It is now possible to create a Swiss security over intermediated
securities that is similar to a floating charge, although this has
yet to be embraced by the market
Switzerland has been a good market for acquisition finance for
quite some time, and it seems that interest in acquiring Swiss
companies is still growing.
So far this year we have already seen high-profile transactions
such as the acquisition of the Swiss Syngenta group by ChemChina.
The $43bn deal, once completed, is said to be the biggest Chinese
foreign takeover ever. It goes without saying that in any leveraged
acquisition finance transaction a good security package is a key
component for success.
In general, foreign lenders in Switzerland can expect to obtain
security over types of assets such as receivables, real estate and
bank accounts, and in a form (assignment or pledge) they are used
to seeing in an international context. There is one exception,
though. Floating charges, ie a security over an underlying asset or
group of assets which is subject to change in quantity and value
over time are seemingly unavailable in Switzerland.
In principle, this statement is true. According to the Swiss
principle of speciality rights in rem must pertain to individual
objects or rights. Consequently, security can be taken over rights
and objects that can be individualised, but there are no securities
over an aggregate of things or rights under Swiss law.
There are ways to mitigate the consequences of the principle of
speciality. For example, an assignor can assign all its current and
future claims vis-à-vis third parties as a security so long
as they can be individualised, or the contents of a warehouse can
be pledged when the security agent has control over the warehouse
– ie the keys. However, it goes without saying that this
principle of speciality does not sit well on the concept of a
A new category of rights
On 3 October 2008 the Swiss Federal Intermediated Securities Act
(FISA) entered into force. FISA introduced to Swiss law
intermediated securities (Bucheffekten), ie fungible claims or
membership rights vis-à-vis the issuer that are credited to
a securities account of an intermediary such as a bank, for
Prior to FISA there were only two categories of rights under
Swiss law: objects and claims. Intermediated securities are a new
category of rights and the question arose of the extent to which
the pre-existing principles of Swiss law should apply to them.
Security over intermediated securities can be established by
transferring the full title of the intermediated securities to an
account controlled by the lenders. Alternatively, the intermediated
securities can be pledged in favour of the lenders. To complete
such a pledge the account owner and the intermediary must enter
into an irrevocable control agreement according to which the
intermediary stipulates to act on the instructions of the lender
without approval or participation of the account holder.
However, subject to an agreement between the lender and the
account holder the latter may continue to operate the account until
the intermediary receives a blocking notice by the lender.
Since intermediated securities are a new category of rights it
is not completely clear if, or to what extent, the pre-existing
principles of Swiss law, including the principle of speciality,
should be applicable.
It was clear from the beginning that the principle of speciality
in its purest form demanded either granting security over all
intermediated securities in an account or specifying each
intermediated security in the underlying agreement. The first
option seems rather inflexible and may lead to commercially
unjustifiable results, and the second option appears to be somewhat
To avoid these issues FISA introduced the option of granting
security over a value quota of an intermediated securities account.
Therefore, it is possible to create a Swiss security over
intermediated securities that is, to a certain extent, similar to a
Options and flexibility
So far, it seems that the market has not yet fully embraced the
Swiss 'floating charge' over intermediated securities
because lenders prefer, in most cases, the court-tested
alternatives such as a pledge of physical share certificates, if
these are available. However, additional options and more
flexibility is always welcome when a securities package is
And last but not least, since Swiss law has adopted the floating
charge in one area it may be introduced in other areas too, by new
Originally published by The Lawyer, 6 June 2016.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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