Shortly before the summer break, the Swiss Federal Commercial Register Office (FCRO) published the first practice note for 2024, which contains clarifications regarding certain types of shareholder meetings under the revised company law. We explain these and their significance in practice.
1. Written shareholder resolution
Background
For stock corporations (Aktiengesellschaft, AG), the revision of company law introduced the possibility of shareholders passing resolutions in writing (or in electronic form). This option of passing resolutions in writing already existed previously for shareholder resolutions in limited liability companies and resolutions of the executive bodies (board of directors or management board).
Written shareholder resolutions do not require a basis in the company's articles of associated, but all shareholders must agree to the form of the resolution. The unanimity requirement only applies to the form of the resolution and has no impact on the majority requirements for the subject matter of the resolution, which was expressly confirmed by the FCRO.
In the case of written shareholder resolutions, company law also requires the preparation of so-called acknowledgement minutes, which must fulfill the legal requirements for minutes of regular shareholder meetings. Among other things, such minutes must be signed by the chairman of the meeting - usually the chairman of the board of directors - and a minute keeper. From the FCRO's comments on virtual GMs (see below), it appears that the FCRO presupposes the strict requirement of the Swiss statutory written form (i.e. wet ink or "qualified" electronic signature). However, according to the FCRO, the two signatures can be obtained separately. There are furthermore some ambiguities with regard to the required information related to the date of the "meeting" and its "start" and "end time". The FCRO leaves these questions open, as they are generally not within the cognizance (Kognition) of the commercial register offices or not important from their point of view (except in the case of publicly notarized resolutions).
Clarifications of the FCRO
In its Practice Note 1/23 of 21 March 2023, the FCRO emphasized that, rather than the written shareholder resolutions, the acknowledgement minutes must be submitted as evidence with the competent commercial register office. It was not explicitly mentioned whether this would only apply to the newly introduced option of written shareholder resolutions or equally - contrary to previous practice - to resolutions of boards of directors, shareholders in limited liability companies and management boards.
In its new practice note, the FCRO considers the circular resolution as a particular type of written resolution, in which all shareholders sign a single document circulated among them. Other types of written resolutions include individual voting forms returned by each single shareholder without a single document being "circulated".
A circular resolution, like other written shareholder resolutions, can be evidenced by the acknowledgement minutes. However, the FCRO now recognizes that the circular resolution itself can also serve as proof with the commercial register office. However, this requires that at least one member of the board of directors confirms (in the same or a separate document) that all shareholders have signed the circular resolution, and that the resolution has therefore been passed.
In our view, this also means that resolutions of boards of directors, shareholders in limited liability companies and management boards (for which the commercial register office can verify the requirement itself based on the persons registered in the commercial register) can continue to be submitted as circular resolutions without such additions. This also corresponds to our experience with regard to the current practice of the commercial register offices.
Our assessment
In practice, the distinctions emphasized by the FCRO between circular resolutions and other types of written resolutions become blurred (at least in companies with a limited shareholder base): it is rare that a single document actually is "circulated", i.e. passed from one signatory to the next. In practice, the signing of a circular resolution on different signature pages is much more relevant. From our reading of the FCRO's practice note, this would at the very least come close to the other forms of written resolutions which the FCRO distinguished from circular resolutions. Against this background, it is questionable whether the different treatment of these types of written resolutions (not foreseen in statutory law) is justified.
In practical terms, however, it should be noted that in our view written shareholder resolutions can often not be recommended anyway, in particular when they need to be registered with the commercial register office: As mentioned, acknowledgement minutes of the written shareholder resolution are required under company law. Accordingly, the resolution must be formally recorded in two documents. As a result, the written resolution does not save any documents compared to a resolution passed in a meeting held based on powers of attorney, which was frequently the solution adopted under the old company law in companies with a limited shareholder base. In addition, the anonymity of shareholders is sacrificed when submitting a circular resolution with the commercial register office.
2. Virtual shareholder meetings and shareholder meetings abroad
Background
The revised company law introduced the possibility of a virtual shareholder meeting, i.e. a shareholder meeting by electronic means without a meeting venue, and created an explicit legal basis for a shareholder meeting with a meeting venue abroad. The prerequisite in each case is a basis in the company's articles of association and the appointment of an independent proxy or the waiver thereof based on a corresponding basis in the articles of association (for the virtual shareholder meeting) or the consent of all shareholders (for the shareholder meeting abroad), respectively. With regard to the latter, the FCRO interestingly points out that such waiver can also be declared implicitly.
Clarifications of the FCRO
For both types of shareholder meetings, minutes signed by the minute keeper and the chairman of the meeting are required to prove the resolutions passed to the commercial register office.
The FCRO now emphasizes that the commercial register offices check with full cognizance whether the aforementioned requirements (in particular the basis in the articles of association) are met in the case of minutes of a virtual shareholder meeting or a meeting venue abroad. In the case of companies whose articles of association do not contain a corresponding basis, applications on the basis of resolutions passed at a virtual shareholder meeting or a shareholder meeting abroad will therefore be rejected.
The FCRO then points out that all of the above-mentioned types of resolution are also possible if the resolution is to be publicly notarized. Notarization is subject to cantonal notarization law, whereby the FCRO considers notaries to be primarily responsible for compliance, as in this respect the cognizance of the commercial register offices is "very limited". The FCRO then mentions that it generally assumes that, in addition to the public deed of the shareholder resolution, separate minutes are being drawn up that meet the requirements of art. 702 CO. Accordingly, public deeds submitted as evidence do not have to contain all the information required by law for minutes of shareholder meetings.
Our assessment
In our opinion, the FCRO's practice is questionable: the commercial registers' cognizance, in relation to questions on the substance (as opposed to formal questions), should be limited to obvious and unambiguous violations of mandatory legal provisions that have been established in the public interest or for the protection of third parties. On the other hand, in the case of violations of non-mandatory provisions or provisions that only affect private interests, the affected parties should be referred to the court, and the commercial register offices should not prejudice such process by refusing registration. In the case at hand, there are important opinions in legal doctrine stating that resolutions passed in a virtual shareholder meeting or a shareholder meeting abroad without a corresponding basis in the articles of association (except in exceptional cases) can be challenged, but are not void. The strict practice of the FCRO, therefore, could entail that the registration of a resolution that (in absence of a legal challenge) is valid under company law is refused.
In any case, the FCRO's practice note also makes it clear that companies that have not yet adapted their articles of association to the revised company law should do so promptly in order to benefit from the new possibilities of shareholder meetings. This applies in particular with regard to shareholder meetings abroad, which were already tolerated under the old company law and occur time and again in practice (but now require, among other things, a basis in the articles of association).
As an interim solution until the articles of association are amended, it is often advisable for companies with a limited shareholder base to hold a "hybrid" shareholder meeting, in which there is still a physical meeting venue (in Switzerland) from where the chairman chairs the shareholder meeting and shareholders are given the opportunity to participate virtually. No basis in the articles of association is required for this type of shareholder meeting.
The clarification that publicly notarized resolutions can be passed at all of the above-mentioned types of meetings, is to be welcomed.
3. Further explanations of the FCRO
In the practice note, the FCRO makes further comments on certain types of capital increases. We highlight these in a separate publication.
