Revision of company law | Part 1: Capital and reserves
This article is part of our series of articles summarising the "Revision of the Stock Corporation Law (expected to be in force from 1 January 2023)". We will regularly highlight amended parts of the revision and outline the possible implications for practice.
Adaptations and implications for practice
Share capital in foreign currency
Since the revision of the accounting law in 2013, a company's accounts can be kept in a foreign currency if this is material for the business activity. This is the case if it corresponds to the primary economic environment of the company (functional currency).
In contrast to the accounting law, the share capital must be stated in Swiss francs under the current law(Art. 621 CO and Art. 45 para. 1 let. h HRegV). In order to ensure consistency between stock corporation law and accounting law, the share capital may now also be stated in the functional currency of the company, provided that the requirements of Art. 621 para. 2 revOR are met.
Above all, companies that already keep their accounts in a foreign currency benefit from this provision and can determine capital-related procedures such as the formation of reserves, dividend distribution or the assessment of over-indebtedness in the chosen currency without having to convert them into Swiss francs. In our opinion, nothing will change for companies that currently keep their accounts in Swiss francs.
Adjustment of the minimum nominal value
The current share law prescribes a minimum par value of 1 centime per share. However, even for shares with a par value of 1 centime, there may still be a need for a share split or a par value reduction, for example, if the company wishes to create new share categories such as voting shares. Therefore, the only new requirement is that the shares must have a par value of more than zero Swiss francs(Art. 622 para. 4 revOR).
The division of shares into smaller shares does not change the individual shareholder's share in the total share capital, provided that all shares are divided into equal parts. By adjusting the minimum nominal value, the public limited company can be more flexible in the denomination of its shares.
Deletion of the provisions on qualified incorporation
In the current law, Art. 628 CO regulates the qualified formation facts of contribution in kind, (intended) acquisition in kind and special advantages. All facts show the increased risk for the creditors that the objects have an uncertain value and thus the liquidity for the company does not exist in the promised amount. Furthermore, the application of the facts of the (intended) takeover of assets in kind is particularly associated with uncertainties, since on the one hand the subjective element of intention causes difficulties and on the other hand it is difficult to recognise when a contribution in kind and when a takeover of assets in kind exists. Since the creditors are already protected by existing regulations of capital maintenance, responsibility and accounting law, the qualified facts will be deleted with the revision. The associated publicity in the articles of association and register will no longer apply.
Despite the deletion of the current Art. 628 CO, qualified incorporations are still permitted. The limit is the abuse of rights by means of sham contributions. Supporting documents must be submitted in accordance with Art. 43 para. 3 and Art. 45 para. 2 revHRegV, whereby the provisions on the submission and registration of acquisitions in kind have been deleted. In the case of mixed contributions in kind and acquisitions in kind, whereby both shares/common stock and a consideration are paid by the company for the assets contributed, the disclosure of the consideration in the articles of association and register remains unchanged.
Capital band
Under current company law, the authorised capital increase is permitted, but not the authorised capital reduction(Art. 651 CO). In addition, the authorised capital increase is limited to 2 years. With the new capital band(Art. 653s ff. revOR) the general meeting can authorise the board of directors to flexibly increase or decrease the share capital by 50% for a period of 5 years. It is also possible to determine only the increase or only the reduction of the capital with the capital band. The capital band thus replaces the authorised capital increase and introduces a new "authorised capital reduction".
The capital band enables the board of directors to react to changes more dynamically and in line with requirements. Capital changes can thus be made immediately without prior request to the creditors and without audit confirmations by auditors.
Reserves
In the current law, the statutory capital and profit reserves are regulated in Art. 671 CO as "general reserves". The voluntary statutory reserves are found in Art. 672 CO. The provisions on reserves are adapted with the revision to the already revised accounting law. Thus, the statutory capital reserve, the statutory profit reserve and the voluntary profit reserve, which can be defined in the articles of association, are now found in Art. 671 ff. revOR. The voluntary reserves may now only be expressly created if the long-term prosperity of the company justifies this. This means that the reserves may not serve non-business or abusive purposes. In addition, it is expressly stipulated that statutory capital reserves may be repaid to the shareholders if the statutory capital and profit reserves, after deduction of any loss carried forward, exceed half (20% in the case of holding companies) of the registered share capital.
Our recommendations for action
We recommend that the statutes and regulations be reviewed by an expert and, if necessary, that the new provisions already be considered in draft form. In this way, the advantages of the new law can be exploited and obsolete articles can be amended with foresight. We will be happy to help you with this.
Source: Dispatch on the amendment of the Code of Obligations (Stock Corporation Act), BBl 2017 399, 23 November 2016.
Do you have any questions about the 2023 revision of company law? Please contact Balthasar Wicki or Sebastian Wälti.