SWITZERLAND Law and Practice Contributed by: Marco Toni, Gilles Pitschen, Leonard Baumann and Lara Pafumi, Loyens & Loeff
2.6 Change of Corporate Form or Migration If a start-up is incorporated as a corporation, there is no need to change the corporate form in a later stage of venture capital financing. However, if a start-up is incorporated as a Swiss limited liability company, it will usually have to convert into a corporation prior to (or in the context of) an equity financing round with independent investors (see 2.2 Type of Entity ). 3. Initial Public Offering (IPO) as a Liquidity Event 3.1 IPO v Sale Generally, a liquidity event in Switzerland is still run through a sale process, rather than through an IPO. Dual-track processes are sometimes pursued, but there is no general trend towards having a dual-track process at the outset. In fact, there are only a few tech- nology companies listed on the Swiss stock exchange (the “SIX Swiss Exchange”), despite the large increase in technology companies in Switzerland. In the past few years, the number of IPOs at the SIX Swiss Exchange has been rather low. The launching of the SIX Swiss Exchange “Sparks” segment for small- and mid-caps has not been able to revive the IPO market as an alternative to sale processes. So far, only four companies have listed on this segment. The costs, time and effort required for an exit via an IPO remain significantly higher than those for an exit via a sale process. 3.2 Choice of Listing A Swiss company is most likely to list in Switzerland unless it has specific interests in listing in anoth- er country. Usually, the decisive factor for a listing abroad would be a larger investment base and higher industry/sector valuations. Currently, such trends are not noted in Switzerland. The main advantages of a “home country” listing in Switzerland are: • the efficiency of the listing procedure and listing maintenance; and • the avoidance of heavier regulatory burdens and additional exposure to litigation risks in multiple jurisdictions.
In general, although there are Swiss companies that are listed on multiple stock exchanges in different jurisdictions, the costs of such multiple listings are usually considered greater than their benefits. 3.3 Impact of the Choice of Listing on Future M&A Transactions A listing on a foreign exchange will have the effect that the company will continue to be subject to Swiss corporate law but must, in addition, comply with the rules of the foreign exchange. This dual applicability of legal systems may lead to increased complexity in structuring a future sale, especially in case of potential conflicts between domestic and foreign law. Moreover, the Swiss tender offer rules (including squeeze-out rules in the context of tender offers) will not apply to a sale of a company that is only listed on a foreign exchange. Therefore, additional steps, such as the implementation of a back-end squeeze- out merger pursuant to the Swiss Merger Act follow- ing a foreign public tender offer, may be necessary to successfully achieve a sale of 100% of the shares in the company. 4. Sale as a Liquidity Event (Sale of a Privately Held Venture Capital- Financed Company) 4.1 Liquidity Event: Sale Process There is no typical rule for a sale being run as an auc- tion or in a bilateral negotiation. Auctions are usu- ally chosen if the investors are keen to maximise the purchase price. However, the uncertainties and costs of an auction process may keep potential buy- ers from participating in the auction. Bilateral nego- tiations are usually conducted by strategic investors that approach potential targets directly if they see a strategic fit. 4.2 Liquidity Event: Transaction Structure Usually, the sale of a privately held technology com- pany is structured as a share purchase whereby all the shares in the company are sold to the purchaser. Key members of the management holding equity in the company are usually required to roll over part of their sale proceeds into the equity of the buyer.
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