Switzerland, one of the most preferred business destinations for global investors, has been seeking the abolition of bearer shares since July 2016, and the concept came into effect on 21st November 2019.
The Federal Assembly has adopted a new rule to abolish the concept of bearer shares in the state, backed by the Global Forum of Transparency and Exchange of Information for Tax Purposes.
What are Bearer Shares in Switzerland?
Bearer shares are a type of company share that does not require registration under any specific business or person. Unlike registered shares, where the ownership is effectively listed in the shares register, the ownership of the bearer shares is untraceable. Thus, anyone in possession of the certificate is deemed an owner in the eyes of the law.
Why are Bearer shares in Switzerland Abolished?
There are numerous reasons for abolishing the bearer shares in Switzerland:
Compliance with Global Forum Standards (OECD)
One of the main reasons for the abolition of bearer shares in Switzerland is due to the recommendations of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The Forum concluded that Switzerland's existing rules did not sufficiently guarantee the identification of beneficial owners of bearer shares.
Combating Tax Evasion
The lack of a registered owner allowed individuals to use bearer shares to conceal assets and investment income from tax authorities, both in Switzerland and internationally. The move enforces greater tax compliance and international exchange of information.
Strengthening Reputation and Financial Integrity
By abolishing bearer shares, Switzerland significantly improved its standing on the global stage as a transparent and cooperative financial center. Failing to act would have risked being labeled non-compliant and facing potential "defensive measures" from other nations.
Result of Abolishing Bearer Shares in Switzerland
The binding law was passed in 2019, when the Federal Council of Switzerland introduced a Bill to implement the OECD demands, including specific provisions for the compulsory conversion of shares.
- Only the listed public company in Switzerland can issue shares. Aside from that, they are totally abolished.
- Existing bearer shares that do not fall under this category would have to be converted into registered and named shares according to this new law.
- Bearer shares that still haven’t been converted 18 months after entry into force of the Global Forum Act would have to be converted automatically into registered shares.
- Criminal sanctions could be imposed on those who violate the obligation to disclose beneficial ownership in the future.
- After 1st January 2020, members of the board of directors or managing directors who deliberately fail to comply with this law or neglect to keep the share register or the register of beneficial owners up to date could be fined up to CHF 10’000.
This means that any non-listed public limited companies (AG) in Switzerland must convert existing bearer shares into registered shares by no later than April 30, 2021.
To complete the conversion in time, the company must act now. The change needs to be registered with the commercial registry and will require amending the company’s statutes and corporate documents at a notary public meeting.
If the company's shareholders and signatories are unable or are uncomfortable with travelling to Switzerland to represent the shares, the change can be carried out by Power of Attorney.
If you need any assistance in handling this obligatory change of shares from bearer to registered or have any general questions about Swiss company administration, experts at BSW can help you to clear the legal aspects. Feel free to contact us today-we’d be glad to assist!
