised in the sense that they will lose the voting rights and financial entitlements that are applicable to them as shareholders.

While The Act is otherwise all-encompassing, companies that have securities listed on a stock exchange or have issued intermediated securities are exempt from the changes. In such a case, it is a requirement that the companies to whom The Act does not apply should formerly announce themselves to the commercial register well before 1st July 2022.

‘Despite being legally admissible, ZEDRA Switzerland haven’t issued non-attributable bearer shares on behalf of client entities for a numbers of years, owing to our best practice processes and internal compliance guidelines. This means that while we will be liaising with clients to convert their bearer shares into registered shares, complying with Switzerland’s announcement is a simple formality, given any of our clients with bearer shares will already have their details registered in the entity’s shareholder register,’ says ZEDRA Zurich and Zug’s Managing Director, Vadim Neumann. ‘Looking forward until July 2022, we will work closely alongside our clients, giving a hands-on assistance to review agreements, articles of association and so on to ensure these are appropriately updated in line with the new legislation,’ says Vadim, in conclusion.

Should you have any questions regarding The Act or anything else within the article, feel free to contact Vadim Neumann for more information.

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