The new “Global Forum Act”: abolition of most bearer shares and stricter reporting obligations

Dr. Benjamin Fehr Partner, Legal, PwC Switzerland 17 Oct 2019

As a result of ever growing international pressure regarding transparency and information exchange, on 21 June 2019 Parliament passed the new Swiss Federal Act implementing the recommendations of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The referendum deadline expired on 10 October 2019 and the Federal Council approved the Act's entry into force on 1 November 2019. This article sheds light on what this means in practice and whether you need to take action. 

The consequences for bearer shares

As the current applicable legal provisions do not sufficiently ensure identification of bearer shareholders, a significant legal amendment concerns the broad abolition of bearer shares.  Given their anonymity and the fact that they are easily transferable, they can be used as a means of tax evasion and money laundering. There are only a few countries globally that still allow bearer shares. Nevertheless, around 57,000 Stock Corporations have issued bearer shares in Switzerland, so the legislative amendment will have practical consequences for many companies.

Once the revised law enters into force on 1 November 2019, bearer shares will only still be permitted if a company (i) has listed equity securities on a stock exchange or (ii) the bearer shares are issued as intermediated securities and deposited with a custodian in Switzerland or entered in the main register. If these conditions are met, the company must register this fact in the commercial register within 18 months.

All other companies with bearer shares must convert them into registered shares within 18 months or they will be converted into registered shares by law, and no new bearer shares may be issued (except for listed companies or in case of issue as intermediated securities). Conversion is also compulsory for those companies which are permitted to have bearer shares but do not comply with the above-mentioned reporting obligations within 18 months. Conversion applies to all holders, irrespective of whether share certificates were issued or whether there are other provisions in the articles of association or commercial register entries. Converted shares keep their nominal value as well as their subscription share and properties in terms of voting rights and proprietary rights. There are no restrictions on their transferability.

Compulsory conversion means that the Commercial Registry must ex officio endorse the conversion to registered shares in the commercial register once the deadline has expired. In addition, a note is added to show that the documents contain details that differ from the entry. This note remains until the company has amended its articles of association to the new legal situation or establishes that such an amendment is not required. Until the articles of association have been amended, the Commercial Registry must reject any request to register another change to the articles of association in the commercial register.

The consequences for holders of bearer shares

Owners of bearer shares that have fulfilled the reporting obligations laid down in the previous law (Art. 697i oCO), i.e. have informed the company within the one-month deadline of the purchase of bearer shares, their first and last name or company name and the address, will be automatically registered by the company in the share register as the registered shareholder following the conversion. Shareholders that have not complied with the reporting obligation will not be registered and will thus lose their proprietary rights and membership rights. The Board of Directors must ensure that no shareholders exercise their rights in violation of this provision. The fact that these shareholders have not fulfilled their reporting obligation and are not able to exercise the rights connected to the shares will be recorded in the share register. These shareholders have the possibility, however, within five years of entry into force and with the company’s prior approval, to request from the court that they be registered in the share register. If the request is approved, the company registers the shareholders and from this point onwards, they can again exercise their proprietary rights. Five years from the date on which the Act comes into force, i.e. on 1 November 2024, the shares of those shareholders who have not requested to be registered in the share register become legally void and the shareholders lose all rights associated with those shares. The voided shares will be replaced by treasury shares held by the company. If there are special circumstances meaning a shareholder's shares are cancelled through no fault of his/her own, the shareholder may, within 10 years and under certain conditions, request compensation from the company in the amount of the actual value of the shares at the time of conversion. The company is exempt from paying such compensation, however, if it does not have sufficient freely disposable equity.

The consequences for reporting obligations

The revised law not only governs the broad abolition of bearer shares, but also clarifies the concept of beneficial owner and the accompanying reporting obligations. As before, anyone who - alone or by agreement with third parties - purchases unlisted shares or quotas of a company, which results in a holding of 25% or more of share- or quota capital or votes must report the beneficial owner of those shares or quotas to the company. Now further clarification is also provided for when the shareholder is either a legal entity or partnership. In this case, any individual person who controls the shareholder pursuant to Art. 963 para 2 of the Swiss Code of Obligations must be registered as beneficial owner. This is the case if the individual person:

  • directly or indirectly holds the majority of voting rights in the shareholder subject to the reporting requirement;
  • directly or indirectly has the right to appoint or dismiss the majority of the members of the highest management or administrative body of the shareholder subject to the reporting requirement; or
  • is able, based on the articles of association, the foundation deed, a contract or similar instrument, to exercise a controlling influence over the shareholder subject to the reporting requirement.

Even if no individual person fulfils the above-mentioned requirements, the shareholder must make a (negative) declaration to the company in order to fulfil the reporting obligation.

The previous law already required the shareholder to inform the company of any change to the first or last name or the address of the beneficial owner. However, there was no deadline by which this had to be done. Now changes must be reported to the company within three months.

Under the revised Penal Code, violating these reporting obligations can now result in a fine.  

The consequences for the company

The new law provides for two additional statements of facts that can constitute an organisational deficiency, which in the worst case could result in the company being dissolved by the court. The two newly included statements of facts are where the share register or the directory of beneficial owners is not managed in line with the regulations and where bearer shares are issued without the relevant requirements being met.

Criminal sanctions for violations

As already mentioned, the legal amendment introduces criminal sanctions in the form of fines. While up to now a violation of the reporting obligations under company law had only civil law consequences (suspension of participation rights, suspension and forfeit of proprietary rights), and non-compliance with record-keeping obligations had, at most, legal liability implications for the Board of Directors, criminal sanctions can now also be imposed.

According to the change to the Penal Code, anyone who deliberately fails to report the beneficial owner of shares or quotas can be fined up to CHF 10,000.  Therefore, anyone who either fails to meet the obligation to initially report the beneficial owner or does not report changes to the first or last name or the address of the beneficial owner within three months can be penalised. It also applies to erroneous or incomplete declarations.

In addition, a fine of up to CHF 10,000 can now also be imposed on anyone who intentionally fails to keep the required directories in line with the regulations or who violates the associated company law obligations. This concerns:

  • for Stock Corporations (AGs), the share register and the directory of beneficial owners;
  • for Limited Liability Companies (GmbHs), the quotaholder register and the directory of beneficial owners;
  • for cooperatives, the directory of members, and
  • for investment companies with variable capital (SICAVs), the share register of  company shareholders and the directory of beneficial owners of shares held by company shareholders.

There are penalties not only for failing to keep the respective directories and registers, but also for managing them incorrectly, e.g. if shareholders are entered in the share register without having presented sufficient identification. The addressee of the new criminal provisions is the person who is obliged to keep the directories. In the case of a violation of the obligations of legal entities with relevance under criminal law, Art. 29 of the Penal Code provides for its attribution to individual persons acting as governing officers or members of governing officers. This means that in the event of a violation, fines will be addressed to the members of the Board of Directors in the case of a Stock Corporation and to the members of the Management Board in the case of a Limited Liability Company. 

Conclusion: an overview of the most important changes

  • Bearer shares are now only permitted if the company has either listed equity securities on a stock exchange or has issued bearer shares in the form of intermediated securities: the Commercial Registry must be informed of this within 18 months;
  • 18 months after the entry into force of this Act, i.e. on 1 May 2021, and provided the bearer shares have not been converted into registered shares, unauthorised bearer shares will be forcibly converted into registered shares;
  • Shares belonging to unreported shareholders will be cancelled five years after the Act enters into force, i.e. on 1 November 2024;
  • Criminal sanctions in the form of fines are now provided for in the event of a violation of reporting obligations or the incorrect management of the required directories and registers;
  • Incorrect management of the required directories or issuance of bearer shares without the necessary conditions being met can now also constitute an organisational deficiency and, in the worst case, lead to the company being dissolved.

Our recommendation to you:

  • If your company has issued bearer shares: check whether this is permitted under the revised law. If in your case the bearer shares are still permitted, this must be noted in the Commercial Register by 1 May 2021: otherwise they are at risk of mandatory conversion.
  • If the existing bearer shares are no longer permitted under the new legal provisions, we recommend that you immediately and proactively convert them to avoid the restrictive effect of a forced conversion. Alternatively, you can review whether the shares could be structured as intermediated securities.
  • To avoid sanctions under criminal and company law, a check should be carried out in the case of participation in other companies to make sure the reporting obligations have been fulfilled and the required registers and directories are being managed in line with legislation.

We are happy to help you with any questions regarding the new legal situation, in particular the conversion of bearer shares to registered shares, the accompanying changes to the articles of association and all relevant reporting obligations.


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Dr. Benjamin Fehr

Dr. Benjamin Fehr

Partner, Legal, PwC Switzerland

Tel: +41 58 792 43 83

Philipp Aichele

Philipp Aichele

Director, Head Legal Technical Office, PwC Switzerland

Tel: +41 58 792 57 92