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SWITZERLAND: An Introduction

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Switzerland Country Overview 2023 

Amid recent geopolitical activity in Europe, Switzerland's political and financial landscape remained rather stable over the past year. While ongoing concerns around the energy supply has decreased, uncertainty regarding the global economic situation is still increasing, especially for export-based companies in the midst of tensions in global economic activities. Nevertheless, Switzerland's ability to retain and attract both private and public companies occupying major roles in the global economy has been unwavering. The country's banking sector continues to be highly regarded with UBS and Credit Suisse at its center. In the sectors of food, beverage and agriculture, Nestlé remains the most renowned entity. The chemical and pharmaceutical industries are also highly recognized with flagship entities such as Roche and Novartis. In the field of engineering, specialist machinery and high technology, highly praised ABB, Schindler, Georg Fischer and OC Oerlikon pave the way. Finally, the country is also home to some of the leading companies in logistics and shipping as well as a hub for trading companies. Furthermore, Switzerland can count on its flourishing small and medium cap market in several business areas. As it is, Switzerland continues to be one of the world's leading economies, mainly capitalizing on its political stability, modern public infrastructures, highly skilled workforce, low corporate tax rates, stable capital markets and efficient legal system.

Market developments 

Mergers and Acquisitions  

2022 marks yet another record high with regards to the M&A market. Overall, 647 mergers and acquisitions, worth an estimated aggregate CHF 130 billion, involved Swiss counterparts. The highest level of activity was recorded in the Technology, Media and Telecommunication sectors, amounting to more than half of all transactions, closely followed by the Pharmaceuticals and Life Sciences sectors.

Capital Markets  

For the past year, the Swiss capital market activity has been stable with a slight decrease in trading turnover. Overall, the Swiss market witnessed fourteen new listings in 2022, for an aggregated transaction value of CHF 3.2 billion. This marks an upshift trend in comparison to the activity recorded in the past years. The relationship between the Swiss market and the Chinese market was further strengthened by the launch in July 2022 of the China-Switzerland Stock Connect. This program allows for Chinese issuers to list Global Depository Receipts (GDRs) in order to raise capital outside China. Following the launch, nine Chinese companies issued GDRs in Switzerland.

Recent key political and legal topics discussed 

Reform of the Company Act  

The second set of rules pertaining to the reform of the Company Act are now officially applicable as of January 1st 2023. Newly applicable rules cover, but are not limited to, improvements in the capital raising structures of companies with the introduction of the capital band, possibility to have the share capital in foreign currency, specific legal basis for interim dividends, the digitalisation of diverse corporate processes, such as the General assembly of the shareholders, improvements regarding the right of shareholders to be granted access to corporate information, enhancements in the rights of shareholders to be involved in the corporate decision making and new reporting duties regarding both financial and non-financial matters.

Registered companies at the time of entry into force of this new set of rules are given a two-year window to fully transition into compliance with the reform. This timeframe is subject to some exceptions. Companies subject to reporting duties on non-financial matters are expected to report on their activity as of 2022, with the first reports published in 2023. Companies whose activity covers the production and sale of raw materials are also required to report on these specific activities, but only starting in 2024, with the first reports published in 2025. As to the newly enacted gender representation "comply or explain" rules in the Board of directors and the management of certain regulated companies, a longer transitional period of up to 2028 for Board of directors and 2033 for the management was agreed upon.

Digitalisation of assets  

In 2021, the Swiss legislator amended the legal framework in order to introduce a new license for trading venues allowing the multilateral trading of Distributed Ledger Technology (DLT) securities, provide clarity regarding the segregation of digital assets in case of bankruptcy and provide greater flexibility and safer environment to issuers willing to tokenise their assets. In particular, this new framework enables the issuance of a ledger-based security without requiring a regulated institution for its creation or its transfer. Since then, the market for tokenized assets has been gradually gaining momentum. During the past year, some private companies have been raising capital and issuing their equity in the form of tokenised shares. The SIX Swiss Exchange, the largest Exchange in the country, is also actively taking part in this new market by allowing for both the tokenization of shares and the digitalisation of bonds on its newly launched SIX Digital Exchange (SDX).

Reform of the Data Protection Act  

The revised Data Protection Act and Data Protection Ordinance, as well as the newly enacted Data Protection Certifications Ordinance, will come into force on September 1st 2023. The entry into force was disclosed on August 31st 2022 in order to give the market a much-needed year to prepare for this set of new regulations. At the center of the reform, improvements on the protection of personal data is expected. To counterbalance the enhanced protection, the new set of rules also aims at simplifying disclosure duties for private entities gathering personal data. One of the key aspects of the project, aimed at making it mandatory for companies to document the reasons for the refusal to grant access to the gathered data, was removed due to the significant reluctance of the market.

This legal framework also aims at ensuring a greater compatibility with the European regulation on the matter. As such, cross-border data transfers with European member states should be proceeding as they used to be, without additional requirements.

Increasing parliamentary scrutiny over Foreign Direct Investments (FDI)

In May 2022, a first draft of the Foreign Investment Screening Act was made public. At first glance, this draft aims at allowing the State Secretariat for Economic Affairs (SECO) to review, and if deemed necessary prohibit, foreign investments in sensitive business sectors. Switzerland's take on the matter is mainly inspired by its United States and European Union counterparts, especially the former regarding the review process. In its current state, the first draft is nonetheless much more transparent and gives more room to the target and the acquirer to take part in the review process and challenge the decisions.

As to the investing entity, the review is mainly targeted at State-owned entities. Regarding sensitive business activities disclosed so far, the main areas of focus would be, when the target's gross return exceeds CHF 100 million, the energy supply sector, the pharmaceutical industry, telecommunications, financial services and public health. However, the Swiss Federal Council is still strongly opposed to the implementation of specific regulation and has raised concerns over this parliamentary progress.

Further steps taken in the prevention of greenwashing 

The topic of greenwashing is on the rise on the financial markets. Greenwashing, that is to mislead customers into acquiring financial products and services that are not as sustainable as suggested, is in the sight of the Swiss Federal Council. As stated by the Swiss Federal Council, a financial product should not be able to qualify as sustainable if it does not have at least one clear objective of sustainability or contributes to one. The issuers will be required to disclose on a regular basis how their products, qualified as sustainable, are able to achieve their specific sustainability targets. The information disclosed in this context will also have to be verified by an independent third party if needed.