Introduction
Losing a share certificate can cause significant problems for shareholders and companies. In Switzerland, however, there is a clear legal procedure for declaring lost or stolen share certificates void. This blog post gives a detailed overview of how this process works and shows how companies can protect themselves from potential risks.
Table of contents
- What is a declaration of invalidity?
- The legal process for declaring invalidity
- Legal particularities and challenges
- Significance for companies and shareholders
- conclusion
What is a declaration of invalidity?
A declaration of invalidity is a legal process aimed at invalidating a lost or stolen share certificate. Once the procedure has been completed, a new document can be issued, thus avoiding the risk of misuse or double issue. This process includes the shares of unlisted Swiss stock corporations whose shares are in physical form and sink over time as a result of loss, theft or force majeure such as water or fire.
The legal process for declaring invalidity
The procedure for declaring the nullity of share certificates in Switzerland comprises several significant steps:
1. Initiation of proceedings
The eligible shareholder must file an application with the competent district court. The application must include detailed information, including:
- Applicant's personal details
- Exact name of the share (type of security, nominal value, serial number)
- Evidence of ownership rights and an affidavit of loss
2. Judicial review and advance payment
The court checks the application for completeness and usually requires an advance payment. These costs vary depending on the canton and the value of the share. However, the total cost of declaring invalidity quickly amounts to a few thousand francs.
3. Public announcement
Once the application has been accepted, a public appeal will be published in the Swiss Official Gazette of Commerce (SOGC) and in the cantonal official gazette. Data subjects have a period of at least six months to file claims.
4. Waiting period of six months
Within this period, third parties who have a legitimate claim may file an objection. If no one answers, the proceedings will continue.
5. Judicial declaration of invalidity
After the waiting period has expired, the court issues the decision to declare invalidity and publishes it again in the SOGC.
6. Legal effect of the declaration of invalidity
With the declaration of invalidity, the old share certificate loses its validity. The shareholder can now apply for a new certificate or have their shares transferred to the electronic share register.
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Legal particularities and challenges
- Exact share name required: An inadequate description may delay or prevent the process.
- Proceedings will be suspended if the document reappears: In this case, the applicant must prove that he is still the legal owner.
- Good faith acquisition: If someone purchased the share in good faith, this may lead to additional legal disputes.
Significance for companies and shareholders
The declaration of invalidity of share certificates has significant effects on companies and shareholders:
- Security for businesses: Protection against unlawful assertion of rights by third parties.
- Protecting shareholders: Legitimate shareholders can secure their property rights.
- Avoiding double exhibitions: Companies can issue a new document without risking legal uncertainties.
- Significant expenses and costs: The process of declaring invalidity is complex, costly and lengthy.
- Digitalization as a solution: Companies should Switch to electronic share registers take into account to avoid losses of physical documents.
REGISTER NOW FOR THE FREE SHARE REGISTER
Conclusion
The annulment of share certificates is an essential process to protect property rights and prevent misuse. However, it is time-consuming and costly and is only necessary for physical share certificates, as digital value rights cannot be lost or damaged in contrast to “paper shares.” By digitizing or dematerializing shares, the risk of losing share certificates and thus a procedure for declaring invalidity can be avoided. Companies and shareholders thus benefit from electronic share registers, which significantly reduce administrative costs and risks.
Coordinated solutions from Konsento
Konsento offers legally compliant digital share registers, the up to 150 shareholders free of charge are. We help companies digitize and dematerialize their physically issued share certificates with a range of coordinated solutions: our Complete solution for legally compliant general meetings supports joint stock companies in preparing for the Annual General Meeting, including Formulation of a legally compliant application for the abolition of paper shares and the creation of digital shares in the form of simple value rights. In doing so, we also ensure that that paper shares cannot be reintroduced via backdoors and thus nullify the efforts of the AG. The form of the general meeting can be tailored to the structure and culture of the shareholders and ranges from traditional face-to-face events to purely virtual and hybrid general meetings to an unbureaucratic proxy general meeting, which is held only with the chairman of the general meeting, the independent voting representative and the notary. We also take care of the necessary amendments to the articles of association and commercial register applications. Our investor communication tools help you revoke, collect and depreciate old physical paper shares and enter the new digital shares in your electronic share book.
Would you like to avoid costly and time-consuming procedures for declaring invalidity in the future? Now Sign up for free with Konsento or a Book a non-binding demo call.
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REGISTER NOW FOR THE FREE SHARE REGISTER
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