Cancellation of shares in Switzerland: how the process works
Introduction
The loss of a share certificate can cause considerable problems for shareholders and companies. In Switzerland, however, there is a clear legal procedure for declaring lost or stolen share certificates invalid. This blog post provides a detailed overview of how this process works and shows how companies can protect themselves against potential risks.
Table of contents
- What is a declaration of invalidity?
- The legal process for invalidation
- Special legal features and challenges
- Significance for companies and shareholders
- Conclusion
What is a declaration of invalidity?
A declaration of invalidity is a legal procedure aimed at declaring a lost or stolen share certificate invalid. Once the procedure has been completed, a new certificate can be issued, thereby avoiding the risk of misuse or double issuance. This process concerns, among other things, the shares of unlisted Swiss stock corporations whose shares are in physical form and perish over time due to loss, theft or force majeure such as water or fire.
The legal process for invalidation
The procedure for invalidating share certificates in Switzerland comprises several key steps:
1. initiation of the procedure
The entitled shareholder must submit an application to the competent district court. The application must contain detailed information, including
- Personal details of the applicant
- Exact designation of the share (type of security, nominal value, serial number)
- Proof of ownership and an affidavit of loss
2. judicial review and advance on costs
The court examines the application for completeness and usually requires an advance on costs. These costs vary depending on the canton and the value of the share. However, the total costs for the declaration of invalidity can quickly amount to a few thousand francs.
3. public announcement
Once the application has been accepted, a public announcement is published in the Swiss Official Gazette of Commerce (SOGC) and in the cantonal official gazette. Affected persons have at least six months to assert their claims.
4. waiting period of six months
Within this period, third parties who have a legitimate claim may lodge an objection. If no one comes forward, the proceedings will be continued.
5. declaration of invalidity in court
After expiry of the waiting period, the court issues the decision to declare the company null and void and publishes it again in the SOGC.
6. legal effect of the declaration of invalidity
The old share certificate loses its validity with the declaration of invalidity. The shareholder can now apply for a new certificate or have their shares transferred to the electronic share register.
Special legal features and challenges
- Exact designation of the share required: An inadequate description can delay or prevent the procedure.
- Proceedings are suspended if the document reappearsIn this case, the applicant must prove that he is still the legal owner.
- Acquisition in good faithIf someone has acquired the share in good faith, this may lead to additional legal disputes.
Significance for companies and shareholders
The invalidation of share certificates has considerable consequences for companies and shareholders:
- Security for companiesProtection against the unlawful assertion of rights by third parties.
- Protection of shareholdersLegitimate shareholders can secure their ownership rights.
- Avoidance of double exhibitionsCompanies can issue a new certificate without risking legal uncertainties.
- Considerable effort and costs: The invalidation process is time-consuming, costly and lengthy.
- Digitization as a solution: Companies should Switch to electronic share registers in order to avoid the loss of physical documents.
Conclusion
The invalidation of share certificates is an essential process for safeguarding ownership rights and preventing misuse. However, it is time-consuming and cost-intensive and only necessary for physical share certificates, as digital uncertificated securities cannot be lost or damaged, unlike "paper shares". The digitalization or dematerialization of shares can avoid the risk of losing share certificates and thus the risk of invalidation proceedings. Companies and shareholders thus benefit from electronic share registers, which significantly reduce administrative costs and risks.
Coordinated solutions from consento
Konsento offers legally compliant digital share registerwhich up to 150 shareholders free of charge are. We support companies in the digitization and dematerialization of their physically issued share certificates with a range of coordinated solutions: our Complete solution for legally compliant general meetings supports stock corporations in the preparation of the Annual General Meeting, including the Formulation of a legally compliant proposal for the abolition of paper shares and the creation of digital shares in the form of simple uncertificated securities. We also ensure that, that the paper share cannot be reintroduced via back doors, thereby destroying the efforts of the AG. The form of the Annual General Meeting can be tailored to the structure and culture of the shareholder base and ranges from traditional face-to-face events to purely virtual and hybrid Annual General Meetings to unbureaucratic proxy AGMs, which are held with only the Chairman of the Annual General Meeting, the independent proxy and the notary. We also take care of the necessary amendments to the articles of association and commercial register registrations. Our investor communication tools support you in revoking, collecting and canceling the old physical paper shares and recording the new digital shares in your electronic share register.
Would you like to avoid costly and time-consuming invalidation procedures in future? Now Register free of charge with Konsento or a Book a non-binding demo call.
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