Automatic Conversion of Bearer Shares into Registered Shares
After May 1, 2021, bearer shares (with a few exceptions) will be converted into registered shares by operation of law. Holders of bearer shares must notify the company of their shares by the end of April 2021 if they have not yet done so. After that, registration as a shareholder can only be requested at court. Companies that have issued bearer shares also need to take action in this respect.
In recent years, in response to international criticism of bearer shares, the Swiss parliament has taken various measures which, taken as a whole, all but abolish bearer shares.
Obligation to report the acquisition of bearer shares
Since July 2015, all acquisitions of bearer shares must be reported to the company. The company, in turn, must keep a list of its shareholders holding bearer shares. This reporting obligation does not apply if the company is listed or if the bearer shares have the form of intermediated securities.
Conversion by law
As from May 1, 2021, bearer shares will only be permissible if one of the following exceptions applies:
- The company is listed on a stock exchange. It is sufficient that a specific category of shares, participation certificates or dividend right certificates is listed. The bearer shares themselves do not have to be listed.
- The bearer shares are structured as intermediated securities (e., they are held via the banking system) and are deposited with a custodian in Switzerland or are registered in the main register.
In addition, the company must record the fact that it relies on one of these exceptions in the commercial register by May 1, 2021. If none of these exceptions apply or if the company has failed to register the exception, the bearer shares of the companies in question will be converted into registered shares by operation of law after May 1, 2021. The same will apply to bearer participation certificates.
The conversion will take effect irrespective of any provisions in the articles of association stating the contrary, and irrespective of whether physical share certificates have been issued or not.
Consequences for shareholders
If a holder of bearer shares has failed to notify the company of the fact that they hold bearer shares as well as of the number of bearer shares held – or has not enclosed the legally required documents – by May 1, 2021, the company is not entitled to register such shareholder in the share register. The membership rights of such shareholder are suspended and their economic rights are forfeited.
After May 1, 2021, a shareholder can only apply to the court, with the prior consent of the company, in order to be registered as a shareholder. To do so, shareholders would have to prove their status as a shareholder. The shares of shareholders who have not applied to the court for entry in the share register by October 31, 2024, will then become null and void by operation of law.
Consequences for Companies
Companies whose bearer shares are converted into registered shares by operation of law after May 1, 2021, must, from then on, keep a share register in which the shareholder information has to be recorded. The board of directors must ensure that shareholders who have not complied with the notification requirements cannot exercise their rights. The board of directors also has to make an annotation in the share register to that effect.
It should be noted that the converted shares can be freely transferred. If, at the time of the conversion, the company already had registered shares outstanding whose transferability was restricted, there will be two categories after the conversion – registered shares with and without restricted transferability.
If physical share certificates have been issued for the converted shares, the board of directors must, to the extent possible, withdraw them and replace them with registered shares.
The companies whose shares have been converted must update their articles of association the next time they amend them. Until then, the commercial register has to reject the registration of other amendments to the articles of association in the commercial register. However, other registrations (such as personnel changes) are still possible.
Holders of bearer shares and companies that have issued bearer shares are advised to check carefully in the next weeks whether there is a need for action. Holders of bearer shares should submit a complete notification to the company by the end of April 2021. For non-listed companies that have issued bearer shares, it may be worthwhile to voluntarily convert them into registered shares by the end of April 2021.
This Bulletin expresses general views of the authors as of the date of this Bulletin, without considering any particular fact pattern or circumstances. It does not constitute legal advice. Any liability for the accuracy, correctness, completeness or fairness of the contents of this Bulletin is explicitly excluded.