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The revised provisions of the Swiss Code of Obligations (CO) regarding joint stock companies have improved the legal position of 'participants'. A 'participant' is the holder of participation certificates, which are part of the participation capital and have a par value.

Participation certificates are issued by the company for a consideration (Article 656a CO). Despite the participation capital being part of the equity of the joint stock company, participation certificates confer no voting rights (Article 565a CO). They are therefore also called 'stocks without voting rights'.

The position of participants has recently been improved. Unless otherwise provided, the provisions on the stock capital, the stock and the stockholder now also apply to the participation capital, the participation certificate and the participant (Article 656a para 2 CO).

The improvement of the participant's position is put in concrete terms by various additional provisions. For example, Article 656f CO requires that the articles of incorporation may not disadvantage the participants vis-à-vis the stockholders with regard to the distribution of balance sheet profit and liquidation proceeds, or on the subscription for new stock. Article 656g CO grants the stockholders a preemptive right as in the case of the issue of new stock.

Article 656e CO grants the participants the right to a representative on the board of directors and under Article 656c para 3 CO, the participants may request in writing, addressed to the general meeting of stockholders, information, an inspection or a special audit.

Article 656b CO provides that the participation capital shall not exceed twice the stock capital. On the other hand, the participation capital does not have to reach the minimum amount of Swfr100,000 (US$70,000) — as required for stock capital.

In view of these revisions, a joint stock company which has issued certificates of participation is now obliged not later than June 30 1997 to:

  • implement the conditions of the issue of participation certificates in its articles of incorporation;
  • adapt the provisions of its articles of incorporation to the property rights as mentioned in Article 656f CO (see above);
  • arrange for the necessary registration in the Commercial Register; and
  • designate the participation certificates as such (Article 656 para 3 CO).

Companies which fail to meet this deadline despite repeated public summons in the Swiss Official Gazette of Commerce and in the cantonal official gazettes, shall be dissolved by the judge at the request of the Commercial Registry.

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