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Switzerland

New market at the Swiss Stock Exchange for venture capital firms

The Swiss Stock Exchange plans to introduce a new trading segment for young, fast growing companies with a strong need for capital. At the moment the companies listed on the exchange are divided into the two following segments: (i) the main market comprising also the market for investment companies for which, beside the ordinary listing rules, some special additional requirements apply and (ii) the parallel market.

Closed ended corporations, organized in accordance with the company law are regarded as investment companies in the sense of the listing rules, if they intend to mainly realise profit and/or capital gain and do not have any entrepreneurial purpose in the strictest sense. They can invest in companies, which need venture capital, but they are not venture capital firms themselves.

The provisions for a listing in the parallel market are set out in separate listing rules and are not as strict as the listing rules for the main market (eg a track record is needed for the last two rather than three years and equity of five million instead of 25 million together with a very brief listing prospectus). The purpose of the parallel market is to provide a trading platform for shares of companies, which do not yet fulfil the requirements for a listing on the main market. In connection with the introduction of the new venture capital segment it is discussed whether the parallel market should be implemented into the new segment or eventually only be reorganized and kept separately.

The new venture capital segment is intended to give young, Swiss and foreign companies in a fast growing sector the possibility to finance themselves through the Swiss capital market. The trading of those securities will take place on the existing technical platform but in the new venture capital segment.

In this connection new listing rules for venture capital firms are being prepared and should soon be presented to the relevant authorities, the Listing Authority and the Federal Banking Commission, for their approval. The trade in the segment itself should start as early as summer 1999. The requirements for the listing will be lower than in the main market, in particular with respect to capitalization and track record. The proposed listing requirements which are under consideration today are even lower than those for a listing on the parallel market. An interesting new feature is that the draft listing rules for venture capital firms propose to prohibit the existing shareholders and members of the board from selling their shares during the first six months after the listing.

The segment for venture capital firms must meet the specific requirements of the Swiss financial market and still match with the requirements of the relevant segment of other European stock exchanges. Discussions concerning a possible cooperation with several European stock exchanges took place in Stockholm earlier this year and appear to have been successful. It is the intention to create as harmonized a set of rules as possible for a network of European markets for venture capital firms.

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