New company law: end of the transition period on 31 December 2024 (No. 21)

18 September 2024

The new company law, which came into force on 1 January 2023, brings many innovations. We present these in detail in our current blog series.

Transitional provisions and deadline

On 1 January 2023, the revised company law came into force, which also applies to limited liability companies (LLC). The VISCHER team has already shed light on selected topics in twenty blog posts to date. In addition to the entry into force of the new company law almost two years ago, there were also transitional provisions. So, although the new law stipulates that it also applies to companies existing before 1 January 2023 from the date it enters into force, a transitional period of two years has been granted to those companies that do not comply with the new regulations in order to adapt their articles of association and regulations (i.e. in particular any organisational regulations issued by the board of directors) to the new law. Until this period expires, the provisions of the articles of association remain in force under the old law. With the deadline fast approaching, the question now arises as to whether there is a need for action and, in particular, what happens to any provisions of the articles of association that have not been amended after 31 December 2024 and what precautions may need to be taken. While listed companies have generally already made the necessary amendments to their articles of association and regulations to comply with the new company law over the last two years, this is now also becoming a pressing issue for all other Swiss companies.

General effects

If the articles of association of a company as at 1 January 2025 still contain provisions under the old law but that contradict the new law, these will become invalid, i.e., they will cease to apply and will be replaced by the provisions of the new law. This means that, in principle, no action is required for unlisted companies, which was also the aim of the legislator. If, for example, the articles of association still stipulate that a company must make the annual report available for inspection at the company's registered office prior to the ordinary general meeting, the law now stipulates that it needs only be made available electronically, contrary to this provision in the articles of association.

Nevertheless, it is advisable to revise the provisions that are not congruent with the new law before 1 January 2025, but at the latest when the articles of association are being amended anyway for other reasons (as every amendment to the articles of association requires public notarisation, a combined amendment to the articles of association will not only save costs but also ensure clarity). A deviation of the articles of association from the applicable law is not only undesirable, but can also lead to legal uncertainty and misunderstandings (e.g. among shareholders) or procedural errors, e.g. if the board of directors, based on an old provision in the articles of association, rejects a shareholder's request to place an item on the agenda at the annual general meeting on the grounds that they do not represent shares with a nominal value of at least one million Swiss francs. Since, under the new law, shareholders of a non-listed company who together hold at least five per cent of the share capital or voting rights can request that items be placed on the agenda, the board of directors may have wrongly rejected the request. These and other pitfalls can be avoided by updating the articles of association (and regulations) properly.

When amending the organisational regulations (if such regulations exist), the main focus will be on the rules governing meetings and the (e.g. electronic) passing of resolutions by the board of directors (generally the amendment of references to legal provisions).

Effects on existing authorized capital

Under the old company law, the general meeting of shareholders could authorize the board of directors to increase the company's share capital by a maximum of 50% for a maximum period of two years. For this purpose, a corresponding provision had to be included in the articles of association. If the authorized capital was approved by the annual general meeting before 1 January 2023, it will remain valid during the transitional period, but can no longer be extended or amended. This means that any existing authorized capital will expire after the two-years period at the latest. If a company wishes to continue to authorize the board of directors to increase the capital, the general meeting must include a capital band in the articles of association.

However, the Swiss Federal Commercial Registry Office (FCRO) has clarified in its practice note 1/23 (only available in German) that a coexistence of old-law authorized capital and a new-law capital band is not permitted. If a capital band is introduced before 1 January 2025, statutory provisions on authorized capital would therefore also have to be deleted. Companies that still have authorized capital and wish to make use of it would have to do so before the articles of association are adapted to the new law, but by 31 December 2024 at the latest.

New features of the revised company law

Irrespective of the transitional provisions, the articles of association must always be amended if the innovations of the revised company law are to be utilised. In addition to the aforementioned capital band, the virtual general meeting, which must have a provision in the articles of association, is particularly worthy of consideration. The same applies to the possibility of holding a general meeting abroad, the adjustment of the nominal value of shares below one centime, having the share capital in a foreign currency, the exclusion of the transferability of the day-to-day management from the board of directors to individual of its members or to an executive board, or the inclusion of an arbitration clause in the articles of association.

Conclusion

In principle, it is not necessary to amend the articles of association of a corporation or limited liability company even after the two-year transition period has expired. However, if you want to have clear articles of association that do not contradict the new law and are therefore less susceptible to procedural errors, it is recommended that you amend them at the latest when other amendments to the articles of association are made. This can also be seen as an expression of appropriate corporate governance and compliance, for example if the articles of association and regulations are reviewed as part of the legal due diligence when shares are purchased. In any case, the articles of association need to be amended if the new possibilities offered by the new company law, such as the capital band or the virtual general meeting, are to be utilised.

Your VISCHER team will be happy to assist you in reviewing and revising your articles of association and regulations and answer any questions you may have in this regard.

Other articles in the series:

• New Corporate Law: New Swiss company law to come into force on 1 January 2023 (no. 1)
• New Corporate Law: General meeting under the new company law – what is changing? (no. 2)
• New Corporate Law: The capital band (no. 3)
• New Corporate Law: Loss of capital, over-indebtedness and (in)ability to pay (no. 4)
• New Corporate Law: Important resolutions (no. 5)
• New Corporate Law: Capital increase and capital reduction (no. 6)
• New Corporate Law: The (intended) acquisition of assets (no. 7) 
• New Corporate Law: The offsetting contribution (no. 8)
• New Corporate Law: The Interim Dividend (no. 9)
• New Corporate Law: The Return of Benefits (no. 10)
• New Corporate Law: Share capital in foreign currency (no. 11)
• New Corporate Law: Simplified rules on reserves (no. 12)
• New Corporate Law: Representation of the shareholders in the new company law (no. 13)
• New Corporate Law: Relevant changes from a tax perspective (no. 14)
• New Corporate Law: Right to Information & Inspection and Special Investigation (no. 15)
• New Corporate Law: Arbitration Clause in the Articles of Association (no. 16)
• New Corporate Law: Simplification in Signing of Commercial Register Applications (no. 17)
• New Corporate Law: The Board of Directors (no. 18)
• New Company Law: Circular Resolutions of the Board of Directors (no. 19)
• New Corporate Law: Commercial Register Application by an Authorized Third Party (no. 20)

Authors: Christoph Enz, Peter Kühn, Thomas Steiner-Krizaj, Roland M. Müller