Capital Markets: Debt

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ContributingLAW AND PRACTICE: Editor p.2 DaleContributed Cendali by SchellenbergZhong Lun Law Wittmer Firm Ltd KirklandThe ‘Law & Practice’Ellis LLP sections provide easily accessible information on Capitalnavigating Markets: the legal system when conducting business in the jurisdiction. Leading lawyers explain local law and practice at key transactional Debt stages and for crucial aspects of doing business.

Switzerland Schellenberg Wittmer Ltd

chambers.com SWITZERLAND Law and Practice

Law and Practice Contributed by Schellenberg Wittmer Ltd

Contents 1. Debt Markets/Exchanges p.5 6. Offering Documents p.9 1.1 Main Markets & Exchanges: Rules or 6.1 The Prospectus or Offering Document p.9 Governance and Indices p.5 6.2 Responsibility and/or Liability for the 1.2 Rules or Governance Requirements p.5 Content of a Prospectus p.10 1.3 Indices p.5 6.3 Offering Documents p.10 1.4 Regulatory Bodies p.6 6.4 Main Publication, Filing or Delivery 1.5 Remit of Regulatory Bodies p.6 Requirements for the Prospectus p.10 1.6 Application Process p.6 6.5 Exemptions to the Requirement to Produce a Prospectus p.10 2. Regulatory and Legislative Framework p.6 7. Marketing p.10 2.1 Key Legislative or Regulatory Instruments p.6 7.1 Marketing of Publicity Restrictions for an 2.2 Eligibility Requirements for Listing Debt Offering of Debt Securities p.10 Securities on the Exchange(s) p.7 2.3 Requirements for Incorporation or Valid 8. Bookbuilding and Underwriting p.11 Existence p.7 8.1 Extent to Which Bookbuilding is Used p.11 2.4 Minimum Rating for Securities Listed on the 8.2 Structure of the Underwriting p.11 Exchange(s) p.7 8.3 Key Terms of Subscription/Dealer Agreement p.11 2.5 Historical Accounting or Reporting 8.4 Rules Regarding Stabilisation and Market Requirements p.7 Manipulation p.11 2.6 Currency of Debt Securities p.7 9. Governing Law p.11 2.7 Eligibility Requirements for Setting up a Debt Issuance Programme for Securities p.7 9.1 Restrictions on the Use of Foreign Governing Law and/or Jurisdiction for Debt Issuances p.11 3. Standalone Listings p.7 9.2 Cases Where the Choice of a Foreign 3.1 Main Steps for a Standalone Listing of Debt Governing Law/Jurisdiction Has Not Been Securities p.7 Recognised p.11 3.2 Companies Incorporated in a Foreign 9.3 Enforceability of Foreign Judgments and Jurisdiction p.8 Arbitration Awards p.12 3.3 Debut Issuers p.8 9.4 Special Requirements for a Contract, 3.4 Main Ways to Structure an Offer p.8 Judgment or Award to be Enforceable p.12 3.5 Additional or Different Procedures for listing 9.5 Special Requirements for the Perfection of Different Types of Debt Securities p.8 Security over Assets p.12 9.6 Effect on Enforceability of a Bondholder 4. Issuances under a programme p.8 Being Domiciled in a Foreign Jurisdiction p.12 4.1 Main Steps to Set Up a Programme for the 9.7 Regulatory Restrictions Concerning Foreign Issuance of Debt Securities p.8 Entities Entering into Bond Transactions or 5. Parties to an offering of debt securities p.9 Offering Their Bonds p.12 5.1 Advisers Appointed in Connection with the 10. Offering Timetable p.12 Issuance p.9 10.1 Timetable of an Offering of Debt Securities p.12 5.2 Roles of Key Advisers p.9 5.3 Differences in Roles Played by Advisors or 11. Clearing and Settlement p.13 Additional Advisers p.9 11.1 Clearing & Settling Debt Securities p.13

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11.2 Differences When Securities Issued in Currency Other Than Local Currency p.13 12. Tax p.14 12.1 Main Tax Issues When Issuing & Listing Debt Securities p.14 12.2 Withholding Tax p.14 12.3 Taxes on the Issue or Transfers of Listed or Unlisted Debt Securities p.14 12.4 Application of Capital Gains Tax on Disposal of Securities by Non-Residents p.15 13. Continuing Obligations p.15 13.1 Continuing Obligations Applicable to Listed Debt Securities p.15 13.2 Continuing Requirements for Retail and Wholesale Offers of Debt Securities p.15 13.3 Foreign Incorporated Issuers p.15 13.4 Penalties for Non-Compliance with Continuing Obligations p.15

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Schellenberg Wittmer Ltd is one of the leading Swiss busi- cial institutions in Switzerland; financial services regulation ness law firms. Over 150 lawyers in Zürich, Geneva and and prudential rules; structuring capital transactions for Singapore offer a comprehensive range of services, from banks; debt and equity matters; M&A; insider dealing and focused advice to project management, for local or foreign market abuse; and assistance in enforcement proceedings companies and high net worth individuals. The Singapore and internal investigations. On the transactional side, cli- office covers key jurisdictions and markets in the Asia- ents are advised on finance transactions, such as syndicated Pacific region, assisting clients in inbound and outbound loan facilities; structured finance transactions; derivatives; investments, and international arbitration. The banking asset management matters and investment law; listing of fi- and finance team acts across a broad range of regulatory nancial instruments at the SIX Swiss Exchange; and Fintech matters, such as the establishment and licensing of finan- issues.

Authors Dr Philippe Borens is a partner and the Dr Olivier Favre is a partner with head of banking and finance (Zürich) and expertise in banking and finance, capital capital markets, and has a wealth of markets, insurance, blockchain experience in financial services, banking technologies and Fintech. He is an and finance, capital markets, corporate authorised representative at the SIX Swiss and commercial. An authorised Exchange and is a member of the representative at the SIX Swiss Exchange, he is a member International Bar Association and the International Swaps of the International Bar Association and the Zürich Bar and Derivatives Association. Dr Favre has written in Association, and has written in various publications on various publications on securities laws, banking and subjects such as debt and equity, capital markets, stock financial markets regulation, regulatory capital, derivatives exchange regulation, structured products and collective and structured finance, and Fintech, including, most investment schemes. recently, as co-editor of the first commentary on the Swiss Financial Market Infrastructure Act and co-author of key sections on securities and derivatives regulation, and on Tarek Houdrouge is a partner, and is the regulation of organised trading facilities; and as highly experienced in the practice areas of co-author of the Swiss chapter in the Virtual Currency banking and finance, capital markets, Regulation Review, first edition. blockchain technologies and Fintech, financial services, M&A, corporate and commercial. He is a member of the Caroline Clemetson is a partner and is Geneva and Swiss Bar Associations, the International the head of banking and finance (Geneva) Association of Young Lawyers, CEDIDAC and AGDA, and and investment funds, who is highly has written articles for several publications, in areas experienced in the practice areas of private including capital markets, Fintech and M&A. equity and venture capital, banking and finance, insurance, capital markets, blockchain technologies and Fintech, and financial services. She is an authorised representative at the SIX Swiss Exchange and a member of the Legal & Compliance Specialist Committee at the Swiss Funds and Asset Management Association, having written for several publications on issues involving investment funds, Fintech and asset management.

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1. Debt Markets/Exchanges SIX Repo operates two markets:

1.1 Main Markets & Exchanges: Rules or (a) the CH Repo Market providing the Interbank Repo Governance and Indices Market and the infrastructure for SNB’s open market Under the Swiss regulatory framework of the Swiss Financial operations; and Market Infrastructure Act (“FMIA”), bonds and notes may (b) the OTC Spot Market for issuing bonds of the Swiss be traded on an exchange (“Exchange”), a multilateral trad- Confederation and short-term debentures (eg, ing facility (“MTF”) or an organised trading facility (“OTF”). GMBF or SNB Bills of the Swiss National Bank).

Exchanges and MTFs are trading venues in the sense of the 1.2 Rules or Governance Requirements FMIA (“Trading Venues”) and must be licensed as finan- On SIX, debt securities in the form of bonds (which for the cial market infrastructures by the Swiss Financial Market purpose of this overview include notes) are listed and admit- Supervisory Authority (“FINMA”). As a result of the admis- ted to trading according to the standard for bonds. sion to trading on a Trading Venue, bonds are subject to transaction-reporting and transaction-recording require- In addition, there are around 2,000 international bonds ments and they fall into the scope of Swiss insider dealing admitted to trading on the separate segment for interna- and market-abuse rules. tional bonds of SIX (ie, bonds issued by a foreign issuer, denominated in a foreign currency and already listed on a OTFs are not Trading Venues in the sense of the FMIA. foreign exchange recognised by the SIX). Unlisted foreign They are not licensed as financial market infrastructures bonds or foreign bonds admitted to trading on an exchange by FINMA under the FMIA, but the operator of an OTF not recognised by the SIX may be admitted to trading on the must be a FINMA licensed securities dealer or bank, which segment for international bonds of the SIX if: has notified FINMA that it operates an OTF and complies with the regulatory obligations resulting from the FMIA for (a) the bond issue originates from an issuer that already such activity. Bonds that are only admitted to trading on an has bonds of an equal or longer duration listed on an OTF (and not on any Trading Venue) are not subject to the exchange recognised by the SIX; transaction-reporting and transaction-recording require- (b) the bond issue originates from an issuer that has ments of the FMIA, nor do they fall into the scope of Swiss equity securities listed on an exchange recognised by insider-dealing and market-abuse rules. the SIX; or (c) the issuer is an OECD Member State or a political The SIX Swiss Exchange (“SIX”) and the BX Swiss AG subdivision of an OECD Member State. (“BX”) (formerly Berne Exchange) are currently regulated as Exchanges by FINMA. However, no debt securities are On SIX Corporate Bonds, only international bonds denomi- currently listed or admitted to trading on the BX. nated in EUR, GPB and USD may be admitted to trading. They must have an issue volume of at least 250 million in The main exchange for debt securities is the SIX, which is their respective currency of denomination. located in Zurich (see https://www.six-group.com/exchanges/bonds/overview_en.html). Issuers include sovereigns, On the OTC Spot Market SIX Repo, only bonds of the Swiss supranational organisations, agencies, corporates and finan- Confederation and short-term debentures (eg, GMBF or cial institutions. More than 400 issuers have bonds listed SNB Bills of the Swiss National Bank) may be traded. on SIX. Approximately half of such bonds have been issued by foreign issuers from around 50 jurisdictions on all five 1.3 Indices continents. The SIX bond segment comprises a wide range SIX publishes the Swiss Bond Indices (SBI) reflecting devel- of instruments, including straight bonds, floating-rate notes, opments in the CHF-denominated bond market. The uni- convertibles/exchangeables, asset-backed securities (“ABS”) verse of securities encompasses all bonds issued in CHF that and loan participation notes (“LPN”). Debt instruments can are listed on SIX and meet the criteria for inclusion in the be listed in all major currencies. SBI.

Bonds are also traded on SIX Corporate Bonds AG (“SIX The SBI is sub-divided by segments, rating categories and Corporate Bonds”) and SIX Repo AG (“SIX Repo”), two terms to maturity. The SBI securities universe is divided affiliates of SIX, which are regulated as MTFs by FINMA into three main segments: (i) SBI Total (all domestic and under the FMIA. foreign CHF-denominated bonds that fulfil the admission criteria); (ii) SBI Domestic (all domestic bonds), and (iii) SIX Corporate Bonds supports trading of large ticket sizes SBI Foreign (all foreign bonds). The SBI Domestic segment in international bonds denominated in EUR, GBP and USD is further divided into the sub-segments Swiss Government, (minimum 2 million of the respective currency). Non-Government and Swiss Pfandbrief. The SBI Foreign

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segment is further divided into the sub-segments Govern- ter for the three judicial bodies, the Sanctions Commission, ment, Corporate and Supranational. the Appeals Board and the Board of Arbitration.

SIX Swiss Exchange also publishes a number of sector indi- 1.6 Application Process ces. They are based on the regulations developed by SIX in In the case of a public offering of debt securities in Swit- partnership with the Swiss Bond Commission. zerland, the issuer is obliged by law to prepare an issuance prospectus (Emissionsprospekt; see also item 2.1 Key Leg- Four types are calculated for each index and subindex: islative or Regulatory Instruments). As long as such debt securities are not listed on SIX, their public offering is not • A price index (performance excluding coupon pay- subject to authorisation by, or registration with, any govern- ments). mental or self-regulatory body. The situation is different if • Total return index (performance including coupon pay- bonds are to be listed in SIX, whether it be on a standalone ments). basis or as a drawdown under a programme: • Yield index. • Duration index. • Standalone debt offering: where an issuer considers a listing of bonds or notes on SIX, it must make a listing Bonds must meet the following criteria in order to be admit- application to SIX (for details, see item 3). ted to the SBI: • Establishment of a debt issuance programme: an issuer wishing to establish a debt-issuance programme reg- • Issue size: Bonds must have an issue size of at least istered with SIX needs to submit an application for CHF100 million. For the SBI Special Products (Foreign, registration of such a programme with SIX (for details, Corporate, Domestic Swiss Pfandbrief and Domestic see item 4). Non-Government), the minimum issue size is CHF400 • Issuance of debt under a programme: in the case of a million. drawdown under an SIX registered programme, the • Bond categories: Only straight bonds (fixed-rate securi- issuer needs to submit a listing application to SIX for the ties) without additional clauses qualify for inclusion in relevant tranche to be listed on SIX. A drawdown under a the SBI. Exceptions to this rule are straight bonds subject foreign programme, ie, a programme that is not regis- to premature redemption, subordinated bonds and step- tered with SIX, is considered a standalone issuance for an up bonds. SIX perspective. • Term to maturity: Each bond issue must have a remain- ing term to maturity of at least one year. • Rating: Each bond must have a SBI composite rating of at 2. Regulatory and Legislative least BBB. Framework SIX informed the market of its intention to have its indices 2.1 Key Legislative or Regulatory Instruments recognised or endorsed in the EU for the purposes of regis- The regulation of securities listing and trading in Switzer- tering them with ESMA as required under EU Benchmark land is characterised by self-regulation at the level of the Regulations (“BMR”) when being used by supervised entities stock exchanges. The framework for such self-regulation is within the EU. defined in the FMIA, governing the organisation and operation of financial market infrastructures and the conduct of 1.4 Regulatory Bodies financial market participants in securities and derivatives SIX is the umbrella organisation for the stock exchange SIX trading. Various ordinances ensure the sound implementa- Swiss Exchange Ltd and the multilateral trading facilities SIX tion of the FMIA. Corporate Bonds AG and SIX Repo AG. At SIX, regulatory functions and operational business are kept separate. As part In line with the principle of self-regulation, trading venues, of its regulatory tasks under FMIA, SIX maintains a distinc- including stock exchanges, are responsible for issuing their tion between rule-making, rule enforcement and adjudica- own rules regarding the listing of securities and their admis- tion. For that purpose, three specific regulatory bodies have sion to trading, which rules are generally subject to FINMA been established, the Regulatory Board, SIX Exchange Regu- approval. The framework of rules and regulations issued by lation, the Sanctions Commission, Appeals Board and Board SIX regarding the listing of bonds consists of several hier- of Arbitration as judicial bodies. archical levels:

1.5 Remit of Regulatory Bodies • The Listing Rules (“LR”) and Additional Rules for the The Regulatory Board handles rule-making for issuers and Listing of Bonds (“ARB”) are at the highest level. participants (including traders), while SIX Exchange Regula- • The schemes (“Schemes”) define the specific require- tion is responsible for enforcing rules. Adjudication is a mat- ments for listing prospectuses and form an integral

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part of the SIX rules. In the case of bonds, Scheme E is 2.3 Requirements for Incorporation or Valid applicable. Existence • Directives (“Directives”) are supplements to the SIX rules The issuer must have existed as a company for at least three and provide more detailed explanations and implement- years. ing provisions. • Circulars explain the listing and enforcement practices of In addition, except for asset-backed securities, on the first the Regulatory Board. day of trading the issuer’s reported equity capital must be • Communiqués are published on an ad hoc basis and at least CHF25 million, in accordance with the financial provide details on individual decisions, legal issues in the reporting standard applied in the listing prospectus. If the application of individual provisions of the SIX rules, and issuer is the parent company of a group, this requirement changes in their application and the practice of SIX. refers to consolidated reported equity capital.

In addition to the SIX rules, where debt securities are offered 2.4 Minimum Rating for Securities Listed on the to the public, the provisions of Articles 1156 et seq of the Exchange(s) Swiss Code of Obligations (“CO”) will apply, including the There is no minimum rating requirement pursuant to the rules on offering prospectuses (Emissionsprospekte), pro- SIX rules. spectus liability and, depending on the applicable law, bond- holders’ meetings. 2.5 Historical Accounting or Reporting Requirements It should be noted that the Swiss regulatory framework for The issuer must have produced annual financial statements the offering and listing of securities, including bonds and that comply with the financial reporting standard applica- notes, will substantially change with the entry into force ble to it for the two full financial years preceding the listing of the new Swiss Financial Services Act (“FSA”), currently application. The issuer may use IFRS, US GAAP or, under scheduled for 1 January 2020, which aims at aligning the reg- certain conditions, their home country’s accounting stand- ulatory framework in Switzerland with the rules applicable ards (local GAAPs). In addition, the issuer’s auditors must within the EU (even though Switzerland is neither a member generally be subject to recognised supervision in line with of the EU nor of the EEA). The FSA introduces uniform pro- the Swiss Federal Act on the Admission and Oversight of spectus requirements for the public offering and/or admis- Auditors. sion to trading of all types of financial instruments, including bonds and notes, and defines the required content for 2.6 Currency of Debt Securities such prospectuses as well as certain exemptions. As a novelty The large majority of bonds listed on SIX are denominated in under Swiss law, the FSA provides for a general approval CHF. However, this is not a regulatory requirement. requirement for prospectuses by an approval authority and a publication obligation regarding the approved prospectus 2.7 Eligibility Requirements for Setting up a Debt prior to the offering of the relevant financial instruments. Issuance Programme for Securities In addition, the FSA requires the preparation of a key infor- Eligibility requirements for issuers of standalone issues are mation document (“KID”) for any offering of financial the same as for issuers under programmes. instruments to retail clients, subject to certain exceptions, eg, for offerings of shares or debt securities without derivative components. Further, the FSA contains a civil liability 3. Standalone Listings regime applicable to anyone participating in the drafting of a prospectus or a KID, and introduces criminal liability for 3.1 Main Steps for a Standalone Listing of Debt certain intentional violations of the prospectus rules pursu- Securities ant to the FSA. As a first step, an issuer considering a standalone listing of bonds on SIX needs to make sure that it complies with the 2.2 Eligibility Requirements for Listing Debt issuer eligibility requirements (see 2.2 Eligibility Require- Securities on the Exchange(s) ments for Listing Debt Securities on the Exchange(s)). Articles 10 et seq of the LR in combination with Articles 5 Second, the issuer must ascertain that the debt securities to et seq of the ARB provide for eligibility requirements that be listed on SIX meet the requirements for securities eligible issuers of debt securities need to comply with. Require- to listing, including, inter alia, that the minimum nominal ments imposed on an issuer in respect of its duration, capital value of the bond issue needs to amount to CHF20 million. resources, and annual financial statements may be waived Also, services pertaining to interest and capital, as well as if, instead of the issuer, a third-party meeting these require- all other corporate actions, including the receipt and han- ments (guarantor) provides a guarantee commitment in dling of exercise notices, must be provided in Switzerland, respect of the obligations associated with the securities. typically by a bank, a securities dealer, some other institu- tion subject to supervision by FINMA or the Swiss National

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Bank. Further, the terms of the bonds need to comply with pre-approval of a new issuer is made within three exchange the SIX rules on applicable law and jurisdiction (see 9 Gov- days. erning Law). 3.4 Main Ways to Structure an Offer Procedurally, the listing of bonds or notes on SIX requires a The SIX rules make no distinction between retail and whole- listing application. The issuer’s recognised representative is sale offers. In essence, disclosure obligations are the same for responsible for submitting such listing application and for both types of offering. liaising with SIX Exchange Regulation. The recognised representative is normally a bank or a law firm. In the case of domestic issuers issuing bonds or notes governed by Swiss law, the statutory provisions on bond- Bonds intended for listing may be admitted provisionally holders’ representatives and bond-holders’ meetings will to trading. For that purpose, the recognised representative apply. Where bonds or notes are subject to foreign law, it is submits electronically an application through the automated normally a matter of the relevant programme to determine web application, Internet Based Listing (IBL). In essence, the structure of the offering (such as trustee or fiscal agency the application will contain a description of the securities, structure). provide assurance that all the listing requirements are met, and confirm that a listing application will follow. Provisional 3.5 Additional or Different Procedures for listing trading can begin within three trading days following receipt Different Types of Debt Securities of the electronic application. Issuers or their recognised In essence, the listing procedure for different types of bonds representatives then need to submit the listing application and notes is the same. Additional rules may apply for special within two months from the start of trading, including the types or structures of debt securities. For instance, where listing prospectus. debt securities are guaranteed by a guarantor, the guarantor may have to provide declarations in addition to the issuer. For the listing, an application (in German, French, Italian Further, in the case of LPN, the listing requirements, the or English) needs to be submitted by the recognised repre- obligations pertaining to the listing and the conditions for sentative, containing a short description of the transaction, maintaining listing must be fulfilled by the ultimate financial the formal application to have the bonds listed on SIX, and issuer. Moreover, as a rule, convertible bonds may only be a reference to the required supporting documents, includ- listed on SIX if the equity securities to which they relate have ing the listing prospectus and an issuer declaration that its already been listed on SIX or on another regulated market, responsible bodies have approved the listing, that the pro- or if they are being listed at the same time. Finally, in the spectus is complete and that no material adverse change has case of ABS, the issuer minimum equity capital of CHF25 occurred. The listing decision is normally issued within 20 million does not apply (see also 2.2 Eligiility Requirements trading days. for Listing Debt Securities on the Exchange(s).

A standalone prospectus may also be produced as part of an issuance programme. The issuance programme and the final 4. Issuances under a programme term sheet that must be submitted for each issue, together with a “wrap-up” or “country supplement” that gives missing 4.1 Main Steps to Set Up a Programme for the information that applies specifically to Switzerland, consti- Issuance of Debt Securities tute the complete listing prospectus. Normally, having a debt-issuance programme registered with SIX only makes sense for frequent issuers. In practice, 3.2 Companies Incorporated in a Foreign while many domestic and foreign issuers of bonds or notes Jurisdiction listed on SIX do have programmes, most have them regis- The listing procedure for domestic and foreign issuers is tered abroad. principally the same. Where an issuer wants to have its debt-issuance programme 3.3 Debut Issuers registered with SIX, the recognised representative will sub- New issuers (ie, issuers not having had securities listed on mit the issuance programme and sample final terms in SIX for the past three years) need to be pre-approved. In this advance for review and registration. The decision regarding case, the recognised representative must submit a written the registration will be issued within 20 exchange days at the application confirming that the issuer fulfils all the require- latest. The programme is valid for 12 months and is renew- ments relating to listing and maintaining the listing. The able annually, provided an application is made at least 20 application must include a brief description of the issuer, exchange days before the one-year validity period expires. including information, inter alia, on the issuer’s capital Any changes and additions made to the issuance programme resources and financial reporting. A decision regarding the during the 12-month validity period must be submitted to SIX Exchange Regulation.

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In the case where an issuance programme is registered with 6. Offering Documents SIX, a drawdown normally follows the structure of a standalone offer (provisional admission to trading, listing appli- 6.1 The Prospectus or Offering Document cation), except that no listing prospectus is required. Instead, Issuance prospectus (Emissionsprospekt): where debt secu- the drawdown final terms will be submitted. rities are publicly offered, they must comply with the provisions set out in Articles 1156 et seq of the CO. The public Where the issuance programme is not registered with SIX, offer may only be made on the basis of an issuance prospec- but with a foreign authority, a drawdown will be treated like tus that needs to be available at the time of the offering. Nei- a standalone offer, meaning that a SIX listing prospectus will ther the public offering nor the issuance prospectus needs to be required (often in the form of a Swiss wrapper with the be authorised or approved by the FINMA or another author- programme offering circular inserted or incorporated by ity in Switzerland (see 1.2 Rules or Governance Require- reference). ments). This will change with the entry into force of the FSA on 1 January 2020 (see 2.1 Key Legislative or Regulatory Instruments). 5. Parties to an offering of debt securities Listing prospectus (Kotierungsprospekt): if the debt securities are listed on SIX, a listing prospectus is required. Where 5.1 Advisers Appointed in Connection with the debt securities are first publicly offered and then listed on Issuance SIX, issuers typically provide for a combined issuance and The lead manager of the underwriter syndicate normally listing prospectus. appoints the underwriter’s counsel. Depending on the type of transaction, the issuer may have its own counsel. The lead Issuance prospectus: the statutory key content requirements manager or the underwriter’s counsel is also normally acting for a listing prospectus are rather basic (see below). In prac- in a capacity as SIX recognised representative. tice, however, issuers and their advisers include additional information in order to meet investor expectations and avoid For a debut issuance/listing, the lead manager or the under- the risk of prospectus liability claims. writer’s counsel acting in a capacity as SIX recognised representative may file the application for verification of the Listing prospectus: Pursuant to Article 27 LR, a listing pro- issuer, the application for provisional admission to trading spectus must provide sufficient information for competent and the listing application. investors to reach an informed assessment of the assets and liabilities, financial position, profits and losses and prospects This will also apply for a debut issuance/listing made by a of the issuer, as well as of the rights attached to the securities. foreign company. Specific mention must be made of any special risks.

To the extent that the bonds are only admitted to trading Issuance prospectus: the main content and disclosure on the segment for international bonds, there is no under- requirements for an issuance prospectus relating to debt writer’s or issuer’s counsel, but the participant requesting securities are specified in Article 1156 in combination with such an admission files the application directly for admission Article 652a of the CO. Among other things, an issuance to trading normally. prospectus must contain information on the issuer’s share capital, financial statements, dividend history, the terms of In the event of a listing for a drawdown under an existing the bonds, collateral (if any) and the bond-holder’s repre- programme, the same requirements as for a debut issuance/ sentative. listing will apply, except that there is no need for a verification of the issuer. Listing prospectus: SIX has issued a prospectus scheme including a checklist for the preparation of a listing prospec- 5.2 Roles of Key Advisers tus relating to bonds (Scheme E). According to Scheme E, See 5.1 Advisers Appointed in Connection with the Issu- a listing prospectus must include both information on the ance. issuer (such as name, incorporation, legal form, administra- tive, management and audit bodies, description of principal 5.3 Differences in Roles Played by Advisors or business activities, patents and licences, proceedings, capital Additional Advisers structure, annual financial statements (last two full years), See 5.1 Advisers Appointed in Connection with the Issu- recent business performance, and material changes since the ance. most recent annual financial statements) and information on the securities (such as corporate resolutions and terms and conditions applying to the securities). For convertible bonds and exchangeable debt securities, the listing prospectus must

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also contain the detailed conversion or exchange conditions precise scope of this exemption under current law, the new and information on the underlying equity securities. FSA (which will enter into force on 1 January 2020) will provide for state-of-the-art “safe-harbour” rules exempting 6.2 Responsibility and/or Liability for the Content issuers from the need to prepare a prospectus in various cir- of a Prospectus cumstances, including offers to a limited number of inves- Pursuant to Article 1156 para 3 CO dealing with prospectus tors and offers addressed to professional investors. liability, a person is liable for the wilful or negligent provi- sion or dissemination of information on an issue of debt Listing prospectus: in certain cases, some information nor- securities that is inaccurate, misleading or in breach of mally required in an SIX listing prospectus may be omitted. statutory requirements. The plaintiff has to prove that the Exemptions are available, for instance, in the case of convert- prospectus contained false statements, that the defendant is ible bonds if the conversion rights relate to equity securities responsible for such statements (intentionally or negligent- already listed, in the case of securities issued by an issuer ly), that the plaintiff has suffered damage and that such dam- who already has listed securities, or in the case of regional age was caused by the false or misleading statements in the authorities acting as issuers. prospectus. An action for prospectus liability may not only be brought in the case of an incorrect, incomplete or misleading prospectus, but also in respect of any other (written) 7. Marketing materials distributed in connection with an offering, and also where debt securities are issued without a prospectus 7.1 Marketing of Publicity Restrictions for an complying with statutory requirements. Potential defendants Offering of Debt Securities include the issuer, its directors and senior officers, auditors, To the extent that such communications (for instance in underwriters and advisers. circulars or advertisements) could be viewed as prospectus- like communications, the principles of prospectus liability 6.3 Offering Documents for any statements made in such communications should be As mentioned in 6.3 Offering Documents, the requirements taken into account. Such liability would apply if communica- for issuance and listing prospectuses are not currently har- tions are not true and accurate or if any material fact is omit- monised in Switzerland. This will change with the entry into ted. In any event, any such communications should include force of the FSA on 1 January 2020. a disclaimer specifying that the respective communication does not constitute a prospectus within the meaning of Swiss As Swiss law makes no formal distinction between wholesale law, and that the investment decision should only be taken and retail offerings, the content requirements for issuance based on the complete prospectus, provided that a prospec- and listing prospectuses are the same. tus is available. The disclaimer should also include a reference specifying the information of the place and the person 6.4 Main Publication, Filing or Delivery where the investor can receive the complete prospectus. Requirements for the Prospectus Issuance prospectus: an issuance prospectus needs to be There are no specific Swiss advertising or financial promo- available at the time of the offering. Currently, in the absence tion restrictions that apply on the marketing of debt secu- of a listing, there is no authority in Switzerland with which rities as such. However, the following principles should be an issuance prospectus needs to be filed. This will change complied with in addition to the above: with the entry into force of the new FSA on 1 January 2020. • Any information in marketing materials must not Listing prospectus: pursuant to Article 30 LR, a listing pro- conflict with the information included in the prospectus spectus must be published and be made available either (i) or any other offering document prepared for the debt free of charge and delivered in printed booklet or bound securities. form at the issuer’s head office and at those financial institu- • A securities dealer should comply with the general tions that are placing the securities, or (ii) by way of elec- “conduct of business” rules for selling such securities. tronic publication on the issuer’s website and possibly also At present, these are the rules of Article 11 SESTA and, on the websites of those financial institutions that are placing going forward (as of the coming into effect of the FSA in the securities. It must be possible to access these documents January 2020), those of the FSA. free of charge. • Any marketing activities are subject to the general prohibition of “unfair competition”, which would in 6.5 Exemptions to the Requirement to Produce a particular prohibit any aggressive selling efforts, such as Prospectus cold-calling. Issuance prospectus: there is no need for an issuance pro- • To the extent that any financial promotion involves the spectus if an offering is addressed to a limited circle of per- payment of any amount/making any gifts to a cus- sons only. While there is only very limited guidance on the tomer, any such payments/gifts could be classified as

10 Law and Practice SWITZERLAND

“soft commissions”. Such “soft commissions” could only of securities. These safe harbours permit a price stabilisation, be received in compliance with the rules applicable to where (i) it occurs within 30 days of the public offer of the inducements (eg, if the customer acted on behalf of its securities, (ii) the trade does not exceed the issue price, (iii) own client, the question would arise to what extent that the name of the broker involved in the stabilisation and the such payments/gifts must be delivered to the corporate maximum duration of the stabilisation measures are pub- customer’s own client under the rules governing induce- lished before such measures are taken, and (iv) the trades ments). are notified to the Trading Venue no later than five trading days after having been entered into and published no later Under the FSA (as of its entry into effect in January 2020), than five trading days after the 30-day period pursuant to the marketing documentation must be labelled as such and (i) has elapsed. it will be a regulatory requirement to cross-refer to the prospectus or, as applicable, the KID and the place where that prospectus or KID can be obtained. Under the proposed 9. Governing Law rules of the FinSO, any offering documents (eg, a prospectus or a KID) and marketing materials for products that may 9.1 Restrictions on the Use of Foreign Governing only be sold to certain types of investors (eg, to professional Law and/or Jurisdiction for Debt Issuances clients as opposed to retail clients) may not be made avail- Pursuant to Article 6 ARB, bonds whose terms are subject to able to any investors other than those for whom the distribu- Swiss law are eligible for listing on SIX. In turn, bonds whose tion is permitted. terms are subject to foreign law may only be listed on SIX if the foreign legal system has been recognised by the Regula- tory Board, which includes the laws of all OECD Member 8. Bookbuilding and Underwriting States. Upon application, the Regulatory Board may also recognise other foreign legal systems, provided the appli- 8.1 Extent to Which Bookbuilding is Used cant demonstrates that the legal system in question meets Debt securities are normally underwritten at a fixed price. international standards in respect of investor protection and transparency regulations. 8.2 Structure of the Underwriting A firm commitment is the standard structure for the under- Further, pursuant to Article 7 ARB, investors must be able writing for an offering of debt securities. to take their case before a state court in order to assert their rights against the issuer. In this respect, issuers must ensure 8.3 Key Terms of Subscription/Dealer Agreement that the courts in the country whose legal system is applica- The underwriting agreement provides for an underwriting ble to the terms of the issue are competent to hear such cases, of the securities offering at the relevant price. It normally be it exclusively or alternatively (eg, the courts of England includes an indemnity providing for an indemnification where the terms of the bonds are governed by English law). of the underwriter against any losses, claims, damages or Exemptions are available for bonds issued by public-sector liabilities, where such losses, claims, damages or liabilities issuers. arise on the basis of untrue statements or omissions in the prospectus or other offering documents or any breach of rep- 9.2 Cases Where the Choice of a Foreign resentations or undertakings by the issuer. The underwriting Governing Law/Jurisdiction Has Not Been agreement typically provides for a right of the underwriter Recognised to terminate the agreement in certain events (eg, suspension The validity of the choice of foreign governing laws and place of trading, moratorium on commercial banking activities, of jurisdiction under Swiss law is subject to the qualifica- material adverse change to the financial condition of the tions referred to in any applicable treaty, in particular the issuer, etc). The underwriting agreement also includes provi- Lugano Convention on Jurisdiction of and the Recognition sions regarding fees to be paid to the underwriter (incentive and Enforcement of Judgments in Civil and Commercial fee and fee contingent on completion of the offering). Matters of 30 October 2007 (“the Lugano Convention”), and in the Swiss Federal Private International Law Act of 18 8.4 Rules Regarding Stabilisation and Market December 1987 (“PILA”), with regard to the determination Manipulation and evidence of a foreign law, the applicability of a foreign Debt securities that are listed or admitted to trading on law in cases of conflicts with Swiss public policy or the appli- an Exchange or an MTF fall into the scope of the insider- cation of mandatory provisions of Swiss or a foreign law, for- dealing and market-abuse rules of the FMIA. As a result, mal requirements relating to the choice of jurisdiction and such debt securities need certain safe harbours in order to compulsory places of jurisdiction for certain areas of law. exercise price-stabilisation measures. The Financial Market Infrastructure Ordinance (“FMIO”) permits certain price- These requirements are usually unproblematic in relation stabilisation measures in connection with a public offering to the documentation of debt issuances, including a choice

11 SWITZERLAND Law and Practice

of laws of an OECD Member State or a choice of a place such choice of law is generally not enforceable against third of jurisdiction in an OECD Member State (see item 9.1 parties. Restrictions on the Use of Foreign Governing Law and/ or Jurisdiction for Dept Issuances. 9.6 Effect on Enforceability of a Bondholder Being Domiciled in a Foreign Jurisdiction 9.3 Enforceability of Foreign Judgments and If, and to the extent that, the bond documentation provides Arbitration Awards for the application of Swiss law and jurisdiction of Swiss A final judgment duly obtained in the competent foreign courts, the enforceability of the transaction documents does courts is normally recognised and enforced in Switzerland not depend on the bondholder’s domicile. Where the terms without re-trial or re-examination of the merits in the case. are governed by foreign law and provide for jurisdiction of Recognition and enforcement in Switzerland of a judgment foreign courts, the question is not a matter of Swiss law. rendered by a foreign court is however subject to the limitations set out in: (a) the Lugano Convention, if applicable, 9.7 Regulatory Restrictions Concerning Foreign (b) such other international treaties by which Switzerland Entities Entering into Bond Transactions or is bound, or (c) the PILA. Pursuant to the PILA, a judg- Offering Their Bonds ment rendered by a foreign court may only be enforced in Except for restrictions due to sanctions, Swiss law does not Switzerland if, among other things, the foreign court had prevent foreign issuers from issuing and/or listing their jurisdiction in accordance with the PILA and no grounds for bonds and notes in Switzerland, provided the Swiss statutory denial exist (such as manifest incompatibility of the foreign law on the establishment of a issuance prospectus and, in the judgment with Swiss public policy). case of a listing on SIX, SIX rules and regulations applicable to the issuer and the securities are complied with. While foreign arbitration awards are normally enforceable in Switzerland in line with the United Nations Conference on International Commercial Arbitration Convention on the 10. Offering Timetable Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 (“the New York Convention”) or the PILA, 10.1 Timetable of an Offering of Debt Securities investors of debt securities listed on SIX must be able to take Debut standalone issuance and repeat standalone issu- their case before a state court (see item 9.1 Restrictions on ance the Use of Foreign Governing Law and/or Jurisdiction for Listing Dept Issuances), so the terms of the bonds listed on SIX To the extent that the issuer is new, an application for pre- normally provide for jurisdiction of state courts only (and approval needs to be submitted (see 3.1 Main Steps for a not arbitration). Standalone Listing of Debt Securities)

9.4 Special Requirements for a Contract, Judgment The issuer must file an application for provisional admis- or Award to be Enforceable sion to trading and within two months from the provisional Other than standard requirements such as due authorisation, admission to trading, the issuer must file the listing appli- due execution and compliance with applicable laws, there cation to the SIX with the relevant supporting documents are no special requirements to ensure the legality, validity, (including the prospectus, issuer declaration, etc). The SIX enforceability or admissibility in evidence of contracts in examines the listing application within 20 trading days Switzerland. In particular, it is generally not necessary for upon receipt of the documentation (for further details, see contracts to be filed, recorded or enrolled with any govern- 3.1Main Steps for a Standalone Listing of Debt Securities). mental or public body or court authority in Switzerland, or that any stamp, registration or similar duty be paid. As Admission to trading only regards the recognition and enforceability of foreign judg- The processes are different for a listing compared to an ments or awards, see item 9.3 Enforceability of Foreign admission to trading only. Judgements and Arbitration Awards. For international bonds (ie, bonds issued by issuers domi- 9.5 Special Requirements for the Perfection of ciled outside Switzerland) or delisted bonds, there is the Security over Assets option (under certain circumstances) of only filing for an Where security is provided under Swiss law, Swiss law per- admission to trading without a subsequent listing. Admis- fection requirements need to be complied with. For instance, sion to trading is generally instigated by a participant. The a pledge over movable goods requires a transfer to the credi- consent of the issuer is not required, and there are no obliga- tor or its agent (de-possession). Under the PILA, the par- tions on the issuer. ties to a security or collateral agreement (pledge, security assignment or other) may agree on the applicable law, but If international bonds are scheduled to be listed on an exchange recognised by the Regulatory Board, the Admis-

12 Law and Practice SWITZERLAND

sion Board may provisionally admit the bonds to trading register (Hauptregister) held by SIX SIS containing informa- before the date of such listing. tion about the issuance, the number and the denomination of the securities); and (ii) such securities must be credited to Drawdown under a programme a securities account (Effektenkonto) of a SIX SIS participant. Bonds may be listed on the basis of an issuance programme Those participants then act for their clients and credit the if the issuer has submitted the issuance programme and the intermediated securities into the custody accounts held for sample of the final term sheet to the SIX in advance for review their clients. and registration (for further details, see 4.1 Main Steps to set up a Programme for the Issuance of Debt Securities). To the extent that the issuer is foreign, the securities may be deposited as a global certificate with SIX SIS or they may be The application for the approval of a programme must be deposited with a CSD in the jurisdiction of domicile of the submitted no later than 20 exchange days prior to the desired issuer according to the applicable rules in such jurisdiction. registration date. Upon filing of an issuance programme for approval, the decision will generally be made within 20 trad- Once intermediated securities have been validly created, the ing days and will be notified to the issuer. Once it has been FISA defines the entitlements of investors in such interme- approved, an issuer may use an issuance programme for a diated securities as rights sui generis of the account-holder period of 12 months. If the issuance programme is to remain in respect of the underlying securities. The rules of FISA in effect without interruption, it must be resubmitted to the applicable to holding, transferring or taking security over Regulatory Board without prior reminder for another review such securities held through securities intermediaries are at least 20 trading days before the one-year validity period the same irrespective of whether the underlying securities expires. are certificated securities (Wertpapiere), a global certificate (Globalurkunde) or uncertificated securities (Wertrechte). To Changes and additions to the issuance programme that are the extent that the issuer is foreign and the securities are made during the 12-month validity period must be submit- held with a foreign CSD, the account-holders may only have ted to the SIX in the form of an addendum for review and such rights as they are resulting from the foreign jurisdic- approval. tion, where the securities are held.

Difference in timing between retail and wholesale offer- Under the rules of the FISA, intermediated securities may ings be transferred by way of debiting the securities account of There is no difference in timing between retail and wholesale the transfer and crediting the securities account of the trans- offer. feree, provided that such transfer is recorded on the basis of a valid instruction for a transfer by the transferor.

11. Clearing and Settlement To the extent that a transaction is entered into on the SIX Swiss Exchange, settlement instructions are sent to SIX 11.1 Clearing & Settling Debt Securities x-clear (an affiliate of the SIX) acting as CCP. When the trade Debt securities of Swiss issuers are held with SIX SIS AG is cleared, the settlement of the trade will be processed by (“SIX SIS”) as the Swiss central securities depositary the SECOM system. Such system will require the seller’s bro- (“CSD”). SIX SIS is an affiliate of SIX and provides complete ker to have a sufficient number of securities available for a services for the clearing, settlement and custody of national “delivery v payment”. When the system has verified that the and international securities. seller’s account is sufficiently covered, a payment instruction is released to the SIC. After the receipt of the payment Normally, the securities of Swiss issuers are either issued has been confirmed, the securities are transferred from the in the form of a global certificate that is deposited with SIX securities account of the transferor to the securities account SIS, or they are issued as uncertificiated securities, where the of the transferee. issuer holds a register of uncertificated securities Wertrech( - tebuch) registering the entire issuance and the first holders 11.2 Differences When Securities Issued in of the debt securities. Currency Other Than Local Currency The clearing and settling of securities is no different in any The securities are held as intermediated securities according currency. to the Swiss Federal Intermediated Securities Act (“FISA”). Under the FISA, intermediated securities are created with respect to any fungible securities of a Swiss issuer as follows: (i) the underlying securities must be deposited with a depository (a global certificate must be deposited with SIX SIS; uncertificated securities must be registered in a public

13 SWITZERLAND Law and Practice

12. Tax • Interest payments on interbank balances and interest payments by participants to a central counterparty within 12.1 Main Tax Issues When Issuing & Listing Debt the meaning of the Financial Market Infrastructure Act Securities and from a central counterparty to its participants are not The main tax issues to be considered when issuing and list- subject to WHT. ing debt securities in Switzerland are (i) Withholding Tax • Interest payments of less than CHF200 on customer (“WHT”) and (ii) Securities Transfer Tax (“STT”). Issuance credit balances are also not subject to WHT. Stamp Tax (“IST”) no longer needs to be considered as the • The WHT risk can be mitigated by issuing the debt secu- issuance of bonds and money market instruments has not rities through a non-Swiss resident. However, it should been subject to IST since 1 March 2012. also be noted that interest payments on debt securities issued by non-Swiss residents could become subject to 12.2 Withholding Tax WHT as well. This is the case when those debt securi- Repayment of the principal is not subject to WHT. Interest ties are deemed to be bonds or customer credit balances payments are generally not subject to WHT either. How- issued by a Swiss resident. This happens if the following ever, interest payments on bonds or similar debt instruments conditions are cumulatively met: (i) the debt securities (Obligationen) as well as customer credit balances (Kunden- issued by the non-Swiss resident company are guaranteed guthaben) issued by a Swiss resident are subject to WHT at by a direct or indirect Swiss parent company by way of a a rate of 35%. downstream guarantee (up and cross-stream guarantees are not considered harmful in this respect since Swiss The definition of a bond for WHT purposes is broader than corporate law limits such guarantees to freely distribut- commonly understood under Swiss civil law or referred to able reserves of the guarantor); (ii) the proceeds from the in the financial industry. A basic distinction is made between issuance of the debt securities by the non-Swiss resident bonds (Anleihensobligationen) and debentures (Kassenobli- company are, directly or indirectly, lent onwards to a gationen). In both cases, there are written debt acknowl- Swiss group company; and (iii) such lending to a Swiss edgments for fixed amounts which are issued in multiple group company exceeds the equity of the non-Swiss tranches at comparable conditions for the purpose of col- resident company at the year-end. Furthermore, there lective financing. For both, bonds and debentures, the total must be no tax avoidance. This is the case if the follow- amount of borrowed capital must be at least CHF500,000. ing cumulative conditions are met: (i) the circumstances The difference between bonds and debentures is that, in the of the case are inappropriate or unusual; (ii) there is an case of a bond, the credit must be borrowed from at least intention to save taxes; and (iii) there is an actual tax ten non-bank creditors at identical conditions. In contrast, saving. Taking these limitations into account, a LPN or a debenture exists if the credit is borrowed from at least 20 a guaranteed offshore SPV structure can be used to issue non-bank creditors at variable conditions. debt securities without triggering WHT.

Interest payments on customer credit balances includes 12.3 Taxes on the Issue or Transfers of Listed or all interest payments from any Swiss resident that publicly Unlisted Debt Securities offers to accept interest-bearing deposits or that accepts Since 1 March 2012, the issuance of bonds and money mar- interest-bearing deposits on a continuous basis from more ket instruments is no longer subject to IST. than 100 depositors with an aggregate amount of at least CHF5 million. The transfer of debt securities, in so far as they qualify as bonds (see definition in12.2 Withholding Tax) is subject to With regard to these interest payments subject to WHT, STT if either one of the contracting parties or the intermedi- there are the following domestic exemptions: ary is a securities dealer within the meaning of the Stamp Duty Act. The ordinary STT rate is 0.15% for securities • Interest payments on contingent convertible bonds issued by a Swiss resident and 0.3% for securities issued by (cocos) and bonds with debt waiver are not subject to a non-Swiss resident. WHT if these bonds are issued between 1 January 2013 and 31 December 2021 and the FINMA has approved In principle, all primary market transactions are exempt their recognition as required capital. from STT, ie, the bond issuance as well as the redemption is • Interest payments on bail-in bonds are also exempt from not subject to STT. Secondary market transactions, on the WHT. These are bonds that can be used to carry losses in other hand, are generally subject to STT. This does not apply a restructuring procedure by reducing debts or convert- to the brokerage or the purchase and sale of foreign bonds ing them into equity and have been approved by FINMA (ie, bonds issued by a non-Swiss resident), in so far as the and issued between 1 January 2017 and 31 December buyer or seller is a non-Swiss resident, whereby the STT is 2021. only waived for the non-Swiss contracting party.

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12.4 Application of Capital Gains Tax on Disposal be published 90 minutes before the start of trading or of Securities by Non-Residents after the closure of trading and have to be communicated Capital gains on disposals of listed or unlisted debt securities as broadly as possible. Exceptionally, the disclosure of by non-Swiss residents could only be taxed if the non-Swiss price-sensitive facts may be postponed if the fact derives resident maintains a permanent establishment in Switzer- from a plan or decision of the issuer and its dissemina- land and the debt securities sold, and thus the capital gain, tion might prejudice the legitimate interests of the issuer. would be attributable to the Swiss permanent establishment. In this case, the issuer must ensure that such facts remain If a Swiss permanent establishment exists, the non-Swiss confidential. resident would have to submit a tax return at the place of • Notification of changes in the rights attached to the secu- the permanent establishment in which the realised capital rities (regular reporting obligations): issuers must comply gain would have to be declared and thus taxed. with certain “regular reporting obligations”, as set forth in Article 55 LR and the Directive on Regular Reporting Obligations (“DRRO”). This includes both information 13. Continuing Obligations on the issuer (such as changes in its name, address, auditors, or reporting standard) and on the debt securities 13.1 Continuing Obligations Applicable to Listed (such as amortisations, early redemptions or increases). Debt Securities With the listing of debt securities on SIX, issuers are subject 13.2 Continuing Requirements for Retail and to certain conditions for maintaining listing, as set out in Wholesale Offers of Debt Securities Articles 49 et seq of the LR in combination with Articles The continuing obligations set forth above apply to debt- 29 et seq of the ARB, and as further specified in SIX direc- issuers of both retail and wholesale offers. tives and guidelines. In particular, debt issuers (and generally guarantors) need to comply with the following continuing 13.3 Foreign Incorporated Issuers obligations:Publication of annual report: Pursuant to article These obligations apply to foreign incorporated issuers, with 49 LR, issuers must publish an annual report which com- the exception that issuers of debt securities listed on SIX prises the audited financial statements as well as the cor- must only adhere to the disclosure obligations regarding responding auditor report. The annual report needs to be price-sensitive facts if their registered office is in Switzerland published within four months after the end of the respective or if they are foreign issuers without a listing of securities in fiscal year. Details can be found in the Directive on Financial their home country (Article 2 DAH). Reporting (“DFR”). 13.4 Penalties for Non-Compliance with • Disclosure of potentially price-sensitive facts (ad hoc Continuing Obligations publicity): the provisions on disclosure of price-sensitive Pursuant to Article 61 LR, SIX may impose sanctions on facts are set forth in Articles 53 and 54 LR and the issuers and guarantors in case of non-compliance with Directive on Ad hoc Publicity (“DAH”). An issuer must continuing obligations, such as reprimands, fines of up to inform the market of any price-sensitive facts which CHF1 million (in the case of negligence) or CHF10 million have arisen in its sphere of activity by publishing an ad (in cases of wrongful intent), suspension of trading, delisting hoc notice. The issuer must provide notification as soon and exclusion from further listings. as it becomes aware of the main points of the price- sensitive fact. As a general rule, ad hoc notices have to

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ContributingLAW AND PRACTICE: Editor p.2 DaleContributed Cendali by SchellenbergZhong Lun Law Wittmer Firm Ltd KirklandThe ‘Law & Practice’Ellis LLP sections provide easily accessible information on Capitalnavigating Markets: the legal system when conducting business in the jurisdiction. Leading lawyers explain local law and practice at key transactional Equitystages and for crucial aspects of doing business.

Switzerland Schellenberg Wittmer Ltd

chambers.com SWITZERLAND Law and Practice

Law and Practice Contributed by Schellenberg Wittmer Ltd

Contents 1. Equity Markets / Exchanges p.5 5. Parties to an Equity Offering p.8 1.1 Main Equity Markets or Exchanges p.5 5.1 Parties to an Equity Offering p.8 1.2 Rules and Governance Requirements p.5 5.2 Role of Advisers for an IPO p.8 1.3 Indices p.5 6. Offering Documents p.8 1.4 Regulatory Bodies Governing the Listing 6.1 The Prospectus or Offering Document p.8 Process p.5 6.2 Responsibility and/or Liability for the 1.5 Remit of Regulatory Bodies p.6 Content of a Prospectus p.9 1.6 Applications in the Process of an IPO p.6 6.3 Content Requirements Differ in the Case of 2. Regulatory and Legislative Framework p.6 Specialist Companies p.9 2.1 Key Legislative or Regulatory Instruments 6.4 Main Publication, Filing or Delivery for Equity Listings p.6 Requirements for the Prospectus p.9 2.2 Specific Eligibility Requirements for Issuers 6.5 Exemptions to the Requirement to Produce a Undertake a Primary Listing p.6 Prospectus p.9 2.3 Incorporation or Valid Existence p.6 7. Marketing p.9 2.4 Minimum Market Value p.6 7.1 Marketing or Publicity Restrictions in 2.5 Minimum Percentage of Shares in a Listed Respect of an Equity Offering p.9 Issuer p.6 8. Research p.10 2.6 Historical Accounting or Reporting 8.1 Liability Issues or Regulatory/Legislative Requirements p.6 Requirements p.10 2.7 Minimum Time Period for Business 8.2 “Unconnected” Research Reports p.10 Operation Prior to Listing p.6 2.8 Corporate Requirements p.6 9. Book building and Underwriting p.10 2.9 Obligations of Underwriters/Brokers to the 9.1 Book building Process p.10 Regulators p.6 9.2 Structure of Underwriting for an Equity 2.10 Eligibility Requirements for Specialist Offering p.10 Companies p.6 9.3 Stabilisation and Market Manipulation Rules p.10 2.11 Main Requirements for Issuers to Undertake 9.4 “Block Trades” p.10 a Secondary Listing p.7 10. Governing Law p.10 3. Primary Listings p.7 10.1 Restrictions Concerning the Use of Foreign 3.1 Main Steps for a Primary Listing p.7 Governing Law and/or Jurisdiction p.10 3.2 Procedures for Companies Incorporated in a 10.2 English or New York Law p.10 Foreign Jurisdiction p.7 10.3 Failure to Recognise Foreign Governing Law 3.3 Foreign Issuers p.8 and/or Jurisdiction p.10 3.4 Main Ways of Structuring an IPO p.8 10.4 Enforcement of Foreign Judgments/ Arbitration Awards p.11 4. Subsequent Equity Offerings p.8 10.5 Special Requirements for Enforcement of a 4.1 Structuring Subsequent Equity Offerings p.8 Contract, Judgment or Award p.11 4.2 Impact on Procedure of Primary or 10.6 Impact of Shareholders Domiciled in a Secondary Listing p.8 Foreign Jurisdiction p.11 4.3 Procedure if Offering Made Only to Existing 10.7 Regulatory Restrictions on Foreign Entities p.11 Shareholders p.8

2 Law and Practice SWITZERLAND

11. IPO Timetable p.11 11.1 IPO: Key Milestones p.11 12. Tax p.12 12.1 Main Tax Issues When Issuing and Listing Equity Securities p.12 12.2 Withholding Tax p.12 12.3 Capital Duties or Transfer Taxes p.12 12.4 Capital Gains on Disposals of Listed Shares by Non-Residents p.12 13. Continuing Obligations p.12 13.1 Main Continuing Obligations for Publicly Listed Companies p.12 13.2 Application of Obligations to Foreign Incorporated Issuers p.13 13.3 Penalties for Non-Compliance With Obligations p.13

3 SWITZERLAND Law and Practice

Authors Dr Philippe Borens is a partner and the Caroline Clemetson is a partner and is head of banking and finance (Zürich) and the head of banking and finance (Geneva) capital markets, and has a wealth of and investment funds, who is highly experience in financial services, banking experienced in the practice areas of private and finance, capital markets, corporate equity and venture capital, banking and and commercial. An authorised finance, insurance, capital markets, representative at the SIX Swiss Exchange, he is a member blockchain technologies and Fintech, and financial of the International Bar Association and the Zürich Bar services. She is an authorised representative at the SIX Association, and has written in various publications on Swiss Exchange and a member of the Legal & Compliance subjects such as debt and equity, capital markets, stock Specialist Committee at the Swiss Funds and Asset exchange regulation, structured products and collective Management Association, having written for several investment schemes. publications on issues involving investment funds, Fintech and asset management. Dr Olivier Favre is a partner with expertise in banking and finance, capital Tarek Houdrouge is a partner, and is markets, insurance, blockchain highly experienced in the practice areas of technologies and Fintech. He is an banking and finance, capital markets, authorised representative at the SIX Swiss blockchain technologies and Fintech, Exchange and is a member of the financial services, M&A, corporate and International Bar Association and the International Swaps commercial. He is a member of the and Derivatives Association. Dr Favre has written in Geneva and Swiss Bar Associations, the International various publications on securities laws, banking and Association of Young Lawyers, CEDIDAC and AGDA, and financial markets regulation, regulatory capital, derivatives has written articles for several publications, in areas and structured finance, and Fintech, including, most including capital markets, Fintech and M&A. recently, as co-editor of the first commentary on the Swiss Financial Market Infrastructure Act and co-author of key sections on securities and derivatives regulation, and on the regulation of organised trading facilities; and as co-author of the Swiss chapter in the Virtual Currency Regulation Review, first edition.

4 Law and Practice SWITZERLAND

1. Equity Markets / Exchanges cap stocks in the Swiss equity market which are not already included in the blue chip SMI index. The SMI 1.1 Main Equity Markets or Exchanges Expanded comprises the SMI and SMIM indices and The main equity exchange in Switzerland is the SIX Swiss hence the 50 most highly capitalised stocks in the Swiss Exchange Ltd (“SIX”) located in Zurich. There is another equity market. regulated stock exchange located in Bern, the BX Swiss Ltd, • The SPI Family: the Swiss Performance Index (“SPI”) is but it is smaller. the broad market index for the Swiss equity market and contains practically all of the equity securities traded on 1.2 Rules and Governance Requirements the SIX from companies that are based in Switzerland The listing at SIX offers different regulatory standards to take or Liechtenstein (upon request, foreign companies with into account companies’ specific requirements. The follow- a primary listing on the SIX may also be included in the ing listing standards are available: SPI). The SPI 20 is the blue chip index within the SPI index family and comprises the 20 largest equities in the • International Reporting Standard: this standard applies SPI (the SPI 20 represents about 85% of the total capitali- to companies using International Finance Report- sation of the Swiss equity market). The SPI EXTRA index ing Standards (“IFRS”) or the United States Generally enables investors to track the performance of small and Accepted Accounting Principles (“US-GAAP”) as an mid-caps not included in the Swiss Leader Index (“SLI”). accounting standard. The SPI and SLI offers the opportunity to track the devel- • Swiss Reporting Standard: this standard applies to com- opment of the stocks not included in the SLI. panies using Swiss Accounting and Reporting Recom- • SLI: the Swiss Leader Index (“SLI”) comprises the shares mendations (“Swiss GAAP FER”) or that are subject to of the SMI and the ten largest stocks in the SMIM. It the accounting standard under the Swiss Banking Act. therefore includes the 30 largest and most liquid stocks • Standard for Investment Companies: this standard on the Swiss equity market. applies to companies established under the Swiss Code of • SXI Family: the SXI Special Industry Index family Obligations with the sole purpose of pursuing collective comprises sectors of particular importance for the Swiss investment schemes to generate income and/or capital economy. The SXI life sciences tracks the prominent gains, without engaging in any actual entrepreneurial pharmaceutical, medtech and biotech sectors. The SXI activity as such. Bio+Medtech covers biotechnology, advanced medical • Standard for Real Estate Companies: this standard applies devices, medical supplies and health care providers. to companies earning at least two-thirds of their revenue • Other indices: the Swiss All Share Index (“SSIRT”) from real estate-related activities, specifically from rental comprises all shares from companies based in Switzer- income, income from revaluations or sales, and from real land and Liechtenstein (it also contains stocks which are estate services. not included in the SPI because of the minimum free • Standard for Depositary Receipts: this standard applies float of 20%), the index of investment companies, which to the listing of depositary receipts/global depositary comprises all investment companies listed on the SIX, the receipts (“GDRs”). GDRs are tradable certificates which Volatility Index on the SMI (“VSMI”) model, which aims are issued to represent deposited equity securities, and to make pure volatility tradable (it creates a portfolio which permit the (indirect) exercise of the membership which does not respond to price fluctuations, but only and property rights attached to the deposited equity to changes in volatility) and the Six Swiss Exchange Real securities. Estate Indices (“SWX IAZI”) for Swiss real estate which • Standard for Collective Investment Schemes: this stand- are based on a pool of transaction data. ard applies to units (or shares) in Swiss or foreign collective investment schemes that, in accordance with the 1.4 Regulatory Bodies Governing the Listing Collective Investment Schemes Act (“CISA”), are subject Process to the supervision of the Swiss Financial Market Supervi- The main regulatory bodies in Switzerland are the following: sory Authority (“FINMA”) (www.finma.ch) (this includes Exchange Traded Funds (“ETFs”)). • The SIX can adopt its own regulations and rules under the supervision and approval of the FINMA. Within the 1.3 Indices SIX: The SIX offers a wide range of indices, including the fol- (a) the SIX Regulatory Board is the regulatory body lowing: responsible for issuing regulations; (b) the SIX Exchange Regulation regulates and monitors • The SMI Family: the Swiss Market Index (“SMI”) is the participants and issuers as well as compliance with blue chip index and the most important stock index in the rules and has the authority to impose sanctions; Switzerland, because it comprises the 20 largest stocks. (c) three judicial bodies (Sanctions Commission, Inde- The SMI MID (“SMIM”) comprises the 30 largest mid- pendent Appeals Board and Board of Arbitration)

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enforce the rules and decisions of the regulatory bodies if the procedure is not resolved by means of a 2.3 Incorporation or Valid Existence sanction decision or concluded by the SIX Exchange As a general rule, the issuer must have been in existence as Regulation; and a corporation for at least three years (not applicable for an (d) the Disclosure Office is responsible for the moni- issuer of the standards for investment companies or for real toring of compliance with reporting and disclosure estate companies). Exemptions may be granted under some rules pursuant to the FMIA (as defined in item2.1 specific circumstances, such as in the context of mergers, Key Legislative or Regulatory Instruments for spin-offs or similar transactions. Equity Listings). 2.4 Minimum Market Value • The Swiss Takeover Board (www.takeover.ch) has juris- There is a minimum equity capital requirement of CHF2.5 diction to issue rules on and ensure compliance with million on the first day of trading. public takeover offers and public share buybacks and supervises compliance with such rules. 2.5 Minimum Percentage of Shares in a Listed Issuer 1.5 Remit of Regulatory Bodies At least 20% of all the issuer’s outstanding securities in the See 1.4 Regulatory Bodies Governing the Listing Process. same category must be in public hands (“free float”) and the capitalisation of the free float must be CHF25 million at the 1.6 Applications in the Process of an IPO first day of the trading. The SIX Exchange Regulation is the authority for the listing of securities on the SIX. In an IPO process, the listing appli- 2.6 Historical Accounting or Reporting cation (including in particular the listing prospectus and list- Requirements ing notice) must be filed by a recognised representative with The issuer must present financial statements prepared in the SIX 20 trading days prior to the book building period. accordance with the applicable recognised accounting standard for the three financial years preceding the filing of the listing application. Interim financial statements may also be 2. Regulatory and Legislative required if the last annual financial statements are older than Framework nine months. 2.1 Key Legislative or Regulatory Instruments for 2.7 Minimum Time Period for Business Operation Equity Listings Prior to Listing The main legislative and regulatory instruments for equity See 2.3 Incorporation or Valid Existence. listings in Switzerland are the following: 2.8 Corporate Requirements • The Listing Rules set out the main conditions and For example, under the Swiss Code of Obligations, exist- requirements for the listing and maintaining of a listing ing shareholders benefit from a pre-emptive right allowing on the SIX. them to subscribe to a portion of new shares issued on a • The Directive on the Procedures for Equity Securities pro rata basis to their shareholdings. However, these pre- (“DPES”) governs the listing procedure for equity securi- emptive rights can be withdrawn for cause under Swiss law ties, as well as for trading equity securities on a separate by a shareholders resolution provided that the equal treat- trading line. ment of shareholders is complied with. • Scheme A – Equity Securities sets out the disclosure requirements of a listing prospectus (specific schemes 2.9 Obligations of Underwriters/Brokers to the apply to investment companies (Scheme B), real estate Regulators companies (Scheme C) and GDRs (Scheme D)). The underwriters and brokers do not have specific obliga- • The Financial Market Infrastructures and Market Con- tions towards the SIX in the context of a primary listing. duct in Securities and Derivatives Trading Act (“FMIA”) However, the lead manager of the issuer must confirm that and its Ordinance (“FMIO”) govern the organisation and equity securities are sufficiently held in public hands (ie, the structure of the financial market. the free float, see 2.4 Minimum Percentage of Shares in a Listed Issuer). 2.2 Specific Eligibility Requirements for Issuers Undertake a Primary Listing 2.10 Eligibility Requirements for Specialist The requirements for issuers wishing to undertake a primary Companies listing on the SIX will depend on the relevant standards. The requirements differ depending on the applicable regulatory standard (see 1.2 Rules and Governance Require- ments).

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2.11 Main Requirements for Issuers to Undertake a For equity securities: Secondary Listing • Legal validity – the securities must have been issued in The applicable requirements for a secondary listing are gen- accordance with the law to which the issuer is subject and erally the same as for a primary listing. The requirements must satisfy the provisions that apply to those securities. are set forth in the Directive on the Listing of Foreign Com- • Listing by class – the listing must comprise all of the panies. issued securities in the same category. • Free float – the free float must be adequate, meaning at In principle, the requirements are fulfilled if the issuer’s secu- least 20% of all the issuer’s outstanding securities in the rities to be listed on the SIX are already listed on an exchange same category are in public ownership and the capitalisa- recognised by the Regulatory Board as equivalent in terms tion of those securities in public ownership amounts to at of listing rules. If the secondary listing application at SIX is least CHF25 million. filed within six months after the primary listing, the Regula- • Tradability – the proper trading of securities on the stock tory Board will recognise the listing prospectus used for the exchange must be ensured and there must be rules on primary listing provided that some technical information establishing legal ownership. is added (eg, security number and paying agent). If the sec- • Denominations – the denominations forming the total ondary listing application at SIX is filed after six months, an value of a security must enable an exchange transaction abridged prospectus must be submitted. in the amount of one round lot. • Clearing and settlement – the issuer must ensure that transactions can be cleared and settled via the settlement 3. Primary Listings systems that are permitted by SIX Swiss Exchange. • Paying Agent – the issuer must ensure that services per- 3.1 Main Steps for a Primary Listing taining to dividends, as well as other corporate actions, In Switzerland, the Exchange Regulation provides for the including the receipt and handling of exercise notices, are listing requirements in the SIX Listing Rules dated 4 April provided in Switzerland. 2018 or in the listing rules of the Bern Exchange (“BX”) as well as additional rules depending on the regulatory In order to be listed, the issuer must publish a listing pro- standard. Different standards apply depending on the type spectus that provides sufficient information for competent of companies and applicable standard. Whereas SIX Swiss investors to reach an informed assessment of the assets and Exchange offers different standards for different segments liabilities, financial position, profits and losses and prospects and types of companies, the main applicable standard is the of the issuer as well as rights attached to the securities. A International Reporting Standard. specific mention must be made of any special risks. Special schemes included in the listing rules must be complied with The main steps for an issuer for a primary listing on the SIX in establishing the prospectus. A recognised representative Swiss Exchange are the following: must file the listing application with all the required documentation proving that the listing requirements are fulfilled • Duration of the company – the company must have 20 days prior to the first day of trading of the equity securi- existed for at least three years, except for young compa- ties. nies where exemptions can apply according to the Direc- tive Track Record (“DTR”). The listing requirements must be fulfilled during the entire • Annual financial statements – the issuer must produce duration of the listing. annual statements that comply with the financial reporting standards applicable to the issuer for the three full 3.2 Procedures for Companies Incorporated in a financial years prior to the listing application. Foreign Jurisdiction • Auditors – the auditors appointed by the issuer must The SIX Swiss Exchange sets basically the same rules for the fulfil the requirements of art. 7 and 8 of the Federal Act secondary listing of foreign issuers as for a primary listing, on the Admission and Oversight of Auditors. with the following requirements that are set out in the SIX • Audit report – the auditors must state in their report Directives on the Listing of Foreign Companies. The shares whether the issuer’s accounts have been drawn up in of foreign companies already listed on another exchange compliance with the applied financial reporting standard. recognised by the Regulatory Board as an exchange with • Capital requirements – the reported capital of the issuer equivalent listing provisions can file a listing application for a must be of at least CHF2.5 million on the first day of secondary listing in Switzerland. For foreign companies, the trading. free float of the capitalisation of the equity securities traded in Switzerland amounts to CHF10 million or if there is a genuine market in Switzerland for the relevant securities. As to the listing prospectus, the conditions differ if the secondary listing takes place within six months after the primary

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listing abroad or after six months. If the listing takes place Legal advisers: appointed by the underwriters and the issuer. within six months after the primary listing, the prospectus will be accepted by the Regulatory Board with some addi- Auditors: will review the financial information in the pro- tional information. If the listing takes place after six months spectus. after the primary listing, the issuer may submit an abridged prospectus according to the SIX Directive on the Listing of Public relations advisers: for IPOs generally and act for the Foreign Companies. issuer in order to do the necessary marketing documents.

3.3 Foreign Issuers 5.2 Role of Advisers for an IPO Foreign issuers seeking a listing usually list shares rather The public relations advisers usually only act in IPOs. than depositary receipts, but both have been seen.

3.4 Main Ways of Structuring an IPO 6. Offering Documents IPOs can be structured in different ways and depend on the purpose of the issuer. The IPO can be for existing shares or 6.1 The Prospectus or Offering Document can be done through the offering of new shares that are being We note that the Swiss regulatory framework for the offer- issued, or a combination of the two. ing and listing of securities, including bonds and notes, will substantially change with the entry into force of the new The process is usually carried out through book building Swiss Financial Services Act (“FSA”), currently scheduled (see 9. Book building and Underwriting) or through a fixed for 1 January 2020, which aims at aligning the regulatory price offering. framework in Switzerland with the rules applicable within the EU (even though Switzerland is neither a member of the EU nor of the EEA). The FSA introduces uniform prospec- 4. Subsequent Equity Offerings tus requirements for the public offering and/or admission to trading of all types of financial instruments, including bonds 4.1 Structuring Subsequent Equity Offerings and notes, and defines the required content for such pro- The subsequent equity offering can be carried out through a spectuses as well as certain exemptions. As a novelty under primary offering or a secondary offering. Swiss law, the FSA provides for a general approval requirement for prospectuses by an approval authority and a pub- 4.2 Impact on Procedure of Primary or Secondary lication obligation regarding the approved prospectus prior Listing to the offering of the relevant financial instruments. In addi- The procedure differs in cases of a primary or a secondary tion, the FSA requires the preparation of a key information offering. In the case of a primary offering, it will be carried document (“KID”) for any offering of financial instruments out through an ordinary or an authorised capital increase. to retail clients, subject to certain exceptions, eg, for offerings In the case of a capital increase, a shareholders meeting will of shares or debt securities without derivative components. vote and instruct the Board of Directors to increase the capi- Further, the FSA contains a civil liability regime applicable tal within three months. In the case of an authorised capi- to anyone participating in the drafting of a prospectus or a tal increase, the shareholders vote upon a capital increase KID, and introduces criminal liability for certain intentional that will be in the articles of incorporation as such and the violations of the prospectus rules pursuant to the FSA. Board of Directors will have the power to conduct the capital increase within two years. As of today, an issue prospectus has to be issued in case of public offering of newly issued shares. In addition, SIX Swiss 4.3 Procedure if Offering Made Only to Existing Exchange requires a listing prospectus, the content of which Shareholders is contained in the schemes included in the Listing Rules. In principle, the procedure of the offering will be different when made only to existing shareholders. For a listing, the key requirements are listed in the different schemes that are part of the Listing Rules at SIX Swiss Exchange. Different schemes apply depending on the type 5. Parties to an Equity Offering of company that is being listed. The applicable schemes can be looked up in the Listing Rules of SIX Swiss Exchange. 5.1 Parties to an Equity Offering The following key advisers should be mentioned: As for the issue prospectus, Art 652a of the Code of Obliga- tions will apply and must contain at least the following infor- Managers: investment banks are usually involved in an equi- mation stated in the Code of Obligations, such as share capi- ty offering, also acting as underwriters. tal, entry in the Commercial registry, latest annual report,

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dividends paid during the last five years and resolution of the 7. Marketing Board of Directors for the issuance of the equity. 7.1 Marketing or Publicity Restrictions in Respect 6.2 Responsibility and/or Liability for the Content of an Equity Offering of a Prospectus Equity offerings are generally marketed by research reports, The liability for the content of the prospectus is set in art 752 road shows, media releases and issuers’ websites. Under of the Swiss Code of Obligation. The issuer and its Board of Swiss law, in case of public offering of newly issued shares, Directors is primarily liable, but any person who participat- an issue prospectus is required according to Art. 652a of ed in the drafting of the prospectus can be held liable for any the Swiss Code of Obligations (see 6.1 The Prospectus or misleading or wrong information or incomplete statements Offering Document). if there is a damage for the investors due to the misleading, wrong or incomplete information and there is a fault (wilful To the extent that such communications (for instance in or negligence). circulars or advertisements) could be viewed as prospectus- like communications, the principles of prospectus liability 6.3 Content Requirements Differ in the Case of for any statements made in such communications should be Specialist Companies taken into account. Such liability would apply if communica- See 6.1 The Prospectus or Offering Document for the list- tions are not true and accurate or if any material fact is omit- ing prospectus, different schemes apply according to the type ted. In any event, any such communications should include of companies. For more detail, see the Listing rules of SIX a disclaimer specifying that the respective communication Swiss Exchange. does not constitute a prospectus within the meaning of Swiss law, and that the investment decision should only be taken 6.4 Main Publication, Filing or Delivery based on the complete prospectus, provided that a prospec- Requirements for the Prospectus tus is available. The disclaimer should also include a refer- The main requirement for the listing of securities is to pro- ence specifying the information of the place and the person vide a listing prospectus with the listing application. After its where the investor can receive the complete prospectus. formal approval by the exchange it should be provided free of charge electronically on the issuer’s website or in a printed There are no specific Swiss advertising or financial promo- booklet at the issuers’ premises. tion restrictions that apply on the marketing of equity offerings as such. However, the following principles should be 6.5 Exemptions to the Requirement to Produce a complied with in addition to the above: Prospectus For the issue prospectus, there are no exemptions to produce • Any information in marketing materials must not a prospectus if there is a public offering. So the only exemp- conflict with the information included in the prospectus tion could apply in the case of a private placement. or any other offering document prepared for the equity offering. For the listing prospectus, the SIX Swiss Exchange provides • Any marketing activities are subject to the general prohi- for exemptions to produce a prospectus in the following bition of “unfair competition”, which would in particular cases for example (the exemptions are in the Listing Rules prohibit any aggressive selling efforts, such as cold call- of SIX): ing. • To the extent that any financial promotion involves the • Issue of securities in exchange for securities of the same payment of any amount/making any gifts to a customer, class that are already listed; such payments/gifts could be classified as “soft commis- • Conversion or exchange of other securities, provided sions”. Such “soft commissions” could only be received they are in the same class and already listed; in compliance with the rules applicable to inducements • Merger, if the securities are allotted in that case and (eg, if the customer acted on behalf of its own client, the provided that there is a document considered as being question would arise to what extent that such payments/ equivalent to a prospectus. gifts must be delivered to the corporate customer’s own client under the rules governing inducements). Other exemptions apply in specific cases. Under the new FSA (as of its entry into effect in January 2020), the marketing documentation must be labelled as such and it will be a regulatory requirement to cross-refer to the prospectus or, as applicable, the KID and the place where such prospectus or KID can be obtained. Under the proposed rules of the New Financial Services Ordinance (“FinSO”), any offering documents (eg, a prospectus or a

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KID) and marketing materials for products that may only be • Termination clause and applicable law. sold to certain types of investors (eg, to professional clients as opposed to retail clients) may not be made available to Usually, the commission structure includes a base fee and an any investors other than those for whom the distribution incentive fee, which is set on a case by case basis and depends is permitted. on the performance of the underwriters. The amounts are discretionary and there are not set rules for the percentage set in a transaction. 8. Research 9.3 Stabilisation and Market Manipulation Rules 8.1 Liability Issues or Regulatory/Legislative Yes, stabilisation, market manipulation rules and market Requirements conduct rules apply to an equity offering in Switzerland. The same liability regime as for the prospectus applies to Further, all rules concerning ad hoc publicity have to be research reports (see 6.2 Responsibility and/or Liability for respected according to the applicable law. The Federal Act the Content of a Prospectus). on Financial Infrastructures and Market Conduct in Securi- ties and Derivatives Trading (“FMIA”) applies and provides To mitigate the risks of liability, any marketing documenta- criminal provisions for insider trading or market abuse. tion includes a risk section and disclaimer as well as standard precautions to avoid misleading information (eg, highlight- 9.4 “Block Trades” ing the use of forward-looking statements). For block trades, all rules applying to listed securities apply, especially ad hoc publicity, reporting requirements as to Art. 8.2 “Unconnected” Research Reports 120 and 121 FMIA or management transactions according Institutions outside the syndicate advising on a specific to the Listing Rules of SIX. transaction do not routinely prepare research reports, but they may do it when it concerns a large company. The liability regime for the prospectus may also apply to such uncon- 10. Governing Law nected research reports. 10.1 Restrictions Concerning the Use of Foreign Governing Law and/or Jurisdiction 9. Book building and Underwriting Foreign governing law and/or jurisdiction can be used in the offering documents for equity issuances in Switzerland, 9.1 Book building Process subject in particular to the following restrictions: The book building process is used in Switzerland in order to determine the price on an equity offering or an IPO. • Pursuant to Art. 151 para 3 of the Swiss Federal Private International Law Act of 18 December 1987 (“PILA”), 9.2 Structure of Underwriting for an Equity Swiss courts, where the public offering is located, also Offering have jurisdiction with respect to a claim for prospectus There are two types of underwritings, the so called “hard liability regardless of a possible choice of forum. underwriting” and “soft underwriting”. In a hard underwrit- • Pursuant to Art. 156 PILA, the claims arising from the ing, the banks commit to purchase a set number of shares at public offering of equity securities by means of pro- a certain price, whereas in the soft underwriting, the com- spectus, circular or similar publication are governed by mitment to purchase the offered shares at the offer price is the law applicable to the issuer or by the law of the state determined after the process. where the offering is made (ie, Swiss law in case of an offering in Switzerland). This article offers the possibility If a best efforts basis is being used, without any firm commit- to choose the more favorable law in a claim for prospec- ment from the underwriters, the underwriters only commit tus liability in Switzerland. to place them on a best efforts basis with the investors and do not commit to purchase the securities. 10.2 English or New York Law English or New York law may be used to govern an under- Usually, the underwriting agreement includes the following writing agreement. key terms: 10.3 Failure to Recognise Foreign Governing Law • Offered shares and listing; and/or Jurisdiction • Conditions to closing; The validity of the choice of foreign governing laws and place • Representations and warranties; of jurisdiction under Swiss law is subject to the qualifications • Covenants; referred to in any applicable treaty, in particular the Lugano • Indemnification clause; Convention on Jurisdiction of and the Recognition and

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Enforcement of Judgments in Civil and Commercial Mat- 10.6 Impact of Shareholders Domiciled in a ters of 30 October 2007 (the “Lugano Convention”), and in Foreign Jurisdiction the PILA, with regard to the determination and evidence of a If and to the extent the equity documentation provides for foreign law, the applicability of a foreign law in cases of con- the application of Swiss law and jurisdiction of Swiss courts, flicts with Swiss public policy or the application of manda- the enforceability of the transaction documents does not tory provisions of Swiss or foreign law, formal requirements depend on the shareholder’s domicile. Where the terms are relating to the choice of jurisdiction and compulsory places governed by foreign law and provide for jurisdiction of for- of jurisdiction for certain areas of law. eign courts, the question is not a matter of Swiss law.

10.4 Enforcement of Foreign Judgments/ 10.7 Regulatory Restrictions on Foreign Entities Arbitration Awards Except for restrictions due to sanctions, Swiss law does not A final judgment duly obtained in the competent foreign prevent foreign issuers from issuing and/or listing their equi- courts is normally recognised and enforced in Switzerland ty securities in Switzerland, provided the Swiss statutory law without re-trial or re-examination of the merits in the case. on the establishment of an issuance prospectus and, in case Recognition and enforcement in Switzerland of a judgment of a listing on SIX, SIX rules and regulations applicable to rendered by a foreign court is however subject to the limita- the issuer and the securities are complied with. tions set out in (a) the Lugano Convention, if applicable, (b) such other international treaties by which Switzerland is bound, or (c) the PILA. Pursuant to the PILA, a judg- 11. IPO Timetable ment rendered by a foreign court may only be enforced in Switzerland if, among other things, the foreign court had 11.1 IPO: Key Milestones jurisdiction in accordance with the PILA, and no grounds A typical timetable for an IPO is the following with the key for denial exist (such as manifest incompatibility of the for- milestones: eign judgment with Swiss public policy). Phase 1: Preliminary phase The recognition and enforcement of foreign arbitral awards in Switzerland is governed by Article 194 PILA, which in • Review corporate governance and restructuring turn refers to the New York Convention of 10 June 1958 • Selection of partners, bank and advisers on the Recognition and Enforcement of Foreign Arbitral • Defining timetable Awards (the “New York Convention”). The New York Con- vention is applied erga omnes, ie, to all foreign awards ren- Phase 2: Preparation (One to six months before the first dered by an arbitral tribunal whose seat was not in Switzer- trading day for an IPO, one to three months for subsequent land, irrespective of whether or not the award was made in equity offering) a contracting State. • Due diligence 10.5 Special Requirements for Enforcement of a • Drafting listing documentation (eg, listing prospectus, Contract, Judgment or Award listing notice, articles of association, underwriting agree- Other than standard requirements, such as due authorisa- ment, etc) tion, due execution and compliance with applicable laws, • Filing listing application there are no special requirements to ensure the legality, • Shareholders resolution on capital increase validity, enforceability or admissibility in evidence of contracts in Switzerland, subject to a Swiss court discretion to Phase 3: Announcement and marketing (three to four weeks) require a contract to be translated into one of the official languages of Switzerland. In particular, it is generally not • Announcement, road shows and other marketing activi- necessary for contracts to be filed, recorded or enrolled with ties (presentations and one-on-one meetings) any governmental or public body or court authority in Swit- • Publication of prospectus zerland, or that any stamp, registration or similar duty be paid. As regards the recognition and enforceability of foreign Phase 4: Implementation (one to two weeks) judgments or awards, see item 10.4. • Execution of underwriting agreement For enforcement proceedings in Switzerland, a judgment or • Book building process and fix placement price award expressed in a currency other than Swiss Francs must • Allocate shares be converted into Swiss Francs.

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Phase 5: Post-phase Transfers of some particular documents are also subject to a stamp duty (transfer stamp duty). The rates of the transfer • Settlement (typically two to three days after the first day stamp duty are 1.5% for Swiss documents and 3% for foreign of trading) documents. The transfer stamp duty is levied in the follow- • Stabilisation period (during the first 30 days after the first ing circumstances: day of trading) • Transfer of a “taxable document” (ie bonds; shares in a limited company, limited liability company or coopera- 12. Tax tive society; profit sharing certificates; participation certificates; shares in an investment fund or documents 12.1 Main Tax Issues When Issuing and Listing related to sub participations to the mentioned docu- Equity Securities ments); Tax treatment of the securities shall be deeply analysed at • A securities dealer is involved in the transaction (a two different levels: securities dealer is a bank or another company with a similar activity; a person (natural or legal), whose activ- • tax treatment of the security itself (for stamp duty and ity consists in trading “taxable documents” on behalf of withholding tax purposes), and third parties or enter into an investment advisory role; a • tax treatment at the level of the investors (for income and Swiss company which holds more than 10 million of tax- wealth tax, it is essential to qualify the potential earnings able documents). Securities dealer may be a party to the as taxable incomes or exonerated gains). transaction or an intermediary.

12.2 Withholding Tax There are also exceptions to the tax collection in particular Dividends paid by a Swiss company are subject to the Swiss circumstances. WHT (35% of the gross amount). However, Swiss WHT is not levied on the reimbursement by the Swiss company of 12.4 Capital Gains on Disposals of Listed Shares by share capital or contribution reserves (when some specific Non-Residents conditions are met). There are no exemptions or strategies Such capital gains are not taxable in Switzerland (assuming for reducing or eliminating WHT. A Swiss company may such shares are not in Swiss real estate companies). opt for a declaration procedure instead of paying the Swiss WHT, when some particular conditions are met (in particular when the dividend is in kind or when the shareholder is 13. Continuing Obligations a company). In addition, when the concerned shareholder is an entity, a refund of the WHT is possible on the basis of 13.1 Main Continuing Obligations for Publicly a double tax treaty (subject to anti-abuse rules). Listed Companies Reporting (financial or otherwise) obligations 12.3 Capital Duties or Transfer Taxes The issuer of securities must publish annual reports and There is a stamp duty (1%) on the issuing of the following respect the recognised reporting standards of SIX Swiss documents (issuing stamp duty): Exchange. The report must be published within four months after the end of the financial year of the issuer and a semi- • shares in a Swiss company (in a form of limited com- annual report must also be published within three months. pany, limited liability company, limited partnership with shares, cooperative society), Disclosure requirements in respect of information • profit sharing certificates issued by a Swiss company, regarding the issuer • additional payment made to the company by a share- The issuer is subject to ad hoc publicity in order to treat holder or an associate of a Swiss company, all investors in the same way and avoid insider dealing and • transfer of the majority of the shares in a Swiss company market abuse. Therefore, all sensitive facts that might have which is considered as economically liquidated, and an influence on the market price should be notified to SIX • the issuing of a foreign investment fund for the shares and published outside of the trading hours. The Listing Rules acquired by a Swiss investor is also taxable but subject and the Guidelines on ad hoc publicity are published by SIX to the transfer stamp duty (and not to the issuing stamp Swiss Exchange. duty), in such a case the tax rate is 1.5%. The transfer of sub-participations to these documents is also subject to Corporate governance requirements the stamp duty. There are some exceptions to the tax col- The listing requirements (see3 Primary Listings) must be lection in particular circumstances. fulfilled at all times.

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Specific rules applying to transactions post-listing 13.3 Penalties for Non-Compliance With Management transactions (Board of Directors and Executive Obligations Board) need to be reported within a couple of days after they The issuer is liable for the non-compliance of the continu- occurred and are published on the website of the exchange. ing obligations. Depending on the type of non-compliance, some breaches can be criminal law (such as non-disclosure of 13.2 Application of Obligations to Foreign relevant participations according to art 120 and 121 FMIA) Incorporated Issuers or can be according to the Listing Rules of the Exchange. Yes, the same obligations apply. Breaches of the Listing Rules are reported to FINMA by the Exchanges. The penalties can be a reprimand, fine and an issuer can be excluded from the exchange.

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