On 21 June 2019, the Federal Assembly passed the Federal Act on the implementation of the recommendations of the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Act). The Act is a further step towards increasing transparency in relation to the legal and beneficial ownership of shares of Swiss legal entities and marks the continuation of the Financial Action Task Force (FATF/GAFI) amendments of 2015 following the peer reviews led by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) and the FATF. The Act prohibits the issuance of bearer shares for non-listed companies, unless they are issued as intermediated securities held with a Swiss custodian. It also introduces criminal law sanctions for breaches of the obligation to disclose the beneficial ownership of shares as well as for breaches of several corporate housekeeping duties generally, including the duty to properly keep a share register and a register of beneficial owners. In addition, it contains potentially draconian sanctions, including for holders of bearer shares who could eventually be expropriated without compensation if they do not comply with the disclosure requirements, and for companies which could eventually be dissolved if they do not comply with their duties to maintain corporate registers or if they unlawfully issue bearer shares. At the same time, the Act leads to welcome clarification around the disclosure of beneficial owners and addresses a number of issues that were subject to controversy until now.
Abolition of Bearer Shares
A central aspect of the Act will be the abolition of bearer shares for joint stock companies (article 622 (1bis) CO as amended), with two exceptions:
– First, companies with equity securities listed on a stock exchange will continue to be able to issue bearer shares (article 622 (1bis) CO as amended). This exception will, however, only be available to a limited number of companies.
– Second, other companies will be able to issue bearer shares only if the shares are issued as intermediated securities held by a Swiss custodian designated by the company (article 622 (1bis) CO as amended). Such intermediated securities are held on custody accounts through the banking system.
In both cases, this fact will need to be registered with the commercial register (article 622 (2bis) CO as amended). These measures go one step further than the reform introduced in 2015, which required shareholders to disclose their identity to the company within a month of the acquisition of the shares, but was deemed to be ineffective in the peer review of the Global Forum.
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