Revision of the Stock Exchange Act

Revised Swiss Takeover Rules

The rules regarding tender offers for Swiss listed companies will be revised as part of the revision of the Stock Exchange Act. We expect the revised provisions to enter into force on April 1, 2013.


1. Scope of Application

In future, the Swiss takeover rules will also apply in the case of tender offers for foreign companies whose equity securities are, at least in part, primarily listed on a Swiss stock exchange. Until now, the scope of application of the Swiss takeover rules required both that the target's corporate domicile is in Switzerland and that its equity securities are, at least in part, listed on a Swiss stock exchange. We expect that there will be hardly any tender offers anymore which are neither subject to the Swiss takeover rules nor to the takeover rules of any other country. Furthermore, if both the Swiss takeover rules and the takeover rules of another country apply, the Swiss takeover rules will give way to the foreign law in case of conflicts, provided that the foreign law provides for an equivalent protection of investors.
 

2. Control Premium

In future, the offer price in mandatory bids and voluntary bids affecting the control of the target will have to be at least as high as the highest price paid by the bidder for equity securities of the target in the preceding twelve months. Thus, it will no longer be possible to pay a control premium to a controlling shareholder or to significant shareholders. The abolition of the control premium is intended to strengthen the equal treatment of shareholders, but was controversial in the parliamentary deliberations.
 

3. Enforcement of the Mandatory Offer Duty

If there is reasonable suspicion that the mandatory offer duty has been violated, the Takeover Board will, in the future, have the competence to suspend voting rights and declare a ban on additional purchases of shares or related derivatives. In addition, intentional violations of the mandatory offer duty will constitute a criminal offense and be punishable with a fine of up to CHF 10 million. As a consequence, the enforcement of the mandatory offer duty will in the future be more effective.
 

4. Takeover Proceedings

Shareholders must in the future hold at least 3% of the voting rights in order to request legal standing in the proceedings before the Takeover Board. Until now, a stake of 2% was sufficient to request legal standing. Consequently, the threshold of the right to participate in the takeover proceedings will correspond to the lowest threshold for the disclosure of significant shareholdings. This means that a bidder will in the future know if and how many significant shareholders can potentially request legal standing and thus complicate the takeover proceedings.
 

The new revisions will further align the Swiss takeover rules with EU law, in particular with regard to the scope of application and the abolition of the control premium. A welcome change is the harmonization of shareholder disclosure and the right to participate in the takeover proceedings as this ensures transparency and thus makes transaction planning easier.
 

We expect the abolition of the control premium to make takeovers of Swiss listed companies more expensive. In addition, it should be noted that there is no transitional provision and that purchases of equity securities made in 2012 can therefore affect the minimum price if the offer is launched after the entry into force of the revised provisions. In order to facilitate change of control transactions, existing controlling shareholders and companies should consider making use of the flexibility granted by the takeover rules and waive the mandatory offer duty ("opting-out") or raise the relevant threshold to up to 49% ("opting-up").

Authors

Dr. Robert Bernet, LL.M.

Attorney at Law
rbernet@vischer.com

Dr. Matthias Glatthaar, LL.M.

Attorney at Law
mglatthaar@vischer.com

VISCHER AG