Introduction
Paper stocks involve significant risks: they can be lost or destroyed by fire, water, or other circumstances. The subsequent declaration of invalidity is expensive, time-consuming and can take up to a year. These challenges place a financial and administrative burden on both companies and shareholders — in particular the Board of Directors, which is responsible for cleaning up the share register. In order to avoid these problems, more and more public companies in Switzerland are opting to dematerialize or digitize their shares.
However, this step also entails legal pitfalls, because anyone who does not correctly adjust the articles of association risks that the paper share can be reintroduced via a back door and against the will of the AG and that the benefits of unsecuritized shares will be lost again:
This is due to a federal court decision from 2021, which, however, has lost none of its relevance and timeliness in connection with the dematerialization of shares: A shareholder had successfully sued for the issuance of a physical share certificate even though the shares were actually managed digitally in accordance with the articles of association. This decision shows that an inadequate statutory basis can quickly nullify efforts to digitize shares.
In order to protect companies from such challenges, we summarize the Federal Court ruling and show what requirements should be placed on a legally secure statutory provision.
Table of contents
- The impact of digitization on equities
- The federal court ruling of 2021: What was it about?
- Statutory bases and their limits
- Requirements for effective statutory regulation
- How Konsento helps with the legally secure digitization of stocks
- conclusion
The impact of digitization on equities
The digitization of stocks offers companies numerous advantages:
- Efficient administration through digital share registers
- Simplified and legally secure transfer
- Reduction of administrative expenses
- Loss before the share certificate dies, e.g. due to loss, fire or water
Despite these advantages, the legal basis is crucial to avoid uncertainties and potential liability risks. The federal court ruling of 2021 impressively illustrates this.
The federal court decision of 2021: What was it about?
A shareholder had required a company to issue him a physical share certificate. The company refused to do so on the grounds that its shares were recorded exclusively digitally in accordance with the articles of association.
The Federal Court ruled in favour of the shareholder. It clarified that registration in the share register alone is not sufficient to preclude the right to a physical certificate. Without a clear provision in the articles of association, a shareholder can insist on such a certificate.
Statutory bases and their limits
The ruling shows that mere references to digital share registers are not sufficient to prevent a surrender obligation. The articles of association must explicitly regulate whether securitization in the form of physical share certificates is excluded.
If such regulation is missing or remains vague, a shareholder can successfully sue for the issuance of a share certificate — with far-reaching consequences for the dematerialization of the shares.
Sign up for the newsletter now and stay up to date on corporate action topics!
Requirements for effective statutory regulation
To ensure that shares only exist in digital form, the articles of association should be formulated precisely. Important points include:
- Clear definition: The articles of association should make it clear that shares are exclusively managed digitally.
- Exclusion of physical securitisation: An explicit exclusion from the issuance of physical share certificates or share certificates is required.
- Reference to legal bases: The regulations should be in line with applicable company law.
An inaccurate or missing passage may result in the dematerialization of the shares remaining ineffective and shareholders being able to successfully sue for the issuance of share certificates.
How Konsento helps with the legally secure digitization of stocks
Konsento offers comprehensive support to enable companies to digitize stocks securely and efficiently:
- Preformulated agenda items for general meetings: Konsento provides standardized resolutions to clearly anchor dematerialization in the statutes.
- Easy and efficient general meetings: With Konsento, general meetings can be organized, held, recorded and notarized quickly and efficiently. Based on the intelligent templates for different types of general meetings, the form that is most suitable for the relevant joint stock company and its shareholder structure can be selected.
- Convenient notarization: Amendments to the articles of association must be publicly certified by a notary. With Konsento, however, the notary takes part in the AGM online, which saves the Board of Directors from going to the notary's office.
- End-to-end service: In Konsento, you will receive everything you need for your amendment to the Articles of Association: from planning and organizing the General Assembly, including invitations and draft documents, to voting and recording, to public certification and commercial register registration, Konsento takes care of all aspects of your amendment to the Articles of Association.
- Electronic share register: You can correctly, completely and legally maintain your new unsecuritized shares in Konsento's digital share register and keep track of shareholders and stock holdings at all times.
With the Konsento tools for General meetings and electronic share register companies can ensure that their shares remain fully digitized.
REGISTER NOW FOR THE FREE SHARE REGISTER
Conclusion
The digitization of stocks is an important step towards modern corporate management, but it also entails legal risks. An unclear or incomplete statutory provision can mean that shareholders can insist on physical certificates — which effectively reverses digitization.
To prevent this, companies should precisely adjust their statutes. Konsento supports public companies with pre-formulated amendments to the articles of association and a digital general meeting solution that meets all legal requirements and covers process steps.
Take action now
Would you like to securely digitize your shares? Now Sign up for free with Konsento or a Book a non-binding demo call.
Contact us now for a non-binding consultation
REGISTER NOW FOR THE FREE SHARE REGISTER
Sign up for our newsletterto stay up to date on business administration.
Or follow us on social media: