Revision of the Swiss Corporate Law: Shareholders' Rights
1. Share holders' Rights - Participation and Representation
The shareholders exercise their rights in the company’s affairs at the shareholders' meeting. Their rights include, inter alia, the appointment of the board of directors and the auditors, the approval of the annual report and the approval of the annual accounts together with the resolutions concerning the allocation of the profit. In principle, they may choose to participate in the shareholders' meeting personally of through a third party of their choice.
The revCO differentiates between several types of third-party representation: (i) the independent representative (unabhängiger Stimmrechtsvertreter), (ii) the depository/custodian (Depotstimmrechtsvertreter), (iii) the member of a corporate body (Organstimmrechtsvertreter), (iv) another shareholder and (v) a third party (non-shareholder).
In connection therewith, however, there are significant differences between the rules for listed and non-listed companies.
The Independent Representative (unabhängiger Stimmrechtsvertreter)
The independent representative may be a natural person, a legal entity or a partnership, as long as its independence is not impaired, either in fact or in appearance. The revCO further stipulates that the independent representative must exercise the shareholders' voting rights as instructed and, in case of absence of such instructions, abstain from voting.
The articles of association of non-listed companies may limit the shareholders' right to be represented by third parties insofar as only other shareholders may act as representatives. The revCO stipulates that in case of such a limitation, the board of directors, at the request of a shareholder, must designate an independent representative or a member of a corporate body (Organstimmrechtsvertreter; cf. below), whom the shareholders may instruct. The board of directors must inform the shareholders accordingly at the latest 10 days prior to the shareholders' meeting. If the board of directors fails to comply with its duties, the shareholders may be represented by any third party.
Furthermore, provided the articles of association of the company provide for the possibility to hold shareholders' meeting abroad and the company makes use of it (cf. our newsletter Revision of the Swiss Corporate Law: Shareholders' meeting and resolutions (2/2); December 2022), the board of directors has an obligation to designate an independent representative, unless all shareholders waive such requirement.
The ordinary shareholders' meeting of listed companies must appoint an independent representative, whose term of office is 1 year. The shareholders' meeting may only remove the appointed independent representative as per the end of the following ordinary shareholders' meeting. If the ordinary shareholders' meeting fails to appoint the independent representative, the board of directors of the company is obligated to do so.
The Depository/Custodian (Depotstimmrechtsvertreter)
Custodians of shares of non-listed companies, which for the purposes of the revCO are defined as banks pursuant to the Swiss banking act, are required to ask the shareholders/depositors for voting instructions prior to a shareholders' meeting. Where the depositors' instructions cannot be obtained in due time, the custodian/depositary exercises the voting rights of the respective shareholder in accordance with his/her/its general instructions and, if no such instructions exist, abstains from voting.
The provisions regarding custodians as representatives are not applicable to listed companies.
The Member of a Corporate Body (Organstimmrechtsvertreter)
Non-listed companies may appoint a member of a corporate body as representative and the shareholders may instruct him/her to vote at the shareholders' meeting.
The provisions regarding members of a corporate body as representatives are not applicable to listed companies.
Another Shareholder or a Third Party
As a general rule, the shareholders may exercise their participation rights (in particular their voting rights) in person or by any representative of their choice by issuing a power of attorney to the latter. However, in non-listed companies, the representation by another individual may be restricted to another shareholder, in which case the shareholders may request the designation of an independent representative (cf. above). In listed companies such restriction is prohibited.
2. Shareholders' Rights - Rights to Information, Inspection and Special Investigation
As a general rule, the board of directors has an obligation to provide the shareholders with all information required for the shareholders' meeting to resolve on any item which may be put to a vote. Furthermore, the revCO has expanded the shareholders' rights to information and inspection, particularly for non-listed companies.
Right to Information
At the shareholders' meeting, any shareholder is entitled to information from the board of directors on the affairs of the company as well as to information from the external auditors on the methods and results of their audit.
Outside of the shareholders' meeting, in the case of non-listed companies, shareholders representing at least 10 per cent of the share capital or of the votes may request the board of directors in writing to provide information on company matters. The board of directors is required to (i) provide the requested information within 4 months and (ii) grant access to the provided information to all (other) shareholders, at the latest at the next shareholders' meeting.
Right to Inspection
As for the shareholders' right to inspect the company's ledgers (books) and files, the revCO does not provide for any differentiation for listed or non-listed companies. Shareholders representing at least 5 per cent of the share capital or the votes, may request such inspection. Just as for the right to information, the board of directors must grant the inspection within 4 months from the request.
Limitations and Court Proceedings
The board of directors' obligation to provide information or grant inspection, respectively, is limited to information which is required for the proper exercise of the shareholders’ rights. The board of directors may refuse to provide the requested information if by complying with the shareholders' requests, trade secrets or other company interests warranting protection would be jeopardized. Any refusal to provide information and/or grant inspection must be justified in writing.
Where information or inspection is wholly or partly refused or made impossible, respectively, the shareholders may, within 30 days, apply to the court for an order to provide the information or grant inspection.
Right to Initiate a Special Investigation
Conceptionally, the right to initiate a special investigation is a subsidiary right of the shareholders. Any shareholder who has exercised his/her/its rights to information and inspection may submit a request to the shareholders' meeting with a view to have specific matters investigated by independent experts. Where the shareholders' meeting approves such request, the company or any shareholder may apply to the court, within 30 days, to appoint the experts to carry out the special investigation. If, on the other hand, the shareholders' meeting rejects the motion, shareholders holding (together) at least
- 5 per cent of the share capital or of the votes, in the case of listed companies; or
- 10 per cent of the share capital or of the votes, in the case of non-listed companies,
may, within 3 months, request the court to order the special investigation.
The court must order the special investigation if the applicants make a prima facie case that (i) the founders or the corporate bodies of the company have violated the law or the articles of association and (ii) the violation is likely to harm the company or the shareholders.
The experts shall report in writing and in detail about the results of their investigation. If the special investigation was ordered by the court, the experts shall submit their report to the court. The court must then make the report available to the company and shall at its request decide whether any passages in the report violate the company’s trade secrets or other interests warranting protection and, therefore, may not be disclosed to the applicants. Finally, the board of directors must make available the experts’ report as well as the board of directors' and the applicants' response available to shareholders at the next shareholders' meeting.
Should you have any questions regarding the revCO or should you require any assistance in corporate matters, please do not hesitate to contact our specialists in Geneva, Lugano or Zurich. We would be more than happy to assist you.