A. What does the TLEA provide for?
Which entities are subject to the TLEA?
The TLEA applies to Swiss legal entities (excluding foundations (Stiftungen) and associations (Vereine)). In addition, it also applies to foreign entities (i) that have a Swiss branch, (ii) whose effective place of management is in Switzerland, or (iii) who have acquired real property in Switzerland.
The TLEA does not apply to listed companies and companies held (directly or indirectly) to at least 75% by listed entities, Swiss pension funds, and legal entities controlled by public authorities.
What are the duties under the TLEA?
Companies within the scope of the TLEA have to identify their UBO (name, date of birth, nationality, residential address, type and extent of control over the entity) and have to reasonably diligently verify such information. If a company is unable to identify the UBO, it needs to document the efforts made in that regard. If the entity is held by a listed entity, it only needs to obtain the name, registered seat, and listing information. This generally corresponds to the company's obligations under the current law.
Further, companies need to submit the above-mentioned information to the centralized register. The notice needs to be submitted within one month from the registration of the company in the commercial register or obtaining knowledge of any change to the submitted information.
Other jurisdictions, such as the UK, foresee an exemption or simplification if the shareholder itself is an entity that is obliged to identify its UBO and submit notices to the transparency register office. Such exemption is based on the rationale that transparency is ensured through the registration on the level of the shareholder. In multi-layer structures, such exemption can help to avoid multiple identical registrations, and thus simplify and streamline the notification processes. Unfortunately, the TLEA does not foresee such exemption.
Significant shareholders of companies within the scope of the TLEA need to notify the company of the UBO (with the information set out above) within one month from acquiring control or obtaining knowledge of any change to the relevant information. This largely corresponds to the shareholder's obligation under the current law.
In addition, the TLEA introduces an obligation of the UBO itself to notify the relevant shareholder or the company of the above-mentioned information.
Who is the UBO in the sense of the TLEA?
The TLEA does not mirror the current definition of the UBO in the sense of Swiss corporate law (which refers to the notion of control in the sense of Swiss accounting standards), but rather introduces a wording more similar to previous versions of the Swiss Code of Obligations. It refers to "any individual who controls an entity by holding, directly or indirectly, alone or acting jointly with others, at least 25% of the capital or the votes of such entity, or otherwise". The terms "indirectly" and "otherwise" controlling are to be defined in an ordinance of the Swiss Federal Council.
Pursuant to the explanatory notes of the Swiss Federal Council (Botschaft), it was explicitly intended to amend the current definition used in Swiss corporate law and align it with the one used in AML legislation. The general criteria remain the same: The obligations are tied to a minimum shareholding of 25%. In relation to indirect shareholdings, "control" is required and is generally understood as having a participation of at least 50% in the direct shareholder (which, in turn, holds 25% in the relevant entity). However, there may be certain differences, in particular with view to the means that may be considered to convey "other controlling" influence (by way of example, the explanatory note also refers to the possibility that options and convertible loans convey such control).
If there is no UBO in the sense of the above-mentioned criteria, the chair of the company's executive body will be considered as such. This is in contrast to the current provision, which calls for a "negative notification" (stating that there is no UBO) in such cases.
Who has access to the transparency register?
The transparency register is not publicly accessible. It can in particular be accessed by police and law enforcement authorities, AML authorities, authorities for international information exchange in tax matters, authorities enforcing embargoes and sanctions, the Federal Intelligence Agency, land registers and Lex Koller authorities, FDI authorities, customs authorities, public authorities in relation to public tenders or subsidies, and social security authorities.
Further, it can be accessed by financial intermediaries, to the extent needed to comply with their AML diligence obligations.
How is the information in the transparency register controlled and maintained?
The transparency register office is tasked with monitoring whether all notices required by the TLEA are made, and otherwise reminding the legal entities in default.
The transparency register office will also be notified by financial intermediaries and public authorities who, based on the information available to them, have doubts as to the information in the transparency register in relation to a particular company (in relation to financial intermediaries, after they have informed their client, and provided the information is not updated within a grace period).
The transparency register office will add a note if it receives such notification from a public authority or financial intermediary, a company was not compliant with a request by the transparency register office, or it has been notified by the company that they were not able to identify the UBO. Any such note will trigger a request to the entity in question to verify the UBO information within a certain time period.
The TLEA also foresees a separate supervisory body, tasked with carrying out checks as to the correctness, completeness and actuality of the information in the transparency register. The supervisory body will also review all entries with the aforementioned note by the transparency register. Following a first, high-level review, it can open a formal investigation.
What sanctions are foreseen?
If an obligation to notify the transparency register office is violated repeatedly, or if the supervisory body is not provided with information despite repeated requests, the supervisory body can suspend the shareholder rights of the shareholder in question (such sanction was so far foreseen upon any breach of the shareholder's duty to notify the company of the UBO; the requirement of a formal suspension by an authority adds legal certainty in that regard), or, if the circumstances justify such measure, have the legal entity liquidated.
A violation of the shareholder's or the UBO's obligation to notify the company of the UBO, and the company's obligation to submit a notice to the transparency register office, each are subject to a fine of up to CHF 500,000. Not following an order by the supervisory body also could entail a fine of up to CHF 100,000.
What needs to be considered upon entry into force of the TLEA?
Shareholders who have notified the company of the UBO in accordance with the current legal provisions will be deemed to have complied with their obligation under the TLEA, provided that the UBO is the same. They will only need to provide further information upon request of the company. However, given that the current legal provisions call for fewer details to be disclosed, such requests will likely become required. Also, there is no corresponding provision in relation to the UBO's own obligation.
Upon entry into force of the TLEA, existing entities will need to make their first notification to the transparency register office within one month from the first filing with the commercial register; however, at the latest within certain time periods ranging from three months to two years, depending on the specific circumstances.
B. What needs to be done?
The TLEA foresees a revised definition of the UBO, expands the information to be recorded in relation to the UBO, introduces additional obligations in relation to the identification of the UBO for the relevant company, namely its board of directors, the (significant) shareholder, and the UBO itself, and foresees only relatively short adjustment periods upon entry into force. Also, there is no longer a grandfathering regime for registered shares acquired prior to 2015.
Against this background, all Swiss entities, all (significant) shareholders, and all UBOs – including those who benefitted from the grandfathering provision under the current law or who used a negative notification – are well advised to carefully review and update the UBO information to comply with the TLEA.
