Corporate Update: Swiss 2021 legislative changes include modernisation of commercial register, gender representation and transparency in commodities sector

After a turbulent and unusual 2020 which saw numerous short-term Covid-19-related legal changes, various planned legislative projects (unrelated to the Covid-19-pandemic) entered into force as per 1 January 2021, including the modernisation of the commercial register. Last year's revision of the Swiss corporation law (Aktienrechtsrevision), however, is not expected to come into force until 2022, with the exception of certain rules on gender representation and transparency in the field of commodities which entered into force as per the beginning of this year.

The amendments on the modernisation of the commercial register are implemented by a full revision of the thirtieth title of the Swiss Code of Obligations (CO, art. 927 et seqq. CO) and partial amendment of the Ordinance on the Commercial Register (OCR). While the majority of amendments are of a formal nature (i.e. linguistic amendments, transfer of certain rules from the ordinance to the statutory level, codification of existing practices), certain substantive changes have been made, including the following:

• Signature of Commercial Register Applications: Until now, commercial register applications had to be signed by members of the supreme governing body (for corporations (Aktiengesellschaften): the board of directors) in accordance with their signing authority. As a result of the amendments, commercial register applications can also be signed by all other signatories (according to their signing authority) or by authorised third parties (i.e. attorneys-in-fact). For attorneys-in-fact, however, a power of attorney executed by members of the supreme governing body (according to their signing authority) needs to be filed with the respective application. Pursuant to the Federal Commercial Register (FCR), such a power of attorney constitutes an attachment, but not a supporting document of the application and therefore can be filed as a copy. In this context, note that the CO and the Swiss Merger Act (MA) can expressly require that the supreme governing body be responsible for filing with the commercial register (e.g. in the case of capital increases, new signatories, liquidations as well as mergers, demergers, changes of the legal form and asset transfers pursuant to the MA). Some but not all of these provisions will be amended or abolished in the course of the revision of Swiss corporation law. It remains to be seen whether, in relation to matters for which the law stipulates a filing by the supreme governing body, the more flexible new provisions of the revised OCR will be applied (i.e. if the above-mentioned provisions in the CO and MA will be construed as an obligation to initiate a filing only) or signing by members of the supreme governing body will still be required. Pursuant to a circular by the FCR and oral information provided from the Commercial Register of the Canton of Zurich, these offices currently take the position that when the law requires an application by the supreme governing body, applications will be rejected if they are signed by authorised signatories who are not members of the supreme governing body. As it now stands, an application of a capital increase needs to be signed by members of the supreme governing body whereas an application for a capital decrease could possibly be signed by other authorised signatories.

• Abolition of the separate "Stampa declaration": Previously, incorporations of companies, capital increases and subsequent payments of paid-in capital required the filing of a separate declaration in addition to other supporting documents, attesting that there were no contributions in kind (Sacheinlagen), (intended) acquisitions in kind ((beabsichtigte) Sachübernahmen), set-offs (Verrechnungstatbestände) or special advantages (besondere Vorteile) other than those mentioned in the supporting documents (i.e. the "Stampa declaration"). This confirmation is now to be included in the public deed (i.e. deed of incorporation or board resolution); a separate Stampa declaration is no longer required.

• Abolition of the "Blocking of the Commercial Register": Previously, according to the OCR, entries to the commercial register could be blocked for ten days by simple notification to the commercial register office. To uphold such blockage, an applicant had to show to the commercial register that a corresponding preliminary measure was filed with the court during the initial 10-day blocking period. In such case, the blockage was usually upheld until the preliminary measure was rejected by the court. Although examples of such blockages were not widespread, the possibility to initiate such process by simple notification represented a potential abuse. The initiation of the blocking by simple notification pursuant to the OCR has now been abolished. In principle, legal protection continues to be ensured based on the Swiss Civil Procedure Act, which provides for the possibility of a court-ordered (super-)provisional measure in the form of an order to the commercial register office. As a result of the amendments, blocking an entry in the commercial register becomes more difficult. It will require that the applicant credibly asserts that (i) a claim to which he is entitled has been infringed or such an infringement is imminent and (ii) that this infringement may cause a disadvantage, which cannot be easily remedied. In contrast to the previous blocking instrument by simple notification, the pertinent company (i.e. the defendant) will be able to present its position in court from the outset, provided that the court does not decide on the application without conducting such a hearing due to a recognition of special urgency (i.e. a super-provisional measure). Note that to defend against such super-provisional measures, a company can submit its position in advance by a protective writ (Schutzschrift).

• Access to Articles of Association: In addition to registrations, the CO now provides that articles of association (or foundation deeds) must also be made accessible free of charge on the internet. Numerous cantons such as the Canton of Zurich already provide such access and often also offer supporting documents as downloads, and others will follow. As long as a cantonal register has not implemented the technical framework to enable a download via an online portal, it must provide non-legalised copies of the articles of association or foundation deeds upon request free of charge.

• Effective Date: Previously, the relevant time for entries in the commercial register was the entry date in the commercial register's chronological daily register (i.e. the journal). Vis-à-vis third parties, however, the entries only became effective on the business day following publication in the Swiss Official Commercial Gazette (SOCG). Since 1 January 2021, entries in the commercial register will become effective upon publication in the SOCG. The new provision on the effective date of commercial register entries no longer addresses effects vis-à-vis third parties. In our view, this does not exclude that certain corporate resolutions may still become effective internally vis-à-vis shareholders already upon the time of the decision and therefore the well-established distinction between corporate resolutions with internal and/or external effect is likely to continue to exist. From a practical point of view, with regard to the effective date, particular attention must be paid to the fact that share certificates, if issued, are only issued and dated after publication of an incorporation or a capital increase in the SOCG. In case of an early issuance at the time of notarisation or (which has been permissible thus far) immediately after the entry in the journal, the newly issued share certificates will become null and void (i.e. they will lack securities character). Furthermore, from a practical point of view, in the case of time-critical entries in the commercial register (e.g. in connection with transactions or in case of mergers), the abolished reference back to the journal entry must be included in the planning for the effective date.

• Protection of Public Faith: In addition to the "positive and negative publicity effect" (positive und negative Publizitätswirkung), the revised commercial register law now provides for the protection of public faith. Similar to the provisions on the land register, the expectations of anyone who relies in good faith on an incorrect entry is to be protected. In contrast to the land register, such statutory protection in relation to the commercial register is expressly subject to reservation of overriding conflicting interests. Ultimately, this new provision corresponds to the position of prevailing legal doctrine. It remains to be seen whether the new statutory provision in practice entails any changes and if so, what these changes may be. Nevertheless, it is worth noting that the Federal Council's explanatory report (Botschaft) expressly mentions capital increases as an example of the new legal provision. Creditors may rely on the capital registered in the commercial register, even if the underlying capital increases are defective.

In addition, certain amendments adopted as part of the revision of Swiss corporation law have already been implemented in advance:

• Gender representation: Listed companies exceeding certain thresholds will have to either maintain a representation of both genders of at least 30% on the board of directors and at least 20% on the level of executive management (Geschäftsleitung); or justify in their compensation report (Vergütungsbericht) any shortfall of these benchmarks and explain supporting measures for the less represented gender. In short, they must comply or explain. This provision will apply for the first time to the business year beginning five years (for the board of directors) or ten years (for the executive management) after it comes into force. The regulation concerning gender guidelines is currently difficult to find. Following the entry into force of the revision of Swiss corporation law, the pertinent provision (art. 734f CO) will be part of the rules on the compensation report (Vergütungsbericht). With the accelerated entry into force of gender guidelines, the future article number (art. 734f CO) was retained, which is why the new norm concerning gender guidelines in the board of directors and in the executive management is currently (i.e. prior to entry into force of the stock corporation law revision) located within the capital decrease.

• Transparency in the commodities sector: Companies that are active in raw material extraction (Rohstoffförderung) directly or through controlled subsidiaries and are subject to a full audit pursuant to the CO must in the future disclose all "payments" (in cash or kind) to all state agencies of at least CHF 100,000 (with partial payments for the same subject of performance being added together) in an annual report to be published electronically. These reports must contain payment amounts in total and broken down by type of payment for each state agency and each project. In case of payments in kind, the subject matter of the payments must be stated, including value, valuation method and, if applicable, size. Violations will be subject to criminal sanctions (i.e. fines). The Swiss Federal Council may extend such obligations to the area of commodities trading if such an extension is internationally coordinated. The reporting obligation will apply for the first time to the financial year beginning one year after it comes into force (i.e. for the financial year 2022 in the case of companies that use the calendar year as their financial year).

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