The correct transfer of shares is crucial because, in the event of transfer errors, the acquirer may not become the owner of the shares and can therefore no longer legally resell them.
Introduction
Shares can be issued as certificates, as value rights, as book securities or as register value rights. The shares of most newly founded joint stock companies in Switzerland are currently issued as value rights. However, older AG still has considerable holdings of physical share certificates. We have described the pitfalls of transferring share certificates in a previous blog post. The following statements therefore relate exclusively to the transfer of value rights. In addition, in this blog, we do not go into more detail about the effects of shares that have not been fully liberated and transfer restrictions (so-called vinculation).
Transfer of uncertificated securities
The transfer of value rights takes place in two steps:
- First, the parties conclude a contract, such as a sales contract. Although the law accepts a contract concluded orally, it is advisable to draw up the contract in writing for reasons of evidence.
- The seller (assignor) prepares a declaration of assignment, including Cession called. This is a document with which he transfers the shares to the acquirer (assignee) and signs it. The written form of the assignment is mandatory, otherwise it is not valid. In practice, this means that the seller must sign the assignment agreement either by hand on paper or electronically with a qualified electronic signature. Other forms of signature are not legally valid. The seller must have control over the value rights to be transferred and any other formal requirements (e.g. approval by the company in the case of registered shares registered) must be considered.
The shareholder's right to the share therefore results from a complete chain of written statements of assignment, which must be traced back to the first subscriber of the share (as can be seen from the public certificate of incorporation or capital increase). If the seller lacks the power of disposal, the acquirer's good faith is not protected.
Stumbling blocks in share transfers
In practice, gaps often exist in the chain of share transfers, meaning that the buyer does not actually become the legal owner and therefore cannot validly sell the shares further. This is especially true for uncertificated registered shares, where parties frequently conclude only the obligatory agreement (the purchase contract). However, for ownership to pass, the dispositional act, i.e. the written assignment (cession), is also required.
In many cases, share purchase agreements merely set out the seller’s obligation to transfer the shares, while the actual written assignment is missing. As a result, legal ownership remains with the seller, even though the parties have agreed on the sale. The buyer, in turn, is not yet the legal owner and cannot validly exercise shareholder rights.
Another widespread misconception concerns the role of the share register. Many board members and both selling and buying shareholders mistakenly believe that by entering the buyer into the share register and deleting the seller, ownership of the shares automatically transfers. This assumption is incorrect: the share register has only declaratory effect. It merely confirms and records the existing legal situation but does not establish it. The registration cannot replace a missing assignment — it presupposes a valid one. Only once the transfer has been properly executed under civil law may the new shareholder be entered in the share register — not the other way around.
Conclusion
With a view to subsequent resale, the buyer of shares is well advised to ensure that there is a seamless chain of transfer. If there is no seamless transfer chain, the defective share transfers must be formally correctly made up for. At best, this requires going back to the founding shareholders.
In the case of shares issued as value rights, Konsento supports the boards of directors of public limited companies by reminding them of the correct form of transfer. In the case of the purchase and sale of value rights, a reference to the necessary declaration of assignment appears. In addition, a template for a declaration of assignment is provided right at the time of the transaction itself.
Konsento's electronic share register is free of charge for up to 150 shareholders. Companies with more than 150 shareholders We would be happy to provide you with an individual offer. Register now on Konsen to to keep your share register in compliance with the law and to legally record future transactions.
Sign up for our newsletterto stay up to date on business administration.
Or follow us on social media: