SWITZERLAND Law and Practice Contributed by: Marco Toni, Gilles Pitschen, Leonard Baumann and Lara Pafumi, Loyens & Loeff
• thresholds of 66.6% or less are in principle reason- able; • thresholds of 66.6% or more are only reasonable in specific situations; and • thresholds of 90% are reasonable in case of hold- ing offerings. With a 66.6% majority, a shareholder is able to con- trol all important decisions of a Swiss target company according to Swiss law, unless the articles of incorpo- ration stipulate different voting thresholds. 6.8 Squeeze-Out Mechanisms If a bidder does not achieve a shareholding of 100% after a public tender offer, it may squeeze out the remaining minority shareholders. The squeeze-out mechanism depends on the ownership threshold, as follows. • If the bidder already holds more than 98% of the voting rights, the squeeze-out can be effected through court proceedings. In this case, the bid- der would file a squeeze-out request within three months after the end of the additional offer period. The shares of the minority shareholders will be cancelled upon a court order against compensa- tion payable by the bidder and re-issued to the bid- der. Subsequently, and after the general meeting of shareholders has resolved a delisting, the target company may request the delisting of its shares. Often, the delisting process is already initiated in parallel to the squeeze-out procedure. • If the bidder holds more than 90% but less than 98%, the squeeze-out can be effected through a statutory squeeze-out merger. In this case, the bidder (or one of its affiliates) is merged with the target company. This requires the entering into of a merger agreement between the merging compa- nies, approval by the general meeting of sharehold- ers of both companies, a report by the board of the merging companies outlining the reasons for the merger, a report by a Swiss-qualified auditor reviewing the merger documentation and a filing with the commercial registers where the two com- panies are registered. Following registration of the merger, the transferring company will be deleted from the commercial register, and the minority shareholders will receive cash compensation. The
adequacy of the compensation can be challenged during a period of two months following the publi- cation of the merger in the Swiss Official Gazette of Commerce . 6.9 Requirement to Have Certain Funds/ Financing to Launch a Takeover Offer Upon publication of the offer prospectus in connec- tion with a public tender offer, the bidder must confirm that the funds required to finance the takeover will be available on the settlement date. Under Swiss public takeover laws, an independent review body (auditor) has to confirm the availability of the necessary funds. In the case of debt financed offers, the executed financing documentation (and not only a term sheet) should be available, as the financing banks will issue their commitment letters only under such documen- tation. The permissibility of conditions and covenants in the financing documentation are admissible but limited and need to correspond with the offer conditions. Offers conditional on obtaining financing are not per- mitted, as the financing documentation must already be available in executed form at the time of publishing the prospectus. There is no certain funds requirement in a statutory merger. 6.10 Types of Deal Protection Measures To secure support for a transaction, the bidder and the target company may enter into a transaction agree- ment and agree on deal protection measures. Typical deal protection measures are: • the undertaking of the board of directors of the target company to support the deal; These measures are all subject to the fiduciary duties of the board of directors of the target company and, therefore, must not be overly restrictive. Break-up fees and reverse break-up fees are generally limited up to the amount of coverage of reasonable costs incurred at the level of the bidder. Punitive break fees are not admissible, and transaction agreements must contain • non-solicitation provisions; and • matching rights and break fees.
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