On 17 January 2017, the Swiss Government said it would launch a public consultation on converting anonymous bearer shares in private companies into registered shares which have owners’ names attached.
It further proposed sanctions against shareholders and companies that failed to report or keep a register of beneficial owners.
Currently, bearer shares allow a person to remain anonymous as they do not require any name or ownership information to be attached to them, even when they are transferred.
Meeting international standards
The consultation was carried out in response to investigations by the Organisation for Economic Cooperation and Development (OECD) Global Forum Panel and the Financial Action Task Force (FATF) in December 2016.
The investigations found the country’s rules for identifying ultimate beneficial owners of qualified interests and legal entities to be insufficient.
Swiss authorities have come under increased pressure from the international community and non-government organisation in recent years to dismantle its controversial banking secrecy practices.
The consultation into ending the practice, which closed on 24 April, drew considerable opposition.
Swiss law firm CMS von Erlach Poncet said the measures are opposed by three out of Switzerland’s four most powerful political parties.
“A main point of resistance is the so-called ‘Swiss finish’, meaning that measures proposed by the government go beyond what is being demanded by the FATF or the Global Forum.
“In particular, the abolition of bearer shares is not a measure necessary to align with international standards.
“The rules on transparency of legal entities [enacted in 2015], which confirmed the feasibility of bearer shares, were at the time recognised as compliant with the FATF’s respective recommendations. Moreover, those rules have proven to be effective,” say Bernhard Loetscher and Flavia Widmer of CMS von Erlach Poncet.
Loetscher and Widmer said the proposed measures would not only replace a system that was only introduced three years ago, “but would also entail severe consequences for approximately 60,000 companies in Switzerland”.
“The number of shareholders and creditors affected is likely to be many times higher.
“In its present form, it is unlikely that this proposal will find the requisite support in parliament”, says Loetscher and Widmer.
“Bearer shares are not yet doomed to disappear in Switzerland.”