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Complying with Swiss Ultimate Beneficial Owner Registers
In 2015, Switzerland introduced provisions on the disclosure of ultimate beneficial owners (UBO) of a Swiss company into the Swiss Code of Obligations (CO). The legal change followed the recommendations of the Financial Action Task Force (FATF), an inter-governmental organization dedicated to the combat of global money laundering and terrorist financing. The following article provides an overview of the rules currently in force for companies limited by shares (“Aktiengesellschaften”, “Société anonyme”) as well as limited liability companies (“Gesellschaften mit beschränkter Haftung”, “Société à responsabilité limitée”).
The UBO register
Any Swiss company listed by shares or with limited liability must keep an internal register of its beneficial owners (Art. 697l CO). In the register, the name of the company, surname and address of the beneficial owner must be included (Art. 967l (2) CO).
This register is neither public nor has to be submitted to a governmental body for central storing. However, the register must at any time be accessible to the authorities in Switzerland (Art. 967l (3) CO).
The ultimate beneficial owner
Anyone who alone or together with a third party acquires shares in an unlisted Swiss company that either reach or exceed 25% of the entire share capital or voting rights must inform the company about the person for whom the acquirer is ultimately acting (the “UBO”; Art. 697j and Art. 790a CO). The deadline to provide this information is one month after acquisition. If any of these information changes, the share- or quotaholder must inform the company within three months accordingly.
Under Swiss law, the UBO is always a natural person. If the (direct) shareholder is a legal entity or partnership, each natural person that controls the said shareholder must be recorded. If no such person with control can be identified, the share- or quotaholder needs to notify the lack of a UBO to the company.
If the shares or quotas are (ultimately) held by a listed company, no UBO has to be identified. The share- or quotaholder must merely inform the company about the fact that it is listed and provide its name and address. The rationale is that the disclosure rules of the stock exchanges already ensure the desired transparency.
Group of companies and ultimate beneficial owners
In a group of companies, any natural person that controls the share- or quotaholder must be reported. This rule only applies on the condition that the first tier of control between the two companies reaches or exceeds the threshold of 25% of the share capital or voting rights. Control is assumed when the natural person (Art. 963(2) CO by analogy):
- Directly or indirectly holds a majority of votes in the supreme management body;
- Directly or indirectly has the right to appoint or remove a majority of the members of the supreme management or administrative body; or
- Is able to exercise a controlling influence based on the articles of association, the foundation deed, a contract or comparable instruments.
If these means of control are present it is irrelevant whether control is in fact exerted or not.
Sanctions
Whilst it is the duty of the company and members of the board of directors to have an UBO registry, the UBO reporting obligation is primarily a duty of the shareholder with strict consequence if not complied with. Failure to comply with it results in membership rights of the share- or quotaholder (voting rights, etc.) are dormant until due notice of the UBO was given to the company (Art. 967m (1) CO). Similarly, the rights to dividends or other financial gains can only be exercised after the notification was made (Art. 967m (2) CO). If the share- or quotaholder misses the one-month deadline to notify the company about the UBO, the property rights (e.g., dividends and other entitlements to proceed, etc.) are forfeited (Art. 967m (3) CO). In addition, an intentional non-notification may be fined pursuant to Art. 327 of the Swiss Criminal Code.
Outlook
On the 12th of October 2022, the Federal Council mandated a bill to increase the transparency in UBOs of legal entities. To that aim, the bill shall introduce a central UBO register. This register shall, however, not be public and only made accessible to the relevant authorities. The departments must submit the draft bill to Parliament by June 2023. The possible entry into force of the new law is not yet determined but, in any event, unlikely to occur before 2024 (at the earliest).
André Brunschweiler, Yael Dubno, Laura Knöpfel
LALIVE SA