The (de facto) end of the bearer share
On 21 June 2019, Parliament adopted the new Federal Act on the Implementation of the Recommendations of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The transparency regulations for bearer shares will thus become even stricter after Switzerland implemented the recommendations of the Groupe d'action financière (GAFI) back in 2015 (creation of a bearer share register and reporting obligation for the beneficial owner).
The new law is expected to enter into force at the beginning of 2020 and will require action by the boards of directors of stock corporations with bearer shares, but also by the bearer shareholders themselves. Creditors whose claims are secured by bearer shares (pledge of securities) are affected indirectly.
The issuance of bearer shares will no longer be permitted. Exceptions exist in the case of listed companies or if the bearer shares are structured as intermediated securities securities. Apart from this, existing bearer shares must be converted into registered shares within 18 months. Bearer shareholders, who have not complied with the obligation to report the acquisition, which has been in place since 2015, and who do not comply with their reporting obligation in good time even after the bearer shares have been converted into registered shares, may lose their shares (by means of withdrawal and cancellation by the company). Fines may be imposed if bearer shareholders fail to comply with their reporting obligations or in case of a breach of proper maintenance of the share register and the list of beneficial owners in accordance with the regulations. Furthermore, non-compliance with the new rules shall be deemed to be a defect in the organisation which may lead to the dissolution of the company by the Commercial Register Office.
If a company still has bearer shares remaining and does not fall under either of the two exceptions, a conversion can be initiated now without any time pressure. Due to the imminent sanctions, the company and its shareholders would be well advised to comply with the reporting obligations and to keep the necessary registers in accordance with the law.
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