Sale and purchase transactions with respect to privately held companies in Switzerland are usually structured as share or asset deals or, in certain cases, bulk transfers or mergers. This article provides an overview of the approvals and authorisations that might be required with respect to a share deal in Switzerland. In particular, it focuses on the laws regulating foreign investments in Switzerland and summarises their key characteristics.
The Takeover Board recently assessed whether adopting an opting-out clause which will apply only to two specific investors and only for a period of five years is permissible from a takeover law perspective. In its decision, the Takeover Board confirmed its case law on selective opting-out clauses. However, there is still considerable legal uncertainty in this area.
Public takeover offers are regarded as competing offers if, at the time of their publication, another offer in relation to the target has already been launched. To guarantee freedom of choice of the recipients of the offers, and to avoid the sequence of offers influencing the shareholders' decision, the law sets forth specific rules for competing offers. In the recent LifeWatch case, the Takeover Board took its position on issues relating to multiple offerors.
Switzerland recently decided to facilitate the financing activities of groups operating in or out of Switzerland by easing some restrictions under the Withholding Tax Ordinance. The amendment of the ordinance is meant to strengthen the establishment of headquarter activities with further central corporate functions, as well as treasury activities, particularly those performed outside Switzerland.
In a recent case regarding the takeover of Actelion by Johnson & Johnson, the Takeover Board expanded its case law on the permissibility of conditions in public takeover offers. In this case, the Takeover Board had to assess whether the implementation of a demerger of a business division from the target constituted a permissible condition within a public offer.
The completion of larger M&A transactions is usually conditional on the absence of material adverse changes (MAC). This can be achieved by including either a MAC clause or a condition that all warranties must be true at completion in combination with a warranty confirming the absence of a MAC. A MAC clause defines what is deemed to be a MAC of the target company and entitles the acquirer to step back from the proposed transaction in case a MAC event has occurred or is alleged to have occurred.
In a recent Takeover Board case, the offeror filed a request with the board for approval that it should – before the distribution of the special dividend – have the right to acquire shares outside the offer without triggering the best-price rule. In its decision, the board stressed the importance of the offer price as a reference for the best-price rule and held that any acquisition of shares for a consideration above the offer price would violate the rule.
The Takeover Board has reviewed the methods of valuing different share categories of a target and the monetary value of additional covenants and obligations entered into by a shareholder. The decision is relevant for the interpretation of similar provisions under the Merger Act, requiring equal treatment of shareholders in the context of a merger, demerger or conversion.
Swiss M&A transactions involving public companies are mainly governed by the Financial Market Infrastructure Act, which replaced the former Federal Act on Stock Exchanges and Securities Trading. This regulates both friendly and hostile public takeovers for Swiss resident companies with at least one class of equity security listed on a Swiss exchange, and for foreign resident companies whose shares are mainly listed on a Swiss exchange.
On January 1 2016 revised regulations for the disclosure of significant shareholdings in listed companies and amendments to takeover regulations took effect. The new regulatory framework regulates key market infrastructures and incorporates many former provisions of the Stock Exchange Act, including those on public takeovers and those relating to the disclosure of significant interests in listed companies.
In the context of a friendly public offer, the bidder will usually seek to enter into a transaction agreement with the target. Such a transaction agreement customarily includes provisions regarding the continuance of the contractual relationship between the target and its management, as well as the (dis)continuance of certain target board members' mandates as per the settlement of the public offer.
The Federal Council recently enacted the Financial Market Infrastructure Act. While the act requires the formal alignment of the Takeover Ordinance with the provisions relating to takeovers, the amended ordinance brings substantive changes. By implementing these changes, the Takeover Board acknowledges that electronic publication has become the standard procedure for disseminating important financial information.
An amendment of the Ordinance of the Takeover Board on Public Takeover Offers has entered into force, abolishing the requirement that announcements and notices relating to a public offer be physically published in newspapers. Consequently, the Takeover Board has issued guidance on the newly applicable rules for the publication of the offer documents.
Two recent Takeover Board decisions have determined the validity of an opt-out clause in the Sika takeover. The board had to ascertain the validity of an opt-out clause in Sika's articles of association and determine whether the opt-out clause applied in the contested acquisition by Compagnie de Saint-Gobain SA.
In March 2013 the Swiss voting population approved the fiercely debated 'Rip-off Initiative', originally launched in 2008 by Thomas Minder. Its incorporation into national law is now ongoing. It remains to be seen how this will affect public M&A transactions involving Swiss corporations with publicly listed shares. The consequences are extensive and company boards should carefully consider the implications.
Amendments to the Debt Enforcement and Bankruptcy Act and the Code of Obligations recently entered into force, increasing the attractiveness of acquisitions of distressed businesses and facilitating restructurings. The revised law makes composition proceedings more attractive for both the company and a potential acquirer. For a company in distress, the new law makes it easier to overcome legal hurdles.
The Takeover Board recently modified Circular 1 regarding buy-back programmes. The revised circular brings, in particular, some changes to the reporting and publication procedure. It is therefore important that all existing buy-back programmes take the revised circular into account.
The Takeover Board's practice regarding the evaluation of the validity of an opt-out clause has recently undergone several changes. Transparency requirements must now be met not only at the shareholders' meeting itself, but also with regard to the information provided in the invitation to the meeting, so that the shareholders can understand the reason for, and the effects of, the opt-out clause.
In November 2010 the Federal Administrative Court handed down a decision in a public takeover matter as a result of an amendment in the regulatory framework governing public takeovers. The court rejected part of the Takeover Board's previous decisions. As a result, the board had to reassess numerous issues, and recently handed down its decision regarding the adequacy of the share price offered to the public shareholders.
The Takeover Board previously expanded its practice with regard to the evaluation of the validity of opt-out clauses. In two recent cases, the board had to decide whether opt-out clauses introduced after listing were valid. The board also took this opportunity to reflect on its own practice. These decisions show that board practice is still variable and can be expected to undergo further changes and/or clarifications.