SWITZERLAND Law and Practice Contributed by: Frank Gerhard, Andreas Müller and Timo Hasler, Homburger
the bidder has designated as being its main target (crown jewels); • issue shares without granting pre-emptive rights to the shareholders, unless foreseen in the articles of incorporation; • deal in own shares or related financial instruments, or shares offered by the bidder in exchange for the target shares; or • issue option or conversion rights. In contrast, the board may search for a white knight or make a public tender offer for the bidder’s shares (“Pac-Man” defence). 9.3 Common Defensive Measures Some Swiss public companies have structural take - over defences in their articles of incorporation. For example, the articles may limit shareholders’ rights to be registered in the share register with voting rights to a certain percentage of shares (eg, 5%) and/or limit the exercise of voting rights by one shareholder (or group of shareholders) to a certain percentage. Sometimes, these restrictions can only be lifted by a supermajority of shareholders. A bidder can make its public tender offer conditional upon the removal of these restrictions by a shareholders’ meeting. A number of Swiss companies have one or several anchor shareholders who are not willing to tender their shares in an unfriendly offer. Few companies have a dual-class share structure with a controlling share - holder holding a majority of voting rights but only a minority of the capital. Finally, there may be express or implied change of control provisions in financing arrangements that require loans or bonds to be repaid immediately if the company is subject to a hostile bid. Other material agreements may also contain change of control pro - visions. 9.4 Directors’ Duties When enacting defensive measures, directors are bound by their fiduciary duties and their duty to treat shareholders equally in like circumstances (see 8.1 Principal Directors’ Duties ). This prevents them, for instance, from promising gratuitous benefits to cer - tain shareholders or third parties that become payable
when an unsolicited tender offer is launched. For this reason, poison pills are permissible only under limited circumstances. When a takeover bid has been launched or pre- announced, the board’s leeway to take potentially defensive measures is further restricted (see 9.2 Direc- tors’ Use of Defensive Measures ) and any defensive measures have to be reported to the TOB. 9.5 Directors’ Ability to “Just Say No” Directors are not obliged to enter into discussions or negotiations with a potential bidder if they decide that this is not in the company’s best interest. However, the board’s ability to take defensive measures is limited (see 9.2 Directors’ Use of Defensive Measures and 9.4 Directors’ Duties ). Generally, litigation is the exception in connection with M&A deals in Switzerland. Private M&A agreements often contain arbitration clauses, but initiation of pro - ceedings is rare. In a public takeover, significant shareholders (greater than or equal to 3%) have a right to join proceedings after the launch of a public tender offer and some - times use their right to achieve a higher offer price: eg, arguing that the price offered by the bidder is below the minimum price. If a bidder chooses to carry out a squeeze-out merger after the closing of a public tender offer, the minority shareholders may challenge the merger and/or the adequacy of the consideration (see 6.10 Squeeze-Out Mechanisms ). 10.2 Stage of Deal 10. Litigation 10.1 Frequency of Litigation
See 10.1 Frequency of Litigation . 10.3 “Broken-Deal” Disputes See 10.1 Frequency of Litigation .
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