What legislation governs M&A activity in your
In Switzerland, takeovers (share deals and asset deals) are
regulated by the Swiss Code of Obligations (CO). In this
context, article 181 CO (concerning purchase of a business),
article 184 - 215 CO (concerning purchase of goods) and article
748 - 751 OR (concerning mergers of stock corporations) are of
Companies quoted on the Swiss Exchange are also governed by
the Federal Act on Stock Exchanges and Securities Trading
(SESTA). The SESTA defines the circumstances under which a
purchaser is required to make a mandatory offer for 100% of the
issued shares of a target company. As a general rule, a
purchaser is obliged to make a public offer for 100% of the
outstanding shares of a listed company, if he or she directly
or indirectly controls more than 33.3% of the company's voting
rights. However, the company can increase this threshold in its
articles of incorporation to 49% (opting up). Before the
listing of the securities on an exchange in Switzerland, a
company can also stipulate in its articles of incorporation
that an offeror cannot be bound by the obligation to make a
public offer (opting out).
Other areas affecting M&A transactions are, without
limitation, banking law, insurance law, antitrust law and, most
importantly, tax law.
What impact have recent legislative changes had on
the nature and amount of M&A activity?
No recent changes in Swiss legislation have occurred which
substantially affect the number of M&A transactions.
However, it is worth mentioning the draft of a Swiss statute
on mergers, spin offs and transformation (Fusionsgesetz), which
is intended to come into force in 2004. This new statute will
replace the rules of the CO on mergers and transformations and
is supposed finally to fill in significant gaps of Swiss
legislation in this field.
What have been the most significant M&A
transactions in your jurisdiction over the past
Among the largest M&A transactions of 2002 in
Switzerland were: the take over of Chef America (US) by Nestle;
the acquisition of Roche Vitamin Division by DSM (Netherlands)
and the sale of Structured Finance to GE Commercial Finance;
each with a transaction volume of between €2 billion
($2.18 billion) and €3 billion.
Other key transactions were the acquisition of RMF
Investment by Man Group (GB); the take over of BZ Visionen by
Zürcher Kantonalbank; and the sale of EPA to Coop.
In the context of the grounding of Swissair, the
Nuance-Group was sold to PAM (Italy); SR Technic was purchased
by 3i (GB); and the Gate Gourmet-Group was acquired by the
Texas Pacific Group (US).
Finally, the acquisition of Arthur Andersen Schweiz by Ernst
& Young Schweiz; the merger of the Geneva private banks
Lombard Odier and Darier Hentsch and the sale of Swiss Dairy
Food to Emmi and Crema may be worth mentioning.
How, and to what extent, is foreign involvement in
M&A transactions in your jurisdiction regulated or
The acquisition of real estate and of companies owning real
estate is specifically regulated in Switzerland. Based on the
Swiss Lex Koller/Friedrich, a foreign person or entity needs
the approval of the competent cantonal authority in order to
purchase real estate or shares of companies that own real
estate. However, if the real estate owned by a company is used
for the production purposes of such a company (so called
Betriebsstätte), then no particular authorization is
required in order to purchase the company. No authorization is
needed for EU citizen who have their domicile in
Furthermore, a foreigner who wants to work in Switzerland
needs an official authorization to do so. Highly-educated
specialists and persons working in business areas where not
enough Swiss citizens work, have the best chance of gaining a
work permit. Based on bilateral agreements with the EU,
Switzerland will now continually abolish its working
restrictions with respect to EU citizens. After a transitional
period of two respectively five years, EU citizens will enjoy
full freedom of movement.
Swiss banking law provides for certain restrictions with
respect to the purchase of a Swiss bank.
What are the principal disclosure requirements in a
typical M&A transaction?
In a typical mid-size M&A transaction, full disclosure
is granted once the buyer has entered into a confidentiality
agreement. The standard due diligence request lists are usually
rather extensive. In a larger transaction and in auction
procedures a seller can prepare a data room based on which each
potential buyer must perform its due diligence review. However,
it is typical that additional information will be provided on
receipt of written information requests. Sometimes, a seller
can also prepare a seller's due diligence review, based on
which a purchase agreement (especially the representations and
warranties) must be drafted.
To what extent do the current disclosure
requirements achieve market transparency?
Corporations, which have issued bonds, and corporations,
whose shares are listed on a stock exchange, are obliged to
publish the annual financial statements and - if applicable -
the group financials (article 697, sec 1 CO). Furthermore,
companies quoted on the Swiss stock exchange are required to
comply with various additional disclosure obligations.
According to article 21, SESTA, the company must publish any
changes with respect to its shareholders within two days after
receipt of such information. Furthermore, the listed companies
are required immediately to disclose any information which may
materially effect the price of their listed stock (so called ad
Companies, which have not issued bonds and are not listed on
a stock exchange, are not obliged to publish their annual
financial statements. However, ariticle 697h, sec 2 CO
stipulates that a creditor of such a corporation is entitled to
review the corporation's annual financial statements if the
creditor is able to prove that it has a justified interest in
How significant an issue is prospectus liability in
a typical M&A transaction?
Prospectus liability does not seem to be an issue with
respect to small and mid-size M&A transactions.
Pubic tender offers and the form and content of the offering
prospectus, however, are regulated in detail by the SESTA and
the concerning stock exchange regulations.
The SESTA does not define the legal consequences if its
rules concerning the prospectus are not complied with.
Therefore, it is argued that the principles stipulated in
article 752 CO apply. Based on this provision, any person or
legal entity, who has directly or indirectly caused a
prospectus to be incorrect, may become liable for the damages
How have recent M&A transactions or current
legislation dealt with the issue of material adverse change
In Switzerland, the issue of material adverse change is
addressed by two legal instruments: material error
(Grundlagenirrtum) and the so called clausua rebus sic
The institute of the material error (article 24, sec 1, ciph
4 CO) generally addresses situations, where certain facts which
have been existent before the date of an agreement have not
been known or are materially different from those expected. In
order for this provision to apply, an error must be material
and it must concern a specific subject matter which can be
reasonably qualified as the necessary basis of the agreement.
If article 24, para 1, ciph 4 CO is invoked with cause by a
party, the agreement becomes null and void.
The clausula rebus sic stantibus deals with facts that occur
after the date of the agreement. This legal principle allows a
court to modify and amend an agreement, at its own discretion,
if and to the extend that the relevant facts have materially
changed since the date of the agreement. The thresholds for the
clausula rebus sic stantibus to apply are rather high. If the
parties have stipulated certain material change clauses in
their agreement, such contractual clauses prevail.
Are there any specific regulations and/or regulatory
bodies governing takeovers in your jurisdiction?
The Swiss Antitrust Statute provides for a preventive merger
control process if a merger reaches certain minimal thresholds.
This process is governed and controlled by the Swiss Merger
Control Commission (Wettbewerbskommission).
The official bodies responsible for compliance with the
SESTA are the Swiss Banking Commission (Bankenkommission), and
the Swiss Takeover Board (Übernahmekommission). The Swiss
Takeover Board supports the Banking Commission with respect to
stock exchange matters. It has to make sure that the parties
involved in a public tender offer duly comply with all
applicable rules of the SESTA and the relevant laws and
regulations. In this context, the Swiss Takeover Board issues
recommendations to the parties with respect to specific issues
or questions in the course of a public takeover. If such
recommendations are not duly complied with, the Swiss Takeover
Board will report to the Banking Commission which has the power
to adopt legally binding decisions (subject to appeal to the
Swiss Federal Court). As the Swiss Takeover Board is very
pragmatic and helpful, it is advisable to contact it early
before entering into a formal take over process.
What are the various methods by which a takeover can
Takeovers can be achieved by way of a share deal, asset deal
or by merging corporations. In the case of a merger, two
possibilities exist: either both corporations are merged and a
new corporation comes to existence (fusion) or one corporation
is merged into another corporation (absorption). As mentioned
above, the new Fusionsgesetz will address these issues in one
How differently do the legislation or regulations
treat hostile and voluntary takeover bids?
The Swiss takeover procedure does not distinguish between
friendly and unfriendly takeovers. According to article 29,
SESTA, the board of directors of the target company must
publish a report setting out its position in relation to the
offer. The information provided in this report must be true and
complete. Depending on whether this report supports the
takeover bid or not, the bid is deemed to be hostile or
friendly. However, independently of whether the bid is friendly
or not, the board of directors of the target company is not
allowed to enter into any legal transactions which would have
the effect of significantly altering the assets or liabilities
of the company from the moment the offer is published until the
result is announced. (Decisions taken by the general meeting of
shareholders are not subject to this restriction.)
What penalties are imposed for parties which violate
takeover regulations (or equivalent)?
Whoever intentionally fails to notify a qualified
shareholding in a listed company or fails to disclose the
purchase or sale of equity securities of a listed company as
the owner of a qualified shareholding will be punished with a
fine. The amount of the fine will not be more than double the
purchase price or the sale proceeds.
Under article 42, SESTA, if the target company fails to
publish in good time a correct report setting out its position
(see above), the persons responsible will be punished with a
fine of up to SFr200,000 ($23,000).
What have been the key recent developments in
competition policy and legislation as they relate to M&A in
In 1996 the new Swiss Antitrust Act came into force. The Act
has been revised and the revised Act is intended to come into
force in 2004. With respect to M&A transactions, two
proposed changes are of particular interest. The merger
notification thresholds for media companies are proposed to be
increased to the level of other companies (see below).
Furthermore, the thresholds that trigger an obligation to
notify with respect to banks and financial institutes will be
brought in line with European standards.
How are the competition regulations enforced in your
The Swiss Merger Control Commission is entitled to examine
transactions at its own discretion, without being notified. The
parties involved are then obliged to render all information
required by the Commission. In the case of a violation of
antitrust rules, heavy fines can be imposed (up to three times
the profit earned by an unlawful conduct or - in the case of
non-compliance with the duty to notify a transaction - fines of
up to SFr2 million).
How does the legislation or the regulations approach
the use of abuse of dominant position?
The Antitrust Act specifically addresses the abuse of
dominant position. The regulations and underlying principles
are quite similar to the European rules.
To what extent are parties to a M & A
transaction subject to prior notification
If a transaction exceeds the merger control thresholds, the
parties to the agreement are obliged to notify the Antitrust
Commission before the agreement is executed. The Merger Control
Commission must then decide within four weeks whether further
enquiries are necessary. If they are, a final decision must be
reached within four months. An obligation to notify exists if
the cumulative annual turnover of the companies involved
exceeds SFr2 billion or if the annual turnover of the companies
involved in Switzerland exceeds SFr500 million, and the
turnover of at least one company involved exceeds SFr100
About the authors
Admitted to the Bar in 1994
Joined Wenger Vieli Belser in 1996
University of Zurich (Dr iur),
University College London (LLM)
English, German, French
Preferred areas of practice
Mergers and acquisitions, MBOs, capital market law
Admitted to the Bar in 1993
Joined Wenger Vieli Belser in 1996
University of Zurich (Dr iur),
Duke University School of Law (LLM)
English, German, French, Spanish
Preferred areas of practice
Mergers & acquisitions, private equity and venture
Wenger Vieli Belser
Tel: +41 1 563 33 33
Fax: +41 1 563 33 66