Money laundering: New reporting duties for Swiss company shareholders

By Jana Essebier and Fiona Gao Yue, VISCHER
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On 1 July the first part of the new federal law to implement the 2012 Revised Recommendations of the Financial Action Task Force concerning the tightening of money laundering provisions entered into force. This relates to, in particular, the provisions concerning increased transparency requirements for legal entities.

Jana Essebier 菲谢尔律师事务所 银行及金融团队 合伙人 Partner Banking and Finance Team VISCHER
Jana Essebier
菲谢尔律师事务所
银行及金融团队
合伙人
Partner
Banking and Finance Team
VISCHER

Taking limited companies as an example, the following summarizes the key provisions on transparency and potential sanctions and explains when action is necessary. The amendments also affect limited liability companies and cooperatives.

No more anonymity

Previously, the acquirer of a bearer share remained basically anonymous. This is no longer possible. Whoever acquires even a single bearer share must report the acquisition as well as their first and last names and address to the company.

The acquirer must be identified to the company (by an official photo ID or an extract from the commercial register). The shareholder must report to the company any change of first or last name, company or address.

In contrast to the stock exchange law, there are no thresholds for these reporting requirements. The board of directors must keep a directory containing the date of birth and nationality of the acquirer or shareholder in addition to the first and last name or the business name and the address. The requirements of the legislator thus go beyond what the law requires in the case of registered shares.

Fiona Gao Yue 菲谢尔律师事务所 中国业务团队 律师 Associate China Desk VISCHER
Fiona Gao Yue
菲谢尔律师事务所
中国业务团队
律师
Associate
China Desk
VISCHER

Reporting of beneficial owners

Whoever acquires shares in a company whose shares are neither listed on an exchange nor issued in the form of intermediated securities and thereby, directly or indirectly, reaches or exceeds the limit of 25% of the share capital or voting rights, must report to the company the first and last name and the address of the natural individual(s) for whom they are ultimately dealing (i.e. the beneficial owner) or confirm that they themselves are the beneficial owner.

This disclosure obligation applies to the acquisition of both bearer and registered shares. In contrast to the disclosure law for listed companies, the obligation to report is not imposed on the beneficial owner, but rather on the shareholder. The shareholder must notify the company of any change in the first or the last name or the address of the beneficial owners.

Record keeping

The companies must keep a record of the reported beneficial owners. The supporting documents for the report must be kept for 10 years after the deletion of a person from the directory. The directory must be kept in such a way that it can be accessed at any time in Switzerland.

Sanctions

Both the obligation to report the new shareholder of bearer shares and the obligation to report the beneficial owners are to be fulfilled within one month of purchase. As long as the shareholder fails to meet its reporting obligations, the corresponding voting and other membership rights are suspended. The relevant property rights – especially the right to receive dividends – can also not be claimed.

It should be emphasized that the shareholder, if they do not fulfil the reporting requirements within one month of acquisition, forfeits their property rights. Even if reporting is completed at a later time, their property rights are only effective from the actual reporting date.

Directors’ liability risk

The board of directors must ensure that no shareholder can exercise their rights in violation of the reporting requirements, in particular to take part in the general meeting of shareholders or receive a dividend. Otherwise, the members of the board of directors may be open to responsibility claims.

In addition, relevant decisions of the general meeting of shareholders can be subject to appeal due to the participation of unauthorized persons. There is also the question of whether dividend payments to a defaulting shareholder would be an infringing deposit refund by the company or a hidden distribution of earnings.

Transitional provisions

Individuals who already had held bearer shares on 1 July have to comply with their respective reporting obligations within one month. This also applies in respect of the reporting of the beneficial owners. There is no retrospective reporting requirement for registered shareholders who were in possession of shares prior to 1 July, only for those shares which are purchased from 1 July.

Actions required

All limited companies with registered or bearer shares should take the necessary preparatory measures as soon as possible. For Swiss companies in which legal persons are invested, the board of directors should deal with the question of how the obligation to report the beneficial owners must be implemented in their particular case. Any person or entity who is considering an acquisition of shares in a Swiss company should pay attention to these new reporting obligations.

Since no sanctions apply if the shares are issued in the form of intermediated securities, i.e. deposited or registered with a Swiss domiciled and regulated custodian, it should be considered whether this might be an alternative in the particular case.

Open questions

The consequences of a violation of the new rules on transparency are hard for both shareholders and the board of directors. It is therefore all the more surprising that this part of the revision came into force despite the law not explicitly addressing many questions.

Given the ambiguities, the implementation of the reporting obligations must, in any case, be checked again before the next dividend date in case the implementation needs to be adjusted.

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