On January 17, the Swiss Federal Council issued a draft bill containing the proposal of converting all companies’ bearer shares into registered shares. A consultation was also opened and it will last until April 24. The draft bill will be discussed in Parliament as early as Autumn 2018.
According to the bill, all bearer shares will automatically convert into registered shares when the law, if approved, will enter into force – possibly not before 2019.
The procedure provides that the company shall, at that date, hold a register containing the names of all notified owners of bearer shares and that holders of bearer shares who have not yet notified the company need to comply within the term of 18 months, or they will lose the right in their shares. Finally, the company is required to withdraw all bearer shares and destroy them.
It is worth noting that failure to notify the company or to correctly issue a register of the owners are set to become criminal offences, leading to conspicuous fines.
The case of bearer shares has been debated at length – notably, the bill has been issued in order to implement some recent recommendations from the Global Forum on Transparency and Exchange of Information for Tax Purposes. The main concern related to bearer shares is the one of transparency: bearer shares could be held anonymously, hence they are more prone, at least in theory, to cover or facilitate money laundering activities.
Since 2015, when art. 697i et seq. of the Swiss Code of Obligations came into force, all buyers of non-listed bearer shares had the duty of identifying themselves, communicating their name, address and ID documents to the company within a month from the purchase, otherwise, they would be prevented from exercising some of their rights, notably their voting rights and the right to dividends. These provisions have drastically reduced the danger of anonymity. According to these rules, however, a bearer shares holder who may not wish to identify themselves, may do so – their rights would only be temporarily suspended, and could be reactivated once the identification process is complete. This “anonymity option” fell under the scrutiny of the Global Forum.
With the new proposed legislation, bearer shares would simply be abolished and ex lege turned into registered shares. Will Switzerland follow the route of countries like the UK, Singapore, Hong Kong, Belgium, Isle of Man, Austria and the USA?