Switzerland bows to OECD on bearer shares

Thursday, 22 November, 2018

The Swiss government has begun the legislative process of abolishing bearer shares, in accordance with the demands of the OECD Global Tax Transparency Forum.


The Forum's July 2016 peer review report on Switzerland assessed the jurisdiction as 'largely compliant', but also included several recommendations for reform of Switzerland's bank secrecy law, the transparency of Swiss legal entities, and its exchange of information with other countries. The recommendations were accompanied by strong hints that, if they were not adopted in full, the country would fail its follow-up review at the end of 2018. As well as reputational damage, this would risk the country being blacklisted as a non-cooperative jurisdiction – in particular, by the European Union, which is scheduled to produce the second edition of its blacklist next month, along with sanctions for non-compliant countries.

In January this year, the Swiss Federal Council duly published a draft bill to implement the Forum recommendations. Among other things, the bill proposed the compulsory registration of bearer shares, as well as sanctions against shareholders who do not report beneficial owners, and against companies that fail to keep a register of shareholders and beneficial owners. There are already restrictions in Switzerland on the use of bearer shares, but the OECD peer review considered them inadequate.

Despite strong criticism from the country's financial sector, the bill is now being introduced to parliament. It requires bearer shares to be converted into registered shares or restructured as intermediated securities. Companies will also be required to keep a register of shareholders and beneficial owners, and they and their shareholders will face penalties for failing to report beneficial owners. The registers will be open to inspection by the law enforcement agencies and by financial intermediaries for due-diligence purposes. Unlisted companies will no longer be allowed to issue bearer shares, and holders of bearer shares that did not report them to the issuing company for conversion within 18 months will be expropriated. Bearer shares will only be permitted if the company has equity securities listed on a stock exchange or if the bearer shares are structured as intermediated securities.

The effective abolition of bearer shares, and the expropriation of non-compliant shareholders, have however met stiff opposition. Though the cantons were generally in favour of it, many of the remaining consultation participants expressed negative views, the Federal Council admitted. Swiss law firm CMS von Erlach Poncet says the measures are opposed by three out of Switzerland's four most powerful political parties, not least because they go beyond what the FATF or the Global Forum demanded. Moreover, it would entail severe consequences for 60,000 Swiss companies and many more shareholders and creditors, said the company.

However, the government insists that the measure is 'indispensable' if Switzerland is to escape a bad OECD review next month, followed by blacklisting.

The bill also contains measures on the confidentiality of administrative assistance requests and 'clarification' of the handling of stolen data – a long-running and highly contentious issue for the Swiss.


·         Swiss Federal Council

·         STEP International News 11 June 2018: Swiss bearer shares not yet doomed as money laundering reforms meet stiff opposition

·         STEP International News 22 January 2018: Switzerland prepares to comply with OECD transparency demands

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