Reporting beneficial ownership
On July 1 2015, a new Swiss law entered into force, which implements the recommendations of the international Groupe d'action financière (GAFI) aimed at preventing money laundering and tax evasion. According to the new legislation, any person or entity acquiring (including via primary subscription) - alone or in concert with third parties - shares representing 25% or more of the share capital or voting rights in a non-listed Swiss stock corporation, must notify the corporation of the name and address of the ultimate beneficial owner of the acquiring entity (article 697j of the Code of Obligations - the CO). The deadline for notification is one month from closing the acquisition. Later changes regarding the name or address of the beneficial owner must also be disclosed. Identical reporting obligations exist regarding limited liability companies.
Interestingly, the new rules impose a reporting obligation on the acquiring entity although it may not know who its ultimate beneficial owners are. According to the federal government's explanatory notes regarding the draft legislation submitted to parliament, the acquiring entity must undertake inquiry efforts and make the notification to its best knowledge. If the acquirer simply makes a notification without knowing its beneficial owner it risks sanctions of non-compliance.
As there is no case law on the new regulations yet, their interpretation remains uncertain.
Who must be disclosed
While the new article 697j CO states that the beneficial owner to be reported must be a natural person, it is silent on who qualifies as beneficial owner in holding structures. This ambiguity has caused a debate among legal scholars and practitioners about who shall be disclosed as beneficial owner of an acquisition company - indirectly - held by a private equity fund to acquire a Swiss target company.
In the authors' view, in line with the European Union's interpretation of the GAFI rules (directive 2015/849) the natural person(s) exercising actual control over an entity should be considered as beneficial owner in the sense of the provision. In standard private equity setups, the general partner (GP) usually controls the decisions of the fund and the acquisition company. Therefore, the individuals ultimately controlling the GP are the beneficial owners of the acquisition company in the sense of the new legislation and should be disclosed.
If these individuals cannot be determined, the...