Swiss Beneficial Owner Form a Pursuant to Art 3 and 4 Cbd
To print this commodity, all you demand is to be registered or login on Mondaq.com.
Equally part of a new Swiss legislation aimed at preventing coin laundering and tax evasion, any entity acquiring 25% or more of a non-listed Swiss visitor must inform the latter regarding the acquiring entity's beneficial owner and update such data in case of changes.
In standard private equity structures, the administrative brunt of the new legislation tin can be minimized by implementing a practicable solution compliant with the rules: As typically the Full general Partner takes the relevant decisions regarding the fund and its portfolio companies, the individuals controlling the General Partner (respectively controlling the ultimate shareholder of the General Partner) should be disclosed every bit beneficial owners. If such individuals cannot be determined, the acme executive officer (chairman or CEO) of the General Partner, respectively of its ultimate shareholder, may be disclosed.
Background
On i July 2015, a new Swiss police force entered into strength to implement the recommendations of the international Groupe d'action financière (GAFI) aimed at preventing money laundering and tax evasion. The new provisions go beyond what would have been required to comply with the GAFI recommendations.
As part of the new legislation, entities acquiring 25% or more than in a not-listed Swiss company must disclose their benign owner to the latter. The aim of the rule is to ensure that the visitor knows its substantial beneficial owners and can quickly relay such information to governmental authorities upon their request.
This Briefing summarizes the virtually relevant aspects of the new notification obligation in typical private disinterestedness structures. For general considerations on the new GAFI regulation (including possible requirements to meliorate existing manufactures of associations), please refer to the Bär & Karrer Briefing of June 2015. We would similar to point out that in that location is no example law yet on the GAFI regulations and that the courts may adopt interpretations that differ from our viewpoint.
Typical Private Equity Structure
Notification Obligation of Acquirers
According to the new article 697j of the Swiss Lawmaking of Obligations ("CO"), any person or entity acquiring (including via primary subscription) – alone or in concert with 3rd parties – bearer or registered shares representing 25% or more of the share capital or voting rights in a non-listed Swiss stock corporation, must notify to the latter the proper name and accost of the ultimate beneficial possessor of the acquiring entity. The borderline for the notification is one month from closing of the conquering. Later changes regarding the proper name or address of the benign owner must also be disclosed. Identical reporting obligations exist regarding Express Liability Companies.
Interestingly, the new rules impose a reporting obligation on the acquiring entity although it may non know who its ultimate benign owners are. According to the explanatory notes of the federal authorities regarding the typhoon legislation submitted to parliament, the acquiring entity has to undertake inquiry efforts and make the notification to its all-time knowledge; if the acquirer simply makes a notification without knowing its beneficial owner, information technology risks sanctions of not-compliance.
Who Must exist Disclosed every bit Beneficial Owner?
While article 697j CO states that the beneficial owner to be reported must be a natural person, it remains silent on who qualifies as benign owner in belongings structures. This ambiguity acquired a debate amongst legal scholars and practitioners about who shall be disclosed as beneficial owner of an acquisition company ("AcquiCo") – indirectly – held past a private equity fund to acquire a Swiss target company (and of the AcquiCo itself if it is a Swiss Company). In curt, the following approaches are discussed:
- As long equally the private equity fund has more than 20 investors, no beneficial possessor must be disclosed, based on an analogous application of art. 66 para. 1 of the FINMA ordinance regarding AML (GwV–FINMA) and fine art. 38 para. one of the banking professional standards regarding duties of care (VSB16). Similarly, no beneficial owner must be reported if the indirect owner of the AcquiCo is a publicly listed company. In this case, stock exchange laws already provide for disclosure obligations (analogous awarding of fine art. 4 para. 1 of the Swiss AML Act).
- Beneficial possessor is an (indirect) investor (or several interim together) that holds on each level of the group structure at to the lowest degree 25%; i.e. an uninterrupted chain of minimum 25% stakes down to the AcquiCo.
- Beneficial owners are investors that – lonely or acting together – indirectly agree 25% or more of the target company (multiplication of shareholdings) and at least factually exercise a certain control over the same. If such threshold is not met, no beneficial possessor needs to be reported.
- In standard private equity setups, the individuals controlling the Full general Partner ("GP"), respectively decision-making the ultimate shareholder of the GP, should exist disclosed as beneficial owners. If information technology cannot be determined who such individuals are, the top executive officer of the GP, respectively of its ultimate shareholder, may be reported.
Our View regarding Private Equity Setups
While the above approaches all base of operations on valid arguments, we consider the final solution to be the most appropriate in a typical private equity context: In line with the interpretation of the GAFI rules past the European union (directive 2015/849), the natural person(s) exercising actual control over an entity should be considered equally beneficial owner in the sense of the provision.
In standard private disinterestedness setups, the GP usually controls the decisions of the fund and the AcquiCo. Hence, in our view the individuals ultimately decision-making the GP are the benign owners of the AcquiCo in the sense of the new legislation and should be disclosed. If such individuals cannot be determined, the top executive officeholder of the GP, respectively of its ultimate shareholder, may be reported instead in our view (CEO, chairman of the board or other persons, depending on the structure).
A different reporting obligation may exist depending on the specific circumstances. If, for case, based on the actual contractual setup in place, a Limited Partner ("LP") tin exercise command over the fund (instead of, or together with, the GP), the individuals controlling such LP should exist disclosed as beneficial owners (instead of the GP or in improver to it).
The to a higher place solution has the advantage that – dissimilar in the other approaches – a benign possessor is reported in whatsoever instance. Should a courtroom in the future take a dissimilar stance on who must be disclosed as beneficial owner, the AcquiCo can still claim that information technology reported in good faith the persons it considered as beneficial owners rather than not having disclosed any benign owner at all.
Register Obligation of the Company
Based on new fine art. 697l CO, the target company (and a Swiss AcquiCo) must maintain a register of the beneficial owners disclosed to it and keep all supporting documents. Such annals must be accessible in Switzerland past a director or officer with signatory power and residing in Switzerland (art. 718 para. 4 CO).
Sanctions
If an acquiring entity does not comply with its disclosure obligation regarding beneficial owners, its voting rights in the Swiss visitor are suspended until notification is made (fine art. 697m para. 1 CO).
Further, the acquiring entity's right to dividends (and repayment of majuscule) is irrevocably forfeited for the menstruum until disclosure is made (art. 697m para. ii and three CO). Any dividends paid out prior to a notification could be reclaimed by the company; which could primarily go relevant in a bankruptcy of the latter and may touch dividend recaps.
The lath of a Swiss company must procure that no shareholder exercises voting rights or receives dividends while violating its disclosure obligation (art. 679m para. four CO). Board members not living upwardly to this duty may become liable for damage caused, which is again primarily relevant in a bankruptcy scenario.
It may be noted that parliament decided – confronting the proposition of the federal government – not to innovate criminal sanctions for violations of the disclosure obligation under fine art. 697j CO.
Bearer Shares
If a company has issued bearer shares, all shareholders and any acquirer of shares face additional disclosure obligations. In example portfolio companies notwithstanding accept bearer shares issued, we recommend to convert them into registered shares to avert unnecessary administrative burden.
The content of this article is intended to provide a general guide to the subject matter. Specialist communication should exist sought near your specific circumstances.
Source: https://www.mondaq.com/shareholders/492670/reporting-of-beneficial-ownership-in-swiss-private-equity-acquisitions
Postar um comentário for "Swiss Beneficial Owner Form a Pursuant to Art 3 and 4 Cbd"