Introduction Of Foreign Investment Control In Switzerland ' Federal Council Publishes Preliminary Draft Legislation

• Published date: 25 May 2022
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, M&A/Private Equity, Inward/ Foreign Investment, Corporate and Company Law
• Law Firm: Lenz & Staehelin
• Author: Marcel Meinhardt, Astrid Waser, Beno't Merkt and Sevan Antreasyan

As requested by Parliament, the Federal Council has published a preliminary draft legislation for consultation seeking to introduce foreign investment control in Switzerland. With the planned introduction of foreign investment control, Switzerland is following an international trend towards stricter regulation of foreign investments.

Background

Despite Switzerland being one of the world's largest recipients of foreign investments, it does not yet have a cross-sector regime for the systematic screening of foreign direct investments in place. The newly published preliminary draft legistlation seeks to introduce a targeted and administratively lean foreign investment control in Switzerland.

Acquisitions Subject to Approval

The preliminary draft legislation provides for a cross-sector as well as a sector-specific review of acquisitions. It also foresees a de minimis exemption.

The cross-sector review is intended to cover acquisitions by foreign investors that are directly or indirectly controlled by a state entity.

A sector-specific review is proposed to be introduced for acquisitions in ceratin sectors without restrictions to the type of investor covered (i.e. also including private foreign investors). A distinction will be made between acquisitions (i) of companies in sectors traditionally deemed relevant for national security such as the defence industry, operation of power plants or the supply of important security-relevant IT systems for Swiss authorities, and (ii) of companies in other sectors in which risks to public order or security cannot be completely ruled out. The latter includes, for example, university hospitals or pharamceutical companies. For the second category of companies, only acquisitions exceeding a turnover threshold of CHF 100 million have to be notified, according to the proposal.

A general exemption (de minimis) is foreseen for acquisitions of small domestic companies (with less than 50 full-time employees and worldwide annual turnover of less than CHF 10 million in the past two business years).

According to the preliminary draft legislation, only acquisitions through which an investor directly or indirectly acquires control over a company or parts thereof have to be notified. The concept of control is modeled on competition law. Minority shareholdings without the acquisition of control are therefore not covered.

It is yet unclear whether the acquisition of Swiss subsidiaries of foreign groups of companies will also fall under the...