The Takeover Board (TOB) has recently changed its practice relating to the lawfulness under Swiss takeover law of impliedly privileging opting-out or -up clauses (Decision 518/01 – Advanced Digital Broadcast Holdings AG of October 11, 2012). Opting-out or –up clauses (hereafter "opting–clauses") are provisions in the articles of association of a listed company that release potential control purchasers from their statutory obligation to make a public offer for all outstanding shares (opting-out) or increase the relevant threshold from 33 1/3% to 49% (opting-up). They qualify as impliedly privileging if worded generally, but essentially intended for the benefit of a particular potential control purchaser (hereafter "Impliedly Privileging Opting-Clauses").

In a change to the previous situation, the new TOB practice accepts Impliedly Privileging Opting–Clauses only where the shareholder resolution adopting them is backed by a majority of the minority shareholders participating in the relevant ballot. Minority shareholders are defined as shareholders holding directly, indirectly or in concert with others not more than 33 1/3% in the company's outstanding voting share capital (whether their voting rights are exercisable or not) and neither move the general meeting to adopt the relevant opting–clause nor act in concert with the movants. Further, as in the past, the TOB will not allow the movants and their planned particular control transaction to benefit from an Impliedly Privileging Opting–Clause if the relevant general meeting was not fully informed about the potential control purchaser, its plans and the resulting consequences for the minority shareholders.

In the event that a majority of the minority shareholders participating in the ballot votes against the proposed Impliedly Privileging Opting–Clause the latter is invalid under Swiss takeover law unless the TOB can be convinced that for some exceptional specific circumstances the company's interest in it prevails. According to the TOB, the purchase of a controlling stake in a financially distressed company by a new investor may qualify as such exceptional specific particular circumstance, but a company's interest in control stability for the sake of a strategy change or the prospects for a temporarily increased stock price or stock liquidity do not (only the latter arguments were raised in the Advanced Digital Broadcast Holdings case).
 

In the event that a majority of the minority shareholders participating in the ballot votes, on a fully informed basis, for a proposed Impliedly Privileging Opting–Clause the latter is basically valid under Swiss takeover law, but - as in the past – still subject to an action for annulment under Swiss corporate law (Sec. 706 of the Swiss Code of Obligations; such actions forfeit unless brought within 2 months from the relevant general meeting) and further, there must be no abuse of rights. With respect to the abuse of rights' proviso, the TOB referenced, in its Advanced Digital Broadcast Holdings decision, its unpublished February 3, 2012 decision qualifying an impliedly privileging opting-out clause as abusive because it was embedded in a heavily diluting capital increase resolution that would have resulted in a fundamental change of control and strategy.
Although the TOB has, in its Advanced Digital Broadcast Holdings decision, tightened its practice on the lawfulness of Impliedly Privileging Opting–Clauses, the changed practice is still at odds with the absolute ban of explicitly privileging opting-clauses (established by the Swiss Banking Commission - today FINMA - in its June 23, 2000 decision re. Esec Holding AG). Explicitly privileging opting-clauses limit their scope to a possible particular control transaction by an explicitly named potential control purchaser. Banning them, whilst accepting Impliedly Privileging Opting-Clauses, means forcing potential control purchasers to throw out the baby with the bath water by having the opting-out or opting-up clause introduced broadly where a limited scope would otherwise suffice. It goes without saying, that minority shareholders would prefer explicitly privileging opting-clauses over impliedly privileging ones, at least if equally backed by a fully informed majority of the minority shareholders participating in the ballot. The TOB is aware of this and announced in its Advanced Digital Broadcast Holdings its decision to review the ban of explicitly privileging opting-clauses at a suitable opportunity.

(French) wording of the Advanced Digital Broadcast Holdings decision