The Swiss legislature recently completed work on a new statute governing mergers, demergers, conversions of companies, and the transfer of assets with or without related liabilities. Most of these topics were not addressed in the Swiss Code of Obligations and thus many of the existing rules relating to mergers and demergers are based on case law or on legal principles developed over time by practitioners. Most of the code law provisions that did exist will now be replaced in their entirety.
The main purpose of the new statute is to enable the adaptation of existing business structures to meet the changing needs of the owners and the requirements of the market, while at the same time protecting the legitimate interests of other interested groups such as creditors, employees and minority shareholders. The new legislation also modifies some of the tax rules applicable to reorganizations to make sure the use of the new provisions will not have negative tax consequences. The new legislation includes a number of features that are new to Swiss company law. One of the most striking is the ability to provide consideration other than the shares of the surviving company to the shareholders of the merging company. This new possibility combined with other rules will allow new types of transactions such as triangular mergers, for example, or the squeeze out of minority shareholders in the course of a merger provided at least 90% of all shareholders approve the consideration offered by the surviving company. Under the existing law, only listed companies could squeeze out minority shareholders following a public takeover, provided the offeror held at least 98% of the voting stock of the target after the offer. The new legislation, expected to enter into force in mid 2004, will now allow also small and medium-sized companies to use a squeeze out instrument.