The new company law came into force on 1 January 2023 and brought with it significant innovations. We have accompanied multinational companies in the implementation of the new company law, report on our experiences after the first AGM season and show possible opportunities for the future.
What has changed?
With this revision, legislator intended to modernize the company law and bring it into line with economic needs. The main aim was to improve the flexibility of companies limited by shares. Arguably, the innovations of most interest in the environment of multinational companies relate to the following topics:
- General Meetings can now be held virtually, with a venue abroad or various meeting locations at the same time, as well as in writing by means of circular resolutions. In addition, the casting vote in the general meeting may be assigned to the chairperson.
- Capital may now be denominated in a foreign currency. Where this is the case, the accounts must be kept and financial reports must be filed in the same currency. The currently permissible currencies are US dollar, Euro, British Pound or Japanese Yen.
- It is now possible to distribute interim dividends. The prerequisite for this is that an interim financial statement is prepared and that it shows distributable, freely disposable capital. The interim financial statements must be audited unless an opting-out has taken place or all shareholders agree to the distribution.
- The new instrument of a capital band replaces the authorized capital increase. It allows the Board of Directors to be authorized to increase and/or decrease the capital within a certain bandwidth over a period of up to five years.
- To improve corporate governance, there are now explicit rules for dealing with conflicts of interest affecting the Board of Directors and the Executive Board.
- With the adoption of an arbitration clause in the articles of association, all disputes under company law can now be subjected to arbitration.
Which new provisions have multinational companies already implemented so far?
Quite a few multinational companies were quick to recognize the opportunities offered by the new company law and started implementing it right away, all the more so as certain innovations require a basis in the articles of association and such revisions can take some time to implement. We had the opportunity to accompany multinational companies during their implementation and in doing so were able to gain the following insights in particular:
- The change to a foreign currency for capital was particularly popular. In most cases, the conversion was carried out retroactively as of the beginning of the financial year. In a multinational environment, switching currencies is hardly surprising, as the advantages are obvious (especially for dividends, reserve allocations or tax calculation).
- The interim dividend was mainly used by group companies with foreign parent companies, as these regularly make quarterly distributions (especially current or extraordinary profits). In these situations, it is often possible to dispense with the audit of the interim financial statements, thus limiting the costs.
- The possibility of holding virtual general meetings has met with great approval. This was often implemented as a precautionary measure so as to be prepared in the future in case unforeseen events occur. At the moment, there is apparently no intention to hold purely virtual general meetings. However, hybrid general meetings are a regular occurrence. Particularly with joint venture structures, the hybrid general meeting is a suitable new instrument for multinational companies to conduct the general meeting efficiently and without great administrative effort.
- The option of holding the general meeting at a venue abroad was also frequently requested. The new regulation offers an immensely efficient and administrative advantage to multinational companies, where the shareholders are often wholly or partially domiciled abroad. Foreign holding and parent companies with subsidiaries in Switzerland also amended their articles of association promptly and now benefit from this advantage.
- With regard to corporate governance, many companies were already keenly aware of the issue beforehand. In general, they already had internal regulations for conflicts of interest in place, since the obligations to act already existed prior to the revision and only the explicit anchoring in the law has now taken place. Still, the new regulation led many companies to revise their internal organizational regulations and guidelines with the aim of bringing them up to speed and minimizing liability risks (Board of Directors v. Executive Board).
What is the outlook and what precautions should companies take?
Some innovations will become even more important in the future. Apart from the above-mentioned changes, which have already been implemented in numerous cases, the capital band also offers many opportunities, since the limits can be set as required within the legal framework, the subscription right can be excluded and even combinations with existing capital measures are possible. Equally, the arbitration clause could be increasingly used to the extent that disputes can be judged within a useful period of time, almost conclusively and by expert judges. In addition, it allows for limiting the publicity of the proceedings, thus further protecting their confidentiality.
Any multinational company wishing to benefit from the revised company law should review and amend the articles of association of its Swiss companies. Provisions of the articles of association that contravene the new law will only remain effective for a transitional period of two years, i.e. until 31 December 2024. After this period has expired, such provisions will become invalid.