<h3>Shareholder Activism</h3>
In recent years, various Swiss corporates were facing activist initiatives by shareholders. While some never surface, those that hit the press included Temenos (2022), Richemont (2021), Aryzta (2020), Meyer Burger (2019), Sunrise (2019), Panalpina (2019), Nestlé (2017), GAM (2017), Credit Suisse (2017), and Clariant (2017). In 2020 and 2021, Swiss shareholder activism declined relative to prior years because of the COVID-19 pandemic, but volatility in stock prices in 2022 encouraged hedge funds and other activists. Campaigns have largely focused on board representation, share buybacks, distributions, and company strategy, but activists have also brought ESG matters to the table. Irrespective of the communicated motives, activists often aim to push a company into play for a takeover or spin-off transaction or to create volatility for arbitrage opportunities.
<h3>What Can Boards Do</h3>
Whether they know it or not, many Swiss companies are being observed by activists who might not yet be (outed as) shareholders and who wait for their moment. Listed companies nowadays have their defense manuals in view of potential takeover approaches. However, as public takeovers are increasingly triggered, one way or another, by an active shareholder, boards should also monitor the profile their company offers to potential activists, address weaknesses and remain conscious of the ways and means of activism. Maintaining an open dialogue with key investors is always helpful, but insufficient to prevent activist campaigns. The continuous communication and determined pursuit of a clear and understandable company strategy also makes attacks less likely and undermines their chances of success. Investors aiming to cash out may still seek ways to realize profits, and companies must be prepared to be proactive if needed.
<h3>A New Toolbox for Activists</h3>
The new Swiss corporation law, which took effect on January 1, 2023, gives activists new tools and lowers the hurdles for using existing instruments. As a result, would-be activists need to make smaller investments to pursue their initiatives through legal means.
<h4>1. Right to Call a Shareholder Meeting</h4>
Previously, a shareholder had to represent 10% of a company&#8217;s share capital to compel the board to convene an extraordinary shareholders&#8217; meeting, but under the new law, for listed companies, the threshold has been reduced to 5% of the share capital or voting rights. Activists at small- to medium-sized companies will therefore find it easier to reach this lower threshold.
However, a board might be able to use the lower threshold to its advantage by suggesting to an activist that it is in the activist&#8217;s control to request a shareholder meeting if the activist truly believes this to be necessary. In other words, why should a board listen to a campaigner who prefers just sending letters. Thus, a board may be able to play the ball back into the shareholder&#8217;s court.
Also, while it is easy to publicly call upon a board to convene a shareholder meeting if this has no direct consequences, things are different if the activist must anticipate that the board has to act on such request.
<h4>2. Agenda and Proxy Access</h4>
Now, shareholders representing 0.5% of the share capital of a listed company—not 10% of the share capital or shares with a nominal value of CHF 1 million as before—have the right to have an item included on the agenda of a shareholder meeting. Shareholders with 0.5% can also compel the board to include their motions on specific agenda items and a short explanation in the invitation to the shareholder meeting. By reducing the shareholding requirements, the new law makes it easier for activist shareholders to, among other things, nominate alternative director candidates or make other proposals.
<h4>3. Information and Inspection Rights</h4>
In addition to shareholders&#8217; existing right to ask questions at shareholder meetings (information right), under the new law shareholders representing at least 5% of the share capital or voting rights have a right to inspect certain company documents. Previously, this right was subject to the authorization of the shareholders or the board.
Shareholders&#8217; information and inspection rights are still subject to confidentiality and other legitimate company interests. Such requests need only be granted to the extent that the requested information is needed for the exercise of shareholder rights. If the board refuses to answer questions or grant an inspection, shareholders may challenge the decision in court. Although this was already possible under the old law, by making these rights and obligations explicit the new law may make it easier for boards to decline requests in non-obvious cases and force shareholders to explain in court why their request should be allowed.
<h4>4. Right to Request a Special Investigation</h4>
Shareholders representing 5% of the share capital or voting rights of a listed company (rather than the previous 10% of the share capital or shares with a nominal value of CHF 2 million) now have the right to demand a special investigation from a court if the shareholder meeting has previously rejected such demand.
The new law also lowers evidentiary hurdles for a special investigation. Previously, a claimant had to show that it was more likely than not that a legal violation or a breach of a company&#8217;s articles of association had caused loss to the company or its shareholders. Under the new law, this standard has been lowered to such violation being suitable (geeignet) to have caused such a loss.
Despite these changes, commencing and conducting a special investigation remains a complex and lengthy process. It is therefore unlikely that the number of special investigations will increase materially under the new law.
<h4>5. Litigation</h4>
Under the new law, shareholders may appoint litigation counsel to initiate, on behalf of the company and by simple majority, directors&#8217; &amp; officers&#8217; liability lawsuits or actions to seek repayment of unjustified benefits against directors, officers, or shareholders, among others. Although this makes it easier for shareholders to appoint litigation counsel and force the company to bring a lawsuit, it is unlikely that shareholders will approve such lawsuits. If at all, it seems more effective to replace the board by the same voting majority and have the new board pursue such claims. However, the (threat of a) request for inclusion of such an action on the agenda of a shareholder meeting may be used to put pressure on the incumbent board and management.
<h3>Transition Period</h3>
Companies&#8217; existing articles of association may not comply with the new rights and requirements set out above, particularly the new thresholds. As per the new law&#8217;s transitional rules, we believe that such conflicting provisions remain in force until January 1, 2025, at the latest, but must be amended by then. If, however, a company&#8217;s articles are silent regarding the matters that the new law affects, then the terms of the new law apply immediately.
<h3>Outlook</h3>
The new law makes it easier for would-be activists to initiate campaigns, but it does not follow that they will be successful. Activist campaigns are often &#8220;low-cost and low-engagement&#8221;. Such campaigns may be limited to some e-mails and a public letter or two in which an activist raises its demands to the board. Rather than giving in to these (soft) demands, a board may refer an activist to its available corporate rights, such as the right to request a shareholder meeting, more often and leave the task, hassle and accountability for such actions to the activist. In any case, it will be more difficult for an activist shareholder to blame the board if the activist refrains from making use of available shareholder rights.
In sum, while the new rules do need to be considered in designing the defensive set-up of companies and may have certain effects, we do not expect them to become game changers for shareholder activism in Switzerland.

RZ_Preview_Shareholder Activism

Shareholder Activism: New Year, New Challenges

<h3>Reflections on How COVID May Change the Legal Profession</h3>
I. Taking Care of Our Key Assets
Most big law firms have kept up remarkably well during the pandemic. Some even had record years when their clients, and the economy at large, were in crisis. Even so, the manner in which the legal profession operates may well change—something that in many ways was overdue. This change concerns the two key assets every law firm has:
<ul>
<li>our clients, which include our referral sources, and</li>
<li>our talent, the gifted young lawyers who are pursuing their career with us.</li>
</ul>
II. Keeping up with Our Clients
What Clients Want
COVID has been a boon for law firms, not the least as a result of helping clients who were in firefighting mode. But this constant firefighting may also mean that some law firms have not spent sufficient time to redesign client service in a manner that is fit for the future. A few thoughts on this:
<ul>
<li>Understand what clients want. It cannot be said often enough: lawyers should speak less and listen more. This applies to video conferences (VCs) as much as it does to physical meetings. But how good are lawyers at following up on this promise? Do they call a client after a tedious meeting to debrief, hopefully by video-call, rather than rushing off to the next assignment? Do clients and counterparties—as well as team members working on the file—get a chance to air their views in a VC? After all, every participant occupies the same size of square on a computer screen, so they all deserve to be heard. Moving ahead in a post-COVID world means being inclusive, and this starts with how meetings are conducted.</li>
<li>Be crisp, be concise. During the pandemic, as much as in any other crisis, there was no time to get up to speed on what the law says. Lawyers needed to have all the relevant information at their fingertips. But this does not mean that clients have to be advised with long-winded memos or Ciceronian speeches. Oftentimes it may be better to send the client only a two-page memo summarizing what is really relevant for the business decision; to write talking points for the chair of a board meeting rather than a lengthy summary of the procedural rules for decision-making; to summarize the advantages and drawbacks of settling a drawn-out litigation case in two or three paragraphs.</li>
</ul>
Hans-Peter Frick, who for over 20 years served as the Group General Counsel of Nestlé, got it right: «We are not here to practice law. We are here to offer legally sound business solutions». This has been a yardstick for many inhouse counsel, and it should also be the new normal for law firms. Indeed, lengthy memos are out. Crisp e-mails are in.
Advantages and Limits of Digital Meetings
The world has gone digital; VCs are here to stay. This is unlikely to change even when travel is possible again. Many meetings work well, or even better, on screen than in person: speakers tend to be more disciplined, mutual interruptions are rarer, lengthy speeches do not happen. Law firm partners&#8217; meetings can be efficiently conducted by VC, routine negotiations or project management calls as well. Continuing education also works over the screen: lectures by VC can be most effective, especially if interaction is encouraged. Even court hearings, hitherto seen as the epitome of the presence of an advocate in a room and therefore absolutely indispensable to be held in person, are now conducted online. The English courts have been faster than those on the Continent to pick up on this trend.
Clearly, there are limits to videoconferencing. VCs do not allow for the proverbial «step out on the balcony» where I can take my client out of the room and discretely discuss a point with them to advance a settlement or bring closure to a difficult commercial decision. VCs do not allow me to pick up all the little things, the non-verbal signals that are inherent in any in-person meeting: the smell, the posture, the raised eyebrow.
Still, one can make the best out of VCs. To begin with, they are more inclusive precisely because no-one needs to travel to one location. This allows for broader participation even in critical situations. Moreover, there are other ways to keep up the contact with the client or opposing counsel:
<ul>
<li>Pre-COVID, issues often got sorted out after a meeting, walking back to the office or driving together in a taxi on the way to the airport.</li>
<li>Today, lawyers can find different ways to debrief: after a meeting, they can video-call. This also allows for a glimpse into clients&#8217; lives, especially those who use no artificial screen, whose backgrounds feature real bookshelves or paintings. One of the author&#8217;s favorite clients even takes calls in his garage while repairing his vintage Porsche; and what gets sorted out in the garage is often as robust as what was agreed in the taxi in earlier days.</li>
</ul>
III. Taking Care of our Colleagues in the Firm
The Way We Work
Clearly, COVID has brought a boost in the use of technology. VCs have almost entirely replaced physical meetings, e-Tools have changed the way lawyers work. By now, even the most seasoned lawyer knows that he or she must be able to master new applications without asking their PA or the IT staff.
The way we work will change. Work from home (WFH) is here to stay. Some associates like to work in the office, others are equally and sometimes more productive at home. But those who live in a two-bedroom flat, drafting stacks of contracts with family duties on the side have a different attitude to WFH than those for whom the &#8220;H&#8221; in WFH means a second home in the Hamptons, the Cotswolds or the Swiss Alps. That said, some—but not all—young staff appreciate the flexibility of working from home.
The CEO of Goldman Sachs calls WFH «an aberration». But notwithstanding this quip, most professional service firms will no longer be willing to turn back the clock. Rather, they will have to find their own mix between in-office days and work from home. And a WFH policy should not be decreed from the top, so why not introduce a streak of democracy in otherwise tightly managed firms? It is worth listening to a law firm&#8217;s junior staff before deciding what the right mix between in-office days and work from home is.
Keeping Teams Together
In a WFH environment, seeing one&#8217;s own team and looking them into the eyes is a challenge. But it needs to be done. Virtual coffee breaks can help; and they should be real breaks, not just another pep talk from the boss. Rather than smiling at each other, why not let the most junior member of our team propose a conversation topic on which every team member can chip in?
And even if WFH is here for good, it is important to keep teams together. Mandatory in-office days may help, with continuing education sessions, extended coffee breaks and cocktails in the early evening. These days may be less productive in terms of billable hours, but infinitely more valuable in terms of social glue.
Not to be forgotten: work during COVID has put even more of a strain on new entrants in law firms than on those who already know the organization by heart. A customized in-person induction program is of little help if the office is almost empty. Mentoring becomes more important than ever because meetings on the fly do not happen anymore.
Mental Health
Finally, and perhaps most importantly, mental health has come to the forefront of professional service firms. Burn-out and fatigue have always been an issue for lawyers of all ages, but few dare openly to speak about it.
The well-being of co-workers at every level matters because COVID has brought an additional burden to many of us—but fewer opportunities to re-energize. Some worry about family and friends falling ill, or succumbing to the virus themselves and still having to get the work done. Others may need to take care of people who are struggling. And given restrictions on public gatherings and travel, there is no relief in sight. Over the last two years, everyone missed out on otherwise invigorating highlights: family get-togethers, trips across the world, small concerts in cramped nightclubs.
Stories of associate burn-out abound in the legal yellow press. They are typical for the end of a long economic cycle, rather similar to 1999 and 2007/08. This time, workload is exacerbated by the additional strain that COVID put on everyone&#8217;s lives. London firms try and cope by throwing money at the problem. I&#8217;m afraid this is not going to do the trick in the end.
Right now, the biggest burden appears to be on mid-level associates who do all the documentation work, day in, day out. Do law firm leaders know how they are doing in these times? Do they have the chance to express their feelings if they are overwhelmed? And most importantly, are their concerns taken seriously, and acted upon, when they speak up—before it is too late?
For law firm leaders, it would be dangerous to resign themselves to just getting through the day or to hide in a cocoon. Many of those around them may be in a situation where they are about to reach their limit: colleagues in the firm, those in society who are affected more by COVID than any lawyer is.
IV. Looking Ahead
Building Networks is More Difficult than Keeping Them
Seasoned lawyers should also be mindful of the situation which their junior colleagues are in: if I have built a network of trusted clients and colleagues around the world over 20 years, it is easy to stay in touch on screen or by telephone. We&#8217;ve met many times over. We&#8217;ve had a glass of wine or a masala chai together. We sat in sticky conference rooms with no air-conditioning. We laughed at ourselves. We literally rubbed shoulders.
The game is entirely different for a young lawyer who is just about starting to build her career and her network. She cannot draw on the same depth of relationships and camaraderie. Law firm leaders are in a position to help; they can open the door. After all, networking is not only about building one&#8217;s own contacts, it also means passing on relationships to the next generation. Catching up one-on-one is certainly cozy, but including others in the conversation is now even more important than pre-COVID. Involving the next generation in personal interactions stays a key feature of keeping law firms successful.
Law Firm Conferences
Do law firm conferences still matter? Are they worth the trip, the pre-flight PCR test, the lingering doubt whether one has to quarantine upon return? Continuing education sessions may well be just as efficient online, so they are no longer worth the bother. But people will always want to join networking events with a tangible value. In-person contact still matters. Overseas trips may become fewer and farther between, though, so everyone will have to choose what remains relevant. Boondoggles are out. Networking events that are truly worth the time and travel will come back, eventually.
Working Towards a Brighter Future
During the times of COVID, lawyers and law firms were lucky. We weathered the storm, our books of business remained strong. The world will change many times over, but some principles stay: keeping our client relationships, caring about our associates&#8217; well-being, cultivating our networks and passing them on to the next generation, all of which will make our firms stronger. The future is bright if we approach it with an open mind.

Homburger Bulletin

Back to the Office or Brave New World?

<h4>1. Review of Articles of Association and Internal Regulations</h4>
Companies&#8217; existing articles of association and internal regulations typically do not harness the flexibility offered by the new law and may contain provisions that do not comply with the new rules. These provisions will remain in force until January 1, 2025 at the latest, but must be amended by then.
Both listed and private companies are well-advised to review their existing articles of association and internal regulations and to decide whether and when they should be amended. In certain cases, adaptations might already be warranted this year. In other cases, the two-year transition period could also be exhausted.
In principle, companies could add new provisions that will only be permissible under the new law to their articles of association already now. However, the articles must provide that these provisions will only become effective as of January 1, 2023.
<h4>2. Change of Currency and Introduction of Capital Range as of January 1, 2023</h4>
As of January 1, 2023, stock corporations (Aktiengesellschaften) and limited liability companies (GmbH) may express their nominal capital not only in Swiss francs, but also in euros, U.S. dollars, pound sterling or Japanese yen if this is their functional currency. The nominal capital&#8217;s currency may be changed, prospectively or retrospectively, as of the beginning of the company&#8217;s financial year.

Stock corporations may also introduce a capital range (Kapitalband) under which the board of directors is authorized to increase and/or decrease the share capital by up to 50% during up to 5 years. This makes changes in capital considerably easier.
A change of currency or the introduction of a capital range as of January 1, 2023, may already be resolved in 2022. The corresponding amendment to the articles of association has to be conditioned on the new law taking effect. If the articles are amended again before January 1, 2023, the conditional amendment would have to be resolved again.
<h4>3. Planning of the AGM 2023</h4>
As of January 1, 2023, so-called «Covid 19 general meetings» will no longer be permitted. In addition to traditional physical shareholder meetings, the new law allows virtual and hybrid meetings as well as written shareholder resolutions. The new law brings about numerous other changes in connection with shareholder meetings and the exercise of shareholder rights.
It is advisable, particularly for listed companies, to determine the form in which they would like to hold their AGM in the future. Existing processes relating to the AGM should be reviewed and adapted accordingly. In doing so, it has to be taken into account that virtual shareholder meetings (e.g., by video conference) and shareholder meetings outside Switzerland will only be permissible if the articles of association so provide.
<h4>4. Compensation at Listed Companies</h4>
The rules on compensation at listed companies will change as of January 1, 2023. The compensation system and contracts with directors and executive officers should already be reviewed this year for compliance with the new rules. Contracts already existing on January 1, 2023, must be updated by January 1, 2025. After this date, contractual provisions that conflict with the new rules will no longer be enforceable.
If the articles of association provide for a forward-looking shareholder vote on variable compensation, the compensation report for 2023 and the following financial years must be submitted to a non-binding shareholder vote.
<h4>5. Financial and Non-Financial Reporting, Due Diligence Obligations</h4>
The (few) new financial reporting rules according to the Swiss Code of Obligations and rules regarding the compensation report must be implemented for the first time in the annual report for the year 2023.
The due diligence and reporting obligations regarding conflict minerals and child labor, as well as the reporting obligations for natural resource companies and regarding non-financial matters are already in force. Companies that are subject to these obligations must apply the new due diligence requirements from the financial year 2023 and report on these matters for the first time in their annual report for the year 2023. For more information please refer to the <a href="https://www.homburger.ch/en/insights/new-esg-due-diligence-and-reporting-obligations-enter-into">Homburger Bulletin of December 8, 2021</a>.
* * *
Homburger will be holding events on the new corporation law in the course of this year. If you are interested in receiving an invitation, please feel free to contact the author of this bulletin or write to <a href="mailto:corporate-law-reform@homburger.ch">corporate-law-reform@homburger.ch</a>.
<a href="https://cms.homburger.ch/wp-content/uploads/2022/02/Homburger-Bulletin-Entr%C3%A9e-en-vigueur-du-droit-de-la-SA-FR-1.pdf">French version</a>

Homburger_Illu_AGRev_preview_2020_09

New Corporation Law as of January 1, 2023: What Action Is Required?

Corporate Governance

Corporate / M&A

Private Clients

On November 15, 2022, International Law Office (ILO) and Lexology announced the winners of this year&#8217;s Client Choice Awards.
Claudia Suter received an award in the field of Private Clients, Andreas Müller received an award in the category Corporate Governance and David Oser has been announced the winner of the M&amp;A award.
Established in 2005, Client Choice recognizes those individuals around the world that stand apart for the excellent client care they provide and the quality of their service. The criteria for this recognition focus on an ability to add real value to clients’ business above and beyond the other players in the market.

Homburger partners Claudia Suter, Andreas Müller and David Oser honored with Client Choice Awards

Arbitration

Financial Market Regulation

Financing and Investment Products

IP / IT

On October 14, 2021, International Law Office (ILO) and Lexology announced the winners of this year&#8217;s Client Choice Awards.
Jürg Frick (Financing and Investment Products, Financial Market Regulation) received an award in the field of Banking, Claude Lambert (Corporate / M&amp;A, Corporate Governance) received an award in the category Corporate Governance, Gabrielle Nater-Bass (Arbitration) has been announced the winner of the Arbitration award and Georg Rauber (IP/IT) received an award in the category IP &#8211; Patents.
Established in 2005, Client Choice recognizes those individuals around the world that stand apart for the excellent client care they provide and the quality of their service. The criteria for this recognition focus on an ability to add real value to clients’ business above and beyond the other players in the market. Uniquely, lawyers can be nominated only by corporate counsel, with this year’s winners chosen from a pool of more than 2&#8217;000 individual client assessments.

Homburger partners Jürg Frick, Claude Lambert, Gabrielle Nater-Bass and Georg Rauber honored with Client Choice Awards

Competition

Regulatory

At this year&#8217;s Who&#8217;s Who Legal Switzerland Awards on March 9, 2021, Homburger received the Who&#8217;s Who Legal Switzerland 2021 awards in the categories &#8220;Banking Firm of the Year&#8221;, &#8220;Competition Firm of the Year&#8221; and &#8220;M&amp;A Firm of the Year&#8221;. In addition, the following Homburger lawyers were honored with individual awards: Jürg Frick received the &#8220;Banking Lawyer of the Year&#8221; award, Daniel Daeniker received the &#8220;Corporate Governance Lawyer of the Year&#8221; and &#8220;M&amp;A Lawyer of the Year&#8221; awards, and Stefan Oesterhelt was honored again with the &#8220;Corporate Tax Lawyer of the Year&#8221; award.
Each year Who&#8217;s Who Legal presents awards to individuals and firms that have performed exceptionally well in Who&#8217;s Who Legal&#8217;s research. After an in-depth analysis, Who&#8217;s Who Legal identifies a lawyer and a firm of the year in each of the featured practice areas.

Corporate Governance

Main Contacts

Shareholder Activism: New Year, New Challenges

Back to the Office or Brave New World?

New Corporation Law as of January 1, 2023: What Action Is Required?

Homburger partners Claudia Suter, Andreas Müller and David Oser honored with Client Choice Awards

Homburger partners Jürg Frick, Claude Lambert, Gabrielle Nater-Bass and Georg Rauber honored with Client Choice Awards

Homburger awarded with seven Who's Who Legal Switzerland Awards the second time in a row

Corporate governance and directors' duties in Switzerland: overview 2022 / 2023

Ready for the new Swiss corporation law?

Relationship Agreements zwischen Vertragsfreiheit und zwingendem Aktienrecht