Switzerland - Scope Of Application Of Swiss Takeover Rules

This article was originally published within the International Mergers & Acquisitions Review 2012. Please visit www.euromoney-yearbooks.com for further details.

If an acquisition of a company is subject to the Swiss takeover rules, articles 22 et seq. of the Federal Act on Stock Exchanges and Securities Trading (Stock Exchange Act, SESTA) and the Ordinance of the Takeover Board on Public Takeover Offers (Takeover Ordinance, TOO) impose a number of obligations on the offeror, the persons acting in concert with the offeror as well as the board of directors and significant shareholders of the target company. Such legal entities or persons thus have great interest in knowing whether or not (or to which extent) the Swiss takeover rules apply. This article aims to firstly briefly outline the scope of the application of articles 22 et seq. SESTA and to secondly allude to the topic of analogous application of such rules.

Scope of application

According to article 22 paragraph 1 SESTA, the Swiss takeover rules shall apply to public takeover offers (PTO) for holdingsin Swiss companies whose equity securities are, in whole or in part, listed on a Swiss stock exchange.

Public offer for equity securities

"Equity securities" pursuant to article 22 paragraph 1 SESTA means shares (Aktien), participation certificates (Partizipationsscheine) and bonus certificates (Genussscheine). Unless combined with option or convertible rights, bonds and other debt instruments are not subject to the Swiss takeover rules.

SESTA does not necessarily require a formal "offer" in the sense of article 3 paragraph 1 of the Swiss Code of Obligations (CO) for a contract to be concluded, but rather focuses on the question of whether the shareholders are in fact invited to tender their shares, irrespective of the form and shape of such invitation. Accordingly, an offeror may not escape the Swiss takeover rules if it structures the transaction as an invitation to make an offer or issuance of derivatives. In order to qualify as an offer pursuant to article 2 lit. e SESTA, a public announcement regarding an offer must, from an offeree's perspective, to a certain minimum degree, be considered binding and sufficiently concrete.

Further, it is unclear what the term "public" precisely means and depends on the particular circumstances, especially on whether the offerees are in a position to negotiate rather than merely accept or reject an offer. Obviously, the more fragmented the shareholder base is, the weaker the negotiation power of the individual shareholder is. Therefore, the crucial factor for the Swiss Takeover Board (TOB) is the quantity of offerees, whereas the quality of the offerees (i.e. whether the offerees are institutional investors or not) is irrelevant. This means that if a shareholder does not publicly communicate its purchase intention but rather purchases shares via single block trades (at the or outside the stock exchange), the transaction is not deemed a public offer even if large numbers of shares are acquired according to a plan.

It is not always easy to distinguish PTOs from other transaction structures. For the TOB, it is essential that the shareholders are offered a choice, i.e. to either keep or tender their shares. Thus, a merger for example is not subject to the Swiss takeover rules because for the shareholders of the transferring entity the exchange of shares is compulsory.

Swiss target company

In accordance with the Swiss principle of incorporation (Inkorporationsprinzip) set...