SWITZERLAND: An Introduction

SWITZERLAND: An Introduction  

Switzerland Country Overview 2022 

Despite its relatively small size, Switzerland is home to several large and well-established international companies, spanning a diverse range of industries. These include major banks such as UBS and Credit Suisse, large insurance and reinsurance corporations such as Zurich Insurance and Swiss Re, and food and beverage, healthcare and biotech companies such as Nestlé, Novartis and Roche. Switzerland is also home to mechanical and electrical engineering companies specialising in high-technology, knowledge-based production such as the Swatch Group, Oerlikon and ABB. While Switzerland has large global companies, most businesses are small or medium-sized, and many of them specialise in niche machinery and high technology. Switzerland is one of the world’s most competitive economies, thanks to its large and well-established corporate base, modern infrastructure and highly skilled workforce. Its political stability, comparatively flexible labour market regulations, transparent legal system, efficient capital markets and low corporate tax rates also play a part.

Market Developments 

Mergers & Acquisitions 

The effects of the worldwide COVID-19 crisis that led to an accelerated decline in the M&A market in Switzerland appears to have stabilised in late 2020. Nonetheless the pandemic still characterises the economic environment, especially for Switzerland's small or medium-sized business firms. After companies waited out the uncertainty of market developments and postponed transactions until later, the trend has reversed. The number of takeovers is on the upswing again, not least due to the increase in private equity deals in the technology sector. Above all, the strong increase in cross-border M&A activity is an unmistakable sign of renewed confidence in the Swiss and international economy.

Capital Markets 

From the second quarter of 2021 onwards, the economic restrictions were gradually eased, which led to a strong overall recovery of Swiss capital markets in 2021. This is mainly due to the companies' good preparation compared to the previous year as well as comprehensive support measures by the State. In total, five IPOs were launched in Switzerland in 2021, the major part of them in the second half of the year. In addition, eight Swiss companies completed their IPO on a foreign stock exchange.

Preeminent Key Political and Legal Topics Discussed in 2021

Reform of the Stock Corporation Law 

The reform of the stock corporation law that was adopted by the Swiss Parliament in 2020 remained a major point of discussion in the legal landscape. The revision represents the most significant change in Swiss stock corporation law since 1991. Contrary to expectations, the comprehensive package has not yet been enacted. At present, it is not expected to come into force before 2023. The postponement is due notably to the COVID-19 crisis. The provisions on gender guidelines and stricter transparency rules for companies active in the extraction of raw materials that were brought into force already in 2021 apply after a transition period for the first time for the fiscal year 2022. Besides transparency rules, another core element of the reform is the digitalisation as the communication with shareholders and the holding of the General Assembly in electronic form will be possible. Furthermore, a more flexible capital base is targeted with the introduction of the new legal institution of the capital belt. Following the introduction, the statutes may authorise the Board of Directors to change the share capital within a specified range several times for a maximum period of five years.

New Due Diligence and Transparency Obligations 

In parallel with the reform of stock corporation law, the Swiss Parliament has submitted a counter-proposal to the so-called Responsible Business Initiative regarding new transparency obligations. As the initiative was rejected in a popular vote on 29 November 2020, the indirect counter-proposal entered into force on 1 January 2022 with a respective ordinance. However, there is a transition period of one year until the new reporting requirements apply to the companies. Accordingly, the regulations will apply for the first time to the 2023 financial year. The counter-proposal contains two areas of regulation. On the one hand, it provides for a reporting obligation on non-financial matters and on the other hand, due diligence and reporting obligations in the areas of conflict minerals and child labour. In contrast to the initiative, the new law does not provide for any additional liability provisions for companies.

For large companies, however, it establishes an annual reporting obligation on topics such as human rights, the environment, and corruption (so-called non-financial issues). The reporting obligation exists for companies that exceed the thresholds of at least 500 full-time positions and a balance sheet total of CHF20 million or sales revenue of CHF40 million in two consecutive financial years including subsidiaries in Switzerland and abroad. Companies are also required to comply with due diligence obligations in the areas of conflict minerals and child labour and to report on this. The due diligence obligations apply to a company's entire supply chain. In the area of child labour, the ordinance contains the exemptions from the due diligence and reporting obligations required by law for small and medium-sized companies and for companies with low risks in this area.

Several Reforms of the COVID-19 Act 

In addition to various labour law provisions and hygiene measures, the focus in Switzerland regarding the legislation to fight the pandemic, as in many other countries, was on loans and other support payments for companies, which are non-refundable under certain conditions. A case of hardship under the COVID-19 Act arises where a business’ annual turnover is less than 60 % of its multi-annual average. Two referendums were held against the hardship program and other amendments to the COVID-19 Act, both of which were unsuccessful. In June and November 2021, the Swiss electorate supported the decisions of the Swiss Parliament.  

Amendment of the Federal Act on Stamp Duties 

The Federal Council and Parliament declared their will to abolish the new issues tax as it is laid out in the Federal Act on Stamp Duties on 18 June 2021. As of today, the Federal Government levies a new issues tax when a company raises capital by issuing shares, participation certificates or similar. According to the Parliament, companies should be able to raise new capital without having to pay tax on it, as this would reduce investment costs. A referendum against the bill, scheduled for 13 February 2022, has been called for because, according to opponents, it is mainly large companies that would benefit.

Reform of the Old-Age and Survivors Insurance Act 

At the end of the autumn session 2021, the Parliament finalised another bill concerning the Old-Age and Survivors Insurance reform (OASI). The ordinary retirement age for women will be raised from 64 to 65, same as for men. In return, nine affected age groups will be granted a pension supplement. Furthermore, flexible retirement between the ages of 63 and 70 is now possible for men and women, and a smooth transition from working life to retirement is supported by the introduction of the partial pension drawing in advance. For this purpose, financial incentives are also introduced for the continuation of gainful employment from the age of 65. The aim of the reform is to secure the financial balance of the OASI system and to maintain the pension level.