The Swiss government will begin to phase out bearer shares on 1 November in a bid to curb tax avoidance by bearer shareholders.
Under the new rules companies no longer issue bearer shares—equity in a company that is owned by whoever holds a physical stock certificate—unless they are a listed company or they structure the share through an intermediary. Existing bearer shares will be automatically converted into registered shares after an 18-month transitional period.
The Act sets out a procedure to identify shareholders who fail to do this in time for the conversion deadline. Shares held by non-registered shareholders will become void five years after the entry into force of the Act.
Bearer shares will only be permissible if any equity securities of the relevant stock corporation are listed on a stock exchange or if the bearer shares take the form of intermediated securities and are deposited with or entered into the main register of an intermediary located in Switzerland and designated by the company.
Under current law, the failure to comply with the beneficial disclosure obligations resulted in a suspension of the monetary and membership rights of the respective shareholder. However, after 1 January 2020, the failure to comply, as well as intentional failure by members of the board of directors or managing directors regarding the obligation to maintain the required registers, will be subject to a fine of up to CHF 10,000.
The Act also introduces the right of any shareholder, creditor or the commercial register to initiate proceedings against a company not maintaining the required registers or having issued bearer shares without any of the exemptions applying. In such a case, the competent court may set a deadline to take the required measures or, as ultima ratio, dissolve the company.
The violation of the beneficial ownership disclosure obligations may result in additional criminal sanctions.
Switzerland has been moving towards the abolition of bearer shares since July 2016, when the OECD's Global Tax Transparency Forum published its phase 2 peer-review report.
One of the key recommendations was the need for companies to determine and report their beneficial owners to the authorities, so that they can be traced for tax and anti-money laundering purposes. The existence of bearer shares makes this hard.