Legally compliant share transfer in Switzerland: what you need to know

Introduction

In the life cycle of most Swiss stock corporations, there are occasional changes in the composition of ownership. The legally compliant transfer of shares and ownership thereof is a central component of the purchase and sale of unlisted securities. However, this process is subject to certain legal requirements in order to make the transfer of ownership clear, legally effective and secure. In this blog, we explain why a declaration of assignment (cession) is essential, what the requirements are and how you can avoid mistakes when transferring shares.

Table of contents

1. Legal basis for the transfer of shares
2. The importance of assignment in the transfer
3. Formal requirements for a valid declaration of assignment
4. Risks in the absence of documentation
5. Konsento: Electronic share register for legally compliant transactions
6. Conclusion

Legal basis for the transfer of shares

The transfer of shares issued as uncertificated securities takes place in two stages under Swiss law:

1. Commitment transactionThis is the purchase agreement or another agreement that forms the basis for the transfer. The binding transaction does not require a specific form, i.e. it can also be made verbally, although a share purchase agreement is usually concluded. 
2. Disposal transactionThis is implemented by means of a written declaration of assignment (also known as an assignment), which legally transfers ownership of the shares. Strict and indispensable formal requirements therefore apply, which we present in more detail below.

The importance of assignment in the transfer

Assignment is at the heart of the transfer of ownership of shares. It ensures that the claim - in this case the rights to the shares - is transferred in a legally correct manner. Without a valid assignment, the transfer of ownership remains incomplete, which can lead to legal uncertainties and potential conflicts.

Formal requirements for a valid declaration of assignment

The following criteria must be met for a declaration of assignment to be legally effective:

• Written formThe declaration of assignment must be recorded in writing and signed. 
• Precise description of the claimThe shares to be assigned and the issuer must be clearly identified or identifiable.
• Will to assignThe assignor (seller) must clearly declare his intention to assign.
• Signature of the assignorOnly the seller is obliged to sign. The signature of the assignee (buyer) is not required. The seller's signature must be either handwritten on paper or by Qualified Electronic Signature (QES) on a PDF document. However, notarization by a notary is not necessary. 
• Party informationThe names and addresses of assignor and assignee should be indicated to ensure the identity of the parties.
• DatingThe date of the transfer should be recorded in order to clearly document the chronological order of several sellers of the same share.

Risks in the absence of documentation

If a declaration of assignment (cession) under Swiss law has not been drawn up or can no longer be found, there are serious consequences:

Effects on the buyer

• No legal ownershipWithout assignment, the buyer does not acquire legal ownership of the shares.
• Restrictions on shareholder rights:
  • No legal entry in the share register
  • No entitlement to dividends
  • No entitlement to liquidation or sales proceeds
  • No valid exercise of voting rights at Annual General Meetings

Effects on the stock corporation

• Gap in the chain of ownershipWithout complete documentation, the public limited company cannot prove an unbroken chain of ownership. This leads to legal and operational problems.
• Risks associated with sales proceedsThe original seller remains the legal owner and could later assert claims, especially if the share value increases.
• Problems with due diligence and exitProfessional investors check that the chain of ownership is fully documented. If even one assignment is missing, this can prevent investments or a sale of the public limited company and thus block an exit.
• Contestable resolutions of the Annual General MeetingResolutions in which shareholders who are not lawfully entered in the share register have participated are contestable. This jeopardizes the company's legal certainty and ability to act.

Missing or inadequate declarations of assignment have far-reaching consequences. They prevent the lawful acquisition of ownership, damage shareholders' rights, lead to uncertainties in general meeting resolutions and can prevent the exit of a company. Careful documentation is of the utmost importance for all parties involved.

Konsento: Electronic share register for legally compliant transactions

Correct recording of share transactions

Konsento offers you a modern, electronic share register that helps you to process share transactions in compliance with the law. When entering transactions, the system reminds you that a declaration of assignment is required for a transfer. Konsento also provides you with a template for a legally compliant declaration of assignment.

Ensuring unbroken chains of ownership

You can attach complete and correctly signed declarations of assignment directly to the respective transaction in the Konsento share register. This ensures that the documentation of your company's share transfers remains complete and legally compliant. This is crucial, as an incorrect or incomplete chain of ownership represents a considerable risk for the public limited company.

Subsequent creation of declarations of assignment

Another highlight: Konsento enables you to carry out evaluations of gaps in the chain of ownership and, if necessary, to automatically create declarations of assignment from the share and transaction register afterwards. Hundreds of documents can be generated at the touch of a button - efficiently and legally compliant. If there are still gaps afterwards, Konsento will support you in cooperation with partner law firms with further advisory and technical services to restore an unbroken chain of ownership as efficiently and effectively as possible.

Conclusion

Missing or inadequate declarations of assignment have far-reaching consequences. They prevent the lawful acquisition of ownership, damage shareholders' rights, lead to uncertainties in general meeting resolutions and can block the exit of a company.

With Konsento, you can meet these challenges. Our electronic share register not only provides you with legally compliant tools for creating and documenting declarations of assignment, but also helps you to ensure an unbroken chain of ownership. Automated processes, reminder functions and templates ensure that all formal requirements are met. This provides you and your public limited company with legal certainty and increases your attractiveness for investors.

Register now for Konsento's free share register and check whether your company's chain of ownership is complete and legally compliant. Or contact us directly if you have any questions for a non-binding discussion in private.

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