1) What legislation governs M&A activity in Switzerland?
Public M&A transactions in the form of public tender offers are governed by the Federal Act on Stock Exchange and Securities Trading (SESTA) and its implementing regulations. The SESTA governs both friendly and hostile public tender offers. Its overall goal is to ensure transparency, fairness and equal treatment of shareholders.
The SESTA applies to public tender offers for cash or securities, or a mix thereof, that are made to holders of equity securities of (i) Swiss resident companies whose equity securities are listed on a Swiss exchange or (ii), in exceptional circumstances, companies incorporated outside Switzerland whose equity securities are listed on a Swiss exchange – provided that management control of that company is in Switzerland.
In addition, the SESTA includes rules on (i) the squeeze-out of shareholders that continue to hold shares in the target, upon acquisition by the bidder of 98% of the target's voting rights through its public tender offer; (ii) mandatory offers (see Question 8); and (iii) the public disclosure of beneficial ownership upon reach of certain thresholds (see Question 5).
The Federal Merger Act governs above all (i) statutory mergers (including by means of a triangular merger) and (ii) demergers in the form of spin-offs and split-offs. Various other rules may also apply to public and private M&A activity, including disclosure requirements in relation to pricesensitive information (ad hoc publicity) and insider trading and market manipulation provisions.
2) How, and to what extent, is foreign involvement in M&A transactions in Switzerland regulated or restricted?
Currently, there are no general restrictions on capital transactions between Switzerland and foreign investors that would allow governmental agencies to influence or restrict the completion of business combinations or other M&A transactions. There are, however, industry-specific restrictions, such as with regard to financial services, radio and television, telecommunications and transportation (see further Question 12).
As to real estate, the Federal Act on the Acquisition of Real Estate by Persons Abroad restricts the acquisition by a foreign person or a foreign-controlled company of residential real estate (but not commercial real estate) in Switzerland. The acquisition of shares in a company whose statutory or factual business purpose is trading in non-commercial real estate is also subject to approval, except if the shares of that company are traded on a stock exchange.
3) What restrictions are placed on corporate reorganisation structures, such as statutory mergers, stock swaps, corporate spin-offs, or transfers of the business?
The Federal Merger Act provides for a variety of instruments to accomplish corporate reorganisations – for example, merger, demerger, or transformation (change of corporate form; see Question 1). Statutory mergers and other reorganisation instruments are subject to a formalised procedure. Generally, the following formalities are required:
A merger or demerger agreement or a conversion plan, as the case may be, by the company or between the companies; A merger, demerger or conversion report by the board of directors of the companies involved; An auditors' audit and a report; Resolutions by each company's shareholders; Registration in the commercial register; Creditor protection procedures and consultation of employees. In relation to demerger transactions, it is possible to dispense with some of these formalities if a two-step approach is applied. In the first step, the relevant assets and liabilities of the target are transferred to and assumed by a subsidiary of the target. In the second step, the shares of that affiliate are then distributed to the shareholders of the transferring company (for example, in the form of a dividend in kind or a capital reduction).
4) What merger methods are available to prospective foreign acquirers of companies in Switzerland?
One way of obtaining control of a (public or private) company is by statutory merger. A statutory merger may be effected by absorption (one company is dissolved and merged into another) or by combination (two companies are dissolved and merged into a newly formed company). In both cases, the assets and liabilities of the dissolved companies are transferred by operation of law to the surviving company. Shares and cash may be used as consideration. If shareholders do not receive shares in the surviving company but instead receive cash or any other form of consideration (such as a third company's shares or debt securities), 90% of all voting securities outstanding of the transferring company are required to approve the merger. A merger by absorption may also be effected as a (forward) triangular merger.
However, pursuant to the prevalent scholarly opinion (which is considered a persuasive source of law in Switzerland), a forward triangular...