SWITZERLAND Law and Practice Contributed by: Shelby R du Pasquier, Patrick Hünerwadel, Valérie Menoud and Marcel Tranchet, Lenz & Staehelin
it is not necessary to amend them upon a change of the secured parties. Depending on the type of security interest, the role and powers of the agent or trustee need to be struc- tured differently. • Where the security interest is a security assignment or a security transfer, the security can be held on trust – that is, by a security agent acting in its own name and for the benefit of the (other) secured parties. • By contrast, where the security interest is a right of pledge, it is necessary that the security agent act as a direct representative of the (other) secured parties (ie, in the name and on behalf of the secured parties) because a Swiss law pledge is accessory to the secured obligations. This requires that the secured parties be identical to the credi- tors. Having the security agent act as a direct rep- resentative is the standard approach in Switzerland to address this. Alternative approaches (such as parallel debt) remain untested in Swiss courts, but practitioners generally take the view that the “par- allel debt” concept should work under Swiss law. 3.6 Loan Transfer Mechanisms Loan transfers are generally achieved either by way of an assignment of a lender’s rights under a credit facility or by a transfer of its rights and obligations. Swiss law does not provide for general restrictions on such mechanisms. However, parties to a facility agreement frequently restrict such assignments and transfers contractually by subjecting them to a bor- rower’s consent regime, such that the borrower’s consent is required unless an exemption applies (eg, assignments or transfer upon the occurrence of an event of default or to an existing lender or an affiliate). In terms of loan transfer mechanisms, Swiss law allows for both the assignment (of rights) approach and the transfer (of rights and obligations) route. In practice, in facility agreements governed by Swiss law, it is frequently seen that the agreement provides for the transfer approach only. Security interests of an accessory nature, such as a right of pledge, will follow the claims they secure
when transferred. Security interests of an independ- ent nature (such as security assignments, security transfers or certain types of personal guarantees) will, in principle, not automatically follow the claims they secure and must be transferred expressly with the consent of the security provider. As a result, it is gen- erally recommended to expressly assign and respec- tively novate the security package to the benefit of the new lender in the case of a loan transfer. However, if the relevant security documents are prepared with a security agency concept, there is no need to assign or transfer the security package. Finally, assignments and transfers are subject to con- tinued compliance with the Swiss non-bank rules (see There is no specific Swiss regulation addressing debt buybacks, provided the debt instrument does not offer an equity option or a conversion feature. In practice, where finance documents address the question of debt buybacks, such transactions are generally contractually prohibited or restricted. In some cases, parties may also provide that the par- ticipation of a borrower or financial sponsor (or other affiliates) will be disregarded when it comes to voting matters. 3.8 Public Acquisition Finance Swiss takeover laws provide for “certain funds” rules and requirements that must be complied with in the context of public takeovers. These are generally simi- lar to other well-known standards, such as the certain funds standards in the UK. In a nutshell, details about the financing of the transaction have to be included in the offering prospectus and a review body has to con- firm that the bidder has the necessary funds available (or has taken measures to ensure their availability). With regard to private M&A transactions, Swiss law does not provide for certain funds requirements. It is up to the parties to negotiate these matters, and con- tractual clauses on funding certainty vary in practice. In domestic acquisitions, where the parties are non- financial entities, the threshold of certain funds is often low and accompanied by a “highly confident letter” or 4.1 Withholding Tax ). 3.7 Debt Buyback
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