Background
One of the primary objectives of the corporate law reform was and continues to be the alignment of corporate law with the current and future economic needs of market participants. Specifically, provisions were introduced allowing resolutions (of the general meeting of shareholders or the board of directors) to be adopted in written form, either on paper or electronically.
In addition, changes to the share capital have been simplified. For instance, the authorised capital increase has been replaced by the capital band (Kapitalband), the statutory provisions regarding the intended acquisition in kind (beabsichtigte Sachübernahme) have been entirely repealed, and the full payment of subscribed shares can now be made by offsetting even if the underlying claim is no longer valuable.
Need for action?
As mentioned above, the transitional provision for the amendment of the articles of association and organisational regulations will expire on 31 December 2024. Consequently, all provisions of the articles of association that do not comply with the revised corporate law will automatically become invalid. They will be replaced by the relevant statutory provisions.
It is therefore possible that, despite looking at the articles of association, the applicable legal situation will not be apparent in the articles of association because individual provisions contained therein no longer apply or because the applicable law is only incompletely reflected.
Typical conflicts / discrepancies between unamended articles of association and applicable law
This may be the case, for example, concerning the lowered thresholds for exercising minority rights introduced as part of the corporate law reform: (i) the convening of a general meeting of shareholders can now be requested by shareholders holding at least 5% of the share or participation capital in listed companies, and (ii) the right to include agenda items can now be requested by shareholders holding at least 0.5% in listed companies and at least 5% in non-listed companies. The threshold relates to the share capital or voting rights. Before the reform, convening a general meeting of shareholders required at least 10% of the share capital, and the inclusion of agenda items could be requested by shareholders representing shares with a nominal value of at least CHF 1,000,000 or, in practice, also at least 10% of the share capital. Furthermore, shareholders representing at least 5% of the share capital or voting rights can now request access to the company’s books and records at any time - unlike before the reform, this right is no longer limited to the general meeting of shareholders.
Other deviations from the applicable law may be found in the powers (Kompetenzen) of the general meeting of shareholders. The scope of these powers has been expanded in the revised corporate law, explicitly including decisions on the distribution of interim dividends (only for companies limited by shares) and resolutions on the repayment of statutory capital reserves by the general meeting of shareholders. The same applies to the updated list of important resolutions requiring a qualified quorum and to the inalienable duties of the board of directors or the management board. Articles of association that do not include the extensions of the catalogue of important resolutions are incomplete and may give a false picture of the current legal situation.
Finally, the requirements for the minutes of the resolutions of the general meeting of shareholders have also been clarified.
Elimination of authorised capital / capital band
If the board of directors shall continue to be able to increase the share capital on its own, the articles of association must provide for a capital band instead of an authorised capital. The provisions concerning the authorised capital have been replaced by the capital band, and in our view, capital increases based on an authorised capital provision as stipulated in the articles of association can no longer be executed after 31 December 2024 (provided the period for the execution of the authorised capital has not already expired anyway). The capital band has the additional advantage of enabling the board of directors also to reduce the share capital. It is only available to companies limited by shares and not to limited liability companies.
Other advisable amendments
Even if a review of the current articles of association showed that there is no conflict with the provisions introduced by the corporate law reform, amendments may be advisable. In some cases, the advantages of the revised corporate law can only be made use of based on a respective provision in the articles of associations.
In addition to the capital band, it is particularly worth noting that general meetings can, with the appropriate basis in the articles of associations, be held entirely virtually or at a foreign location. This facilitation is complemented by the fact that the annual report no longer needs to be made available for inspection in advance at the company’s registered office; instead, it is generally sufficient that the documents will be made available to shareholders in electronic form, which is valid even without a provision in the articles of associations.
Furthermore, the articles of associations of a company that have not yet been adapted to the revised corporate law will not provide for the possibility of resolutions (of the general meeting of shareholders or the board of directors) being passed in writing, either on paper or in electronic form (e.g. by e-mail).
Finally, a corresponding provision in the articles of association of non-listed companies can waive the potentially cumbersome requirement for individual elections of board members. In the absence of a provision in the articles of association, the election of members of the board of directors in globo (as this has been the practice in most companies to date) is no longer permissible. If the board of directors shall not be authorised to delegate the management to third parties, a specific provision to this effect is now required in the articles of association, as the revised corporate law presumes the delegation as a default rule.
Conclusion
An amendment of the articles of association of a company limited by shares or a limited liability company is not necessarily required in many cases, even after the two-year transitional period has expired. Many articles of association may only contain a few or even no provisions that conflict with the revised corporate law and will therefore be automatically replaced by the new statutory provisions. And even if this applies to individual provisions, there are no additional legal consequences: The company does not face any (further) sanctions if the articles of associations are not amended.
However, in our view, it is advisable to review the articles of association and to adapt them to the revised corporate law in order to ensure a good corporate governance, avoid procedural errors, and maintain a legally reliable "reference document". This also allows for the implementation of new options, such as the capital band – including with the option to reduce the share capital – or the possibility of implementing virtual general meetings. Additionally, it may be advisable for non-listed companies to amend the provisions regarding the term of office for members of the board of directors or the management. Due to recent case law, the term of office ends six months after the end of the financial year if the articles of association provide for an election for a period of one year until the implementation of the next ordinary general meeting of shareholders. With the end of the term of office, the company thus lacks a management body. This issue can be addressed in the articles of association of non-listed companies, for example by allowing longer terms of office.
Listed companies should revise their articles of association in any case, and as far as we are aware, have also already done so.
