The overwhelming majority of the over 100 participants in the consultation process approved the preliminary draft prepared by the Federal Department of Justice and Police (FDJP) as a whole, endorsing the need for legislative action. However, the bill, the aim of which is to modernize company law and adapt it to the country's economic needs, will have to be revised to take account of the views expressed.

The proposals to improve corporate governance were particularly controversial. On the one hand, the new measures aimed at achieving a balance between the governing and executive bodies of a company, making internal company procedures properly transparent and securing the position of shareholders as the owners of the company were welcomed. On the other hand, however, the extension of shareholders' rights and the reorganization of the way institutional voting rights are represented met with some opposition. The provisions concerning the disclosure of senior management pay and the annual election of the Board of Directors were also the subject of dispute. The proposal to limit auditors' liability likewise came in for some criticism.

Bearer shares retained

The new measures relating to capital structures also met with broad approval. In particular, the introduction of the "capital band" was generally welcomed. The capital band enables a company to increase and reduce its share capital within a specific range by following a simplified procedure. By contrast, the abolition of bearer shares came in for some fierce criticism. Business associations in particular are keen to retain bearer shares as they believe this would preserve the room for manoeuvre currently enjoyed by companies when designing their capital structures. In view of this powerful resistance, the Federal Council decided not to abolish bearer shares as part of the current company law reform.

The proposals to modernize annual general meetings also received a positive response. The use of electronic media in the preparation and holding of annual general meetings was considered an important contribution to updating Swiss company law.

Relationship to tax law revised

The complete overhaul of Switzerland's very outdated accounting and reporting legislation was generally given a positive reception. The main issue to arise was the revision of the proposed relationship with tax law. The preliminary bill stated that depreciation, writedowns and provisions must be reversed in a company's balance sheet if they are not accepted by the tax authorities. Many of the participants in the consultation process resolutely rejected this proposal on the grounds that it would be inappropriate for tax law to be the deciding factor in respect of balance sheets, which are governed by commercial law. They proposed publishing the amount of any set-off in an appendix to the annual accounts rather than including set-offs in the balance sheet. The Federal Council endorsed this proposal as it achieves the desired transparency in financial statements.

Reform of Swiss company law approved in principle