The Swiss parliament passed into law last December the Act on
the implementation of the Financial Action Task Force's
Recommendations (FATF Implementation Act). The Act aims to
align Swiss law with international standards against money
laundering and the financing of terrorism. In a nutshell, this
legislation introduces several important changes, including
characterising tax fraud as a new predicate offence, an
expanded definition of PEPs (politically exposed persons)
including Swiss politicians, leaders and officials of
international and sports organisations (such as FIFA, the
International Olympic Committee, or the International Cycling
Union) and an expanded obligation for financial intermediaries
to identify the beneficial owners of their customers by looking
at operational companies and not only private investment
The FATF Implementation Act also amends general corporate
law to introduce reporting obligations for shareholders of
non-listed Swiss companies limited by shares, and to match
obligations for such companies to maintain registers and retain
documents supporting entries. These changes affect to a lesser
extent listed companies as well as limited liability companies
and cooperatives. These new rules will enter into force on July
1 2015, whereas the bulk of the FATF Implementation Act are
scheduled to enter into force on January 1 2016.
Swiss companies can either issue registered shares or bearer
shares. Prior to the FATF Implementation Act, holders of
non-listed bearer shares were not subject to reporting or
disclosure obligations and could remain anonymous. All that was
needed to exercise rights to vote or to collect dividends was
to present their shares or other evidence of their ownership.
Moreover, Swiss law provided disclosure duties for substantial
shareholders only for listed companies.
The FATF Implementation Act changes this by amending the
Code of Obligations to introduce obligations to report the
acquisition of bearer shares in non-listed Swiss companies
within a month of the acquisition. This filing must be
supported with an official identification document, an excerpt
from the registry of commerce or a comparable document.
Moreover, any change of name and address will also need to be
reported within the same deadline. In parallel, shareholders of
all non-listed companies as well as limited liability companies
will be required under the Code of Obligations as amended by
the FATF Implementation Act to report the beneficial owners of
substantial shareholdings of more than 25% of the voting
rights, regardless whether they issued bearer or registered
shares. This obligation must also be complied with within a
month from the acquisition. As a transitional rule, holders of
bearer shares – but not registered shareholders
– are required to report their shareholding and, if
they reach the 25%-threshold, beneficial owners by December 31
This reporting obligation lies with the shareholder. The
shareholder is required implicitly to identify its beneficial
owner. Notably, the Code of Obligation defines a beneficial
owner as the physical person for whom the shareholder acts.
While the legislative materials suggest that where no such
person exists (as for example with a charity) this fact should
be recorded, it is uncertain how this obligation applies to
listed companies. Under anti-money laundering regulations, it
is not necessary to identify the beneficial owner of listed
companies and their affiliates. It is therefore uncertain
whether courts will apply the letter of the law or,
consistently with anti-money laundering rules, exempt listed
companies and their affiliates from identifying their
beneficial owners, since transparency is ensured through
disclosure duties provided under securities regulations.
Shareholders are cautioned to comply with these rules.
Breaches of reporting obligations will be sanctioned by the
suspension of voting rights and the forfeiture of financial
rights, including rights to dividends. If a shareholder
remediates the breach, it is reinstated in its rights going
forward, but will not receive the rights it forfeited.
The flip-side of these obligations is the requirement for
non-listed Swiss companies to maintain a register of holders of
bearer shares and beneficial owners of substantial
shareholdings, and retain documentation supporting the entries.
This document-retention obligation also applies to the share
ledger recording the owners of listed and non-listed registered
shares as well as to limited liability companies and
cooperatives. In view of facilitating law enforcement efforts,
these registers and records must be accessible in Switzerland
at any time. To ensure the effectiveness of this rule, at least
one person with signature authority will need to be a Swiss
resident and have access to both registers.
Companies may avoid the duty to maintain a register for
bearer shares and beneficial owners and retain supporting
records – but not the obligation to maintain a share
ledger for registered shares – by delegating this
responsibility to a financial intermediary under the Anti-Money
Laundering Act. Alternatively, they may disapply these
obligations by issuing shares as intermediated securities with
a Swiss depository.
Rashid Bahar and Peter Hsu