Pledge over Shares Selected Aspects. 30 April 2016 Seraina Tsering, Attorney at Law, VISCHER AG

Transcription

1 Pledge over Shares Selected Aspects 30 April 2016 Seraina Tsering, Attorney at Law, VISCHER AG

2 Agenda Creation of Pledge Shareholder s Reporting Obligations pursuant to Art. 697i et seqq. CO Upstream and Cross-stream Security Shareholder Rights Enforcement Release Pledge over Shares Selected Aspects 2

3 Creation of Pledge (1/3) Bearer Shares Requirements of pledge over certificated shares Pledge agreement (oral or in writing) Delivery of certificate to pledgee (art. 901 para. 1 CC) Pledgor s power of disposal / pledgee s good faith (art. 935 CC) Pledge over uncertificated shares also possible (art. 900 para. 3 CC) Pledge over Shares Selected Aspects 3

4 Creation of Pledge (2/3) Registered Shares Requirements of pledge over certificated shares Pledge agreement (oral or in writing) Delivery of certificate to pledgee and endorsement of certificate (art. 901 para. 2 CC) Pledgor s power of disposal / pledgee s good faith (art para. 2 and art para. 2 CO) Pledge over uncertificated shares also possible (art. 900 para. 3 CC) Registration in share register it not required by law (but common in practice) In case of share transfer restrictions, consent of company is not required by law (in practice pledgee usually requests removal in view of possible enforcement) Pledge over Shares Selected Aspects 4

5 Creation of Pledge (3/3) Intermediated Securities Creation of security by credit to account Pledge agreement (oral or in writing) Instruction of pledgor to custodian to transfer the intermediated securities, and credit of the intermediated securities to the pledgee s securities account (art. 24 FISA) Pledgor s power of disposal / pledgee s good faith (art. 29 FISA) Creation of security by control agreement Pledge agreement (oral or in writing) Agreement between pledgor and custodian, in which they irrevocably agree that the custodian shall carry out instructions of the pledgee without any further consent or cooperation of the pledgor (oral or in writing) (art. 25 FISA) Pledgor s power of disposal / pledgee s good faith (art. 29 FISA) Creation of security in favour of custodian Pledge is established with the conclusion of an agreement between the pledgor and the custodian (oral or in writing) (art. 26 FISA) Pledgor s power of disposal / pledgee s good faith (art. 29 FISA) Pledge over Shares Selected Aspects 5

6 Shareholder s Reporting Obligations pursuant to Art. 697i et seqq. CO Principle: Reporting obligation of shareholder in case of acquisition of non-listed bearer shares (art. 697i CO) Reporting obligation of shareholder regarding beneficial owner of shares in case of acquisition of non-listed bearer or registered shares and reaching / exceeding of threshold of 25% of share capital or votes (art. 697j CO) No reporting obligations if shares are intermediated securities (art. 697i para. 4 CO and art. 697j para. 4 CO) Pledge: No reporting obligations of pledgee, since no acquisition takes place (acquisition only takes place in case of enforcement of pledge) Relevance in case of pledge: Failure of pledgor (as shareholder) to comply with reporting obligations has negative effects on rights arising out of shares pledgee should contractually ensure that the pledgor complies with its reporting obligations Pledge over Shares Selected Aspects 6

7 Upstream und Cross-stream Security (1/2) P Loan Bank S Upstream Security P S1 S2 Loan Bank Cross-stream Security Pledge over Shares Selected Aspects 7

8 Upstream und Cross-stream Security (2/2) In practice, the following is usually requested: Inclusion of finance provision in the corporate purpose clause of the articles of association Approval of pledge agreement by board of directors and shareholders meeting Swiss limitation language in pledge agreement Pledge over Shares Selected Aspects 8

9 Shareholder Rights Dividends Only current claim at the time of enforcement and dividends due at a later time are pledged, unless otherwise agreed (art. 904 para. 1 CC) In practice, the pledge agreement usually provides that the pledgor is entitled to retain dividends until the occurrence of an event of default Voting rights Shares are represented at shareholders meetings by the pledgor (as shareholder) and not by the pledgee (art. 905 para. 1 CC) In practice, the pledge agreement usually provides that the pledgor is entitled to exercise the voting rights until the occurrence of an event of default (but is obligated to exercise the voting rights in a manner consistent with the pledge agreement); thereafter the pledgor must grant a power of attorney to the pledgee Subscription rights Subscription rights are exercised by the pledgor (as shareholder) In practice, the pledge agreement usually provides that the pledgor is entitled to exercise the subscription rights until the occurrence of an event of default, whereby any additional shares are pledged Pledge over Shares Selected Aspects 9

10 Enforcement Enforcement right: If the pledgor is in default, the pledgee has the right to satisfy its claim from the proceeds of the pledged assets (art. 891 para. 1 CC) Official enforcement proceedings Bankruptcy Enforcement by realisation of collateral Private enforcement Requirements: agreement between pledgor and pledgee, settlement by pledgee and return of excess proceeds to the pledgor Restriction: No longer possible in bankruptcy of the pledgor, except in the case of intermediated securities (art. 31 para. 2 FISA) Types: Private sale (i.e. sale of pledged assets by pledgee to a third party) Purchase of pledged assets by the pledgee itself, provided that pledged assets have a value that can be determined objectively Pledge over Shares Selected Aspects 10

11 Release Reasons: Payment of the secured obligations (Akzessorietätsprinzip) Agreement to terminate pledge agreement Unilateral release of pledge by pledgee Return of pledged assets (art. 899 para. 2 and art. 889 para. 1 CC) Pledge over Shares Selected Aspects 11

12 Thank you. Zürich Schützengasse 1 Postfach 5090 CH-8021 Zürich Tel Fax Basel Aeschenvorstadt 4 Postfach 526 CH-4010 Basel Tel Fax