Reform of Swiss corporate law: interim dividends

An interim dividend is a dividend distributed from the profits of the current financial year and is therefore not based on the financial statements of a completed financial year. The prerequisite is, however, that a distributable profit exists based on interim financial statements. 

The Swiss corporate law did not contain a legal basis for the distribution of interim dividends until 31 December 2022. The permissibility of the distribution of interim dividends was controversial among legal scholars and was not accepted by some audit firms. By request of the corporate community and in line with many other legal systems in Switzerland’s neighboring countries, a legal basis for interim dividends has now been implemented in Article 675a of the Swiss Code of Obligations (CO), as part of the revision of the Swiss corporate law, which came into force on 1 January 2023. The distribution of interim dividends is now expressly permitted, provided that certain conditions are met.

In the following part, we will discuss this new legal provision, the legal prerequisites of such distribution of interim dividends and describe the concrete procedure.

The decision of distributing an interim dividend is taken in the general shareholders’ meeting based on interim financial statements. In order to lawfully decide on an interim dividend, the following conditions and requirements must be met:

1. Interim financial statements
   The preparation of interim financial statements is mandatory for the distribution of an interim dividend (even if the audited financial statements were prepared less than six months ago). The interim financial statements must be prepared in accordance with the provisions governing the annual financial statements and must generally consist of a balance sheet, an income statement and the notes to the financial statements. The notes shall contain the following information:
   
   a. the purpose of the interim financial statements;
   
   b. the simplifications and abridgements, including any deviations from the principles used for the last annual financial statements;
   
   c. other factors that have had a significant effect on the economic position of the company during the reporting period, in particular comments on seasonality.
   
   
2. Audit of the interim financial statements or approval of the interim dividend by all shareholders
   
   In principle, an audit of the interim financial statements must be carried out by the respective auditors. The audit must take place before the general shareholders’ meeting is held. The subject of the audit is the interim financial statements and the proposal of the board of directors to the general meeting on the appropriation of the interim profit to shareholders.
   
   However, the obligation to conduct an audit does not apply under the following conditions:
   
   a. if the company is not required to have its annual accounts reviewed by an     external auditor (regarding the prerequisites for this exception, see Article 727a(2)     CO); or
   
   b. if all shareholders agree to paying the interim dividend and the creditors’ claims     are not jeopardized by doing so.
   
   The resolution of the general shareholders’ meeting on the distribution of the interim dividend is null and void if the financial statements had not been audited pursuant to Article 731 CO or if not all shareholders approved the distribution of interim dividends. In such case, the interim dividend received is subject to reimbursement pursuant to Article 678 CO.
   
   
3. Resolution of the general shareholders' meeting
   
   The holding of a general shareholders’ meeting is mandatory for the distribution of interim dividends. The determination of the interim dividend and the approval of the interim financial statements required for this purpose is a non-transferable power of the general shareholders’ meeting.

1. Preparation of interim financial statements and formulation of proposal for the appropriation of interim profit;
   
   
2. Audit of the interim financial statements by the auditors and proposal of the board of directors (unless above-mentioned exceptions apply);
   
   
3. Holding of an extraordinary general shareholders’ meeting to resolve on the approval of the interim financial statements and the distribution of interim dividends.

Should you have any questions or require any advice regarding interim dividends and its legal requirements and/or concrete procedure, please do not hesitate to get in touch with the legal experts of KPMG Law Switzerland.