Right to Submit Shareholder Resolutions at Meetings

Some Swiss companies have gone to shareholders with a proposal to reduce share capital by decreasing the par value of shares and refunding the difference. In most cases, this repayment replaces a dividend, often to shareholders’ satisfaction since it is more advantageous tax-wise.

Nonetheless, lowering the par value directly impacts shareholders’ rights to submit resolutions at shareholder meetings, since this is tied to the nominal holding. According to the Swiss Federal Code of Obligations, a nominal holding must be at least CHF 1 mn, although each company is entitled to set a lower threshold value at a shareholder meeting and enshrine that value in its articles of incorporation. Therefore, a smaller par value will undermine shareholders’ rights unless the threshold value is reduced commensurately.

ethos. commends companies who offer both to refund part of the par value and, of their own initiative, to adjust the nominal threshold required to submit resolutions at shareholder meetings, e.g. Rieter in 2002, Ciba in 2003. However, ethos. opposes moves to reduce share capital where the company refuses to alter the nominal threshold, e.g. CS Group in 2002.