Overview of the main changes
Subject | Overview | Actions required |
Capital band | The articles of association may authorise the board of directors to increase and/or decrease the share capital within a bandwidth (capital band) for a period not exceeding five years. They shall specify the limits within which the board of directors may increase and reduce the share capital. The company must elect an auditor if the board of directors my reduce the share capital (no opting-out). The capital band is not applicable to a limited liability company (LLC). The main purpose of this new instrument is to provide more flexibility to the companies regarding the increase as well as the reduction of the share capital as well as to guarantee the protection of the creditors. The capital band provides new possibilities of financing future project, acquisition of new shareholders or more flexibility in case of financial difficulties. The capital band replaces the former authorised capital increase. |
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Share capital in the foreign currency required for business operations (functional currency) | A limited company (Ltd.) and a LLC can now have their share capital in the foreign currency required for business operations. This is not applicable for a cooperative. The nominal capital of a Ltd must amount to CHF 100’000 at least (the current daily exchange rate is decisive). The nominal capital of a LLC must amount to CHF 20’000 at least. The conversion of the share capital into the functional foreign currency required for business operations requires an adjustment of the articles of association. With the conversion of the share capital, the company must submit to the competent commercial register a public deed regarding the decision of the general meeting in connection with the conversion as well as a public deed with the adjustment of the articles of association by the board of directors. The functional currency can be changed either prospectively at the beginning of the next financial year or retrospectively at the beginning of the current financial year. The approval for the conversion into a foreign currency need a qualified majority. The conversion will be performed based on the “current” rate. Allowed functional foreign currency: British pound (GBP), Euro (EUR), US-Dollar (USD), Yen (JPY) | The tax burden for federal direct tax as well as cantonal and municipality taxes will be levied in Swiss franc (CHF) even though the company as converted its share capital into the foreign currency required for business operations. The taxable net profit and the taxable equity are converted at the average exchange rate for the year (the average exchange rate [sale] for the tax period is decisive). What is new is that the taxable equity is no longer converted at the historical rate, but at the rate on the balance sheet date. In case a company has its share capital in a foreign currency , the capital contribution reserves have to be converted for the contribution as well as the distribution of the capital contribution reserves with the exchange rate dated of the due date. The capital contribution reserves will only be approved by the tax administration in the foreign currency according to the commercial register (circular letter No 29c from the FTA d from 23 December 2022). |
Interim dividends / Statutory retained earnings | The company can distribute an interim dividend based on the interim account audited by a licensed auditor. However, in case of an opting-out, the interim accounts do not need to be audited by a licensed auditor. The distribution of an extraordinary dividend is still possible. As before, the provisions on the payment of dividends must be observed (for example, allocation to reserves, sufficient liquidity). However, there is no second allocation as under the old law. Allocation of 5% of the annual profit until capital and profit reserve together reach 50% of the registered share capital/common stock (including participation capital) (20% in case of a holding company). | In general, no change regarding income, profit and withholding tax (WHT). The interim dividend distribution is subject to WHT. The interim dividend needs to be booked accordingly in the financial statements of the company who distributes the dividend as well as the recipient of the dividend needs to declare the amount accordingly. |
General meeting may be held abroad / Exercise the rights electronically | General meeting abroad: The general meeting may be held abroad if the articles of association allow it and the board of directors designate an independent voting representative in the notice convening the meeting. In the case of companies, whose shares are not listed on a stock exchange, the board of directors may dispense with designating an independent voting representative if all the shareholders agree. Virtual general meeting: A general meeting may be held with no venue by electronic means if the articles of association permit it and if the board of directors designate an independent voting representative in the notice convening the meeting. In the case of companies, whose shares are not listed on a stock exchange, the articles of association may allow that the designation of an independent voting representative is not mandatory. Furthermore, electronic means can now be used. | If the general meeting is performed virtually as well as in case of the use of electronic rights, it must be ensured that the identity of the participants is known, that the votes are transmitted immediately, that each participant can make motions and take part in the discussion, and that the voting results cannot be distorted. If technical problems arise during the general meeting, with the result that the general meeting cannot be duly conducted, the meeting must be held again. |
Imminent insolvency, loss of capital and over-indebtedness (90-day grace period in case of over-indebtedness / provisional moratorium instead of bankruptcy moratorium) | The board of directors is obliged to constantly monitor the solvency of the company. If the company is threatened with insolvency, the board of directors shall take measures to ensure its solvency. It shall take, where necessary, further measures to restructure the company or shall request the general meeting to approve such measures if they fall within the competence of the general meeting. It shall, if necessary, apply for a debt restructuring moratorium. The board of directors shall act with the required urgency. If the most recent annual accounts indicate that the assets less the liabilities no longer cover half of the sum of the share capital, the statutory capital reserve not to be repaid to the shareholders and the statutory retained earnings, the board of directors shall take measures to rectify the loss of capital. It shall take, where necessary, further measures to restructure the company or shall request the general meeting to approve such measures if they fall within the competence of the general meeting. The board of directors and the external auditor or the licensed auditor shall act with the required urgency. If there is justified concern that the company’s liabilities are no longer covered by its assets, the board of directors shall immediately prepare an interim account at going concern values and sale values. An interim account at sale values is not required if it is assumed that the company will continue to operate and the interim account at going concern values does not indicate over-indebtedness. If it is assumed that the company will not continue to operate, an interim account at sale values is sufficient. Notification of the court is not required if the company’s creditors subordinate their claims to those of all other company creditors to the extent of the over-indebtedness, provided the subordination of the amount due and the interest claims apply for the duration of the over-indebtedness; or provided there is a reasonable prospect that the over-indebtedness can be remedied within a reasonable period, but no later than 90 days after submission of the audited interim accounts, and that the claims of the creditors are not additionally jeopardised. | In the event of imminent insolvency, loss of capital and over-indebtedness, it may be worthwhile to review the existing and, in particular, future subordination agreements to see whether they comply with the new corporate law. |
The new corporate law offers new mechanism to Swiss based companies, which provides more flexibility for share capital and equity distributions, enhancement in the modernisation of general meeting. In order to benefit from the new corporate law, the companies have to adjust their articles of association. Therefore, it is recommended to adjust the current articles of association we well as any other organisational regulations according to the new regulations.
Article written by Dominique Roggo and Caryl Neuenschwander
The provisions of the reform of company law relating to changes in capital are subject to a delayed introduction, likely to be effective in 2023. They are intended to modernise the current law and provide flexibility in determining the capital structure.
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