M&A – Main differences between Share Deals and Asset Deals in Switzerland

• The Share Purchase Agreement (SPA) needs to be carefully tailored in order to include appropriate representations, warranties and indemnities (in particular for deferred taxes and social security contributions).
• No mandatory legal requirements as to the content of the SPA.
  

• Sale of assets or activities of registered sole proprietorships or registered corporations is governed by the Merger Act.
• Purchase Agreement must be in writing (in case of a transfer of real estate, notarization is required) and must provide for the following mandatory legal requirements:
• Name / domicile / legal form of the concerned companies 
• Inventory of assets and liabilities (to be listed individually) to be transferred (transfer of assets only allowed in case of an assets surplus) 
• Total value of assets and liabilities to be transferred
• Consideration for assets and liabilities to be transferred o List of employment relationships to be transferred
• Purchase Agreement to be signed by the board of the concerned companies
  

Limited/Stock Company (Ltd.) 

• No mandatory legal prescription as to the transferability of registered shares if share capital is fully paid in, unless Articles of Association provide for a restriction. 
• Transfer of registered shares by seller’s endorsement + board visa of share certificate; transfer of certified bearer shares by handover of certified share; transfer of uncertified registered shares and bearer shares by written transfer agreement.
• Bearer shares are – since November 1, 2019 – only permitted if:
• the company has equity securities listed on a stock exchange, or 
• the shares are organized as intermediated securities in accordance with the Intermediated Securities Act and
• deposited with a custodian in Switzerland designated by the company or 
• entered in the main register.

Should the target company not fulfil such conditions but nevertheless have bearer shares, the existing bearer shares must be converted into registered shares by April 30, 2021.

• Entries of transfers in company’s share registries and accounts. 
• In case of acquisition of > 25% of the share capital or of the voting rights (registered or bearer shares), obligation to report ultimate beneficial owner to the company within a month’s period; if the shareholder is a legal entity, partnership or corporation, the person who controls the shareholder must be named.

Limited Liability Company (Sàrl) 

• Transfer must take a written form.
• Approval of the shareholders is necessary (at least 2/3 of votes represented and absolute majority of the share capital for which the right to vote may be exercised). 
• In case of the acquisition of > 25% of the share capital or of the voting rights, obligation to report ultimate beneficial owner to the company within a month’s period; if the shareholder is a legal entity, partnership or corporation, the person who controls the shareholder must be named. 
• Sàrl must be represented by a manager/director with an address in Switzerland. 
• No need to adapt Articles of Association, unless purpose or seat of the target company is changed.
  

• Consultation of the employees’ representative body (such body may ask the judge that the Commercial Register does not register the asset deal in case it has not been heard)
• Board to register Purchase Agreement with the Commercial Register (constitutive effectiveness).
• Board of the transferring company to inform shareholders of the transfer of assets either in the annex to the annual financial statement or at the next general meeting, except where transferred assets are  5% of the balance sum of the transferring company. 
• Joint liability during 3 years from publication of Purchase Agreement for all transferred liabilities.
  

• No transactional tax.
• In case of a sale of the shares by an individual, the capital gain may be tax free under certain circumstances (domicile in Switzerland and subject to the purchase price not being paid with assets/future earnings of the target company).
• In case of a sale of the shares by a company, the gain is taxable (profit tax); if the participation is > 10%, a participation exemption applies.
  

• No transactional tax. 
• In principle, taxable realisation of hidden reserves (i.e. difference purchase price – book value); under certain conditions, the transfer may be tax-neutral (procedure of regulated transfer of assets). 
• In case real estate is transferred, depending on the Canton, tax on profits from real estate may apply.