Legal developments in the field of Corporate Governance in Switzerland

Feb 07, 2022

Switzerland is yet to adopt a binding code for the regulation of the matters relating to corporate governance. There are some existing bindings Acts, rules, ordinances, and stock exchange regulations as well as several non-binding codes developed by private organisations where provisions for the regulation of the corporate governance matters can be found, however an exhaustive list of provisions is yet to be introduced.

The good news is that the Swiss parliament in the year of 2020 approved a bill. It is believed that these new provisions in the Swiss Code of Obligations (CO) shall modernize Swiss corporate law from an overall perspective while adhering to its core principles. While it is presumed that most of these provisions shall take effect in 2022, some provisions have already entered into force at the beginning of 2021. Some legal developments in corporate governance arena in Switzerland have been highlighted below.

  1. A new provision (new article 734f CO) as regards gender quota has been introduced. The implementation of this provision works on a comply-or-explain basis. Though the new provisions have already taken effect in Switzerland, however, they are still subject to long transition periods. As per this gender quota provision each gender must be represented on the board of directors at least by 30% starting from 2026, and by 20% in the executive management starting from 2031. Since the implementation of this provision works on comply-or-explain basis, companies therefore will not be sanctioned if they cannot reach the targets set out in the provision. The companies will nevertheless have to divulge the reasons of their non-compliance in the report of compensation.
  2. Say-on-pay (that includes an annual binding say-on-pay vote) rules and regulations currently enshrined in the Ordinance against Excessive Compensation (OaEC) will be moved to the CO. Some new adjustments have been brought to the existing ones such as regulation of post-contractual non-compete agreement which is also known as ‘restrictive covenants’. As per this sterner regulation, irrespective of the stint of the post contractual non-compete agreement, the total compensation has now been fixed at the annual average compensation of the last three years.
  3. Developments have been brought to some other rules of corporate governance as well such as:

a) the rights of shareholders, where the new and lower threshold shareholders will now be able to put items on the agenda,

b) rules on general meetings, which will include virtual or online meetings as well as expedition of electronic distribution of documents,

c) powers of shareholders, where the shareholders will now be required to approve de-listing.

Mohammed Rakib-ul-Hassan
Legal Research Analyst
Zazoon AG

Please get in touch should you face corporate governance challenges info@zazoon.com

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