SWITZERLAND Law and Practice Contributed by: Marco Toni, Gilles Pitschen, Leonard Baumann and Lara Pafumi, Loyens & Loeff
companies whose shares are at least partly listed in Switzerland, Swiss takeover law already takes this principle into account (eg, by stipulating the best price rule, meaning that the highest price paid for equity securities must be offered to all shareholders). Swiss takeover law further stipulates the principle of equal treatment of different bidders. Extensive exclusivity agreements with individual potential buyers not allow- ing the board of the target company to negotiate with other potential buyers will likely be unlawful in light of this principle. 11.2 Special or Ad Hoc Committees Swiss listed companies often establish a special or ad hoc committee in the context of M&A transactions. The establishment of such a committee is a way to avoid conflicts of interest but can also be beneficial in streamlining the transaction process. Even if certain tasks might be delegated to the special or ad hoc committee, important strategic decisions (eg, author- ising due diligence by a party or deciding to defend the company) must be passed by the full board, excluding principal directors with conflicts of interest. 11.3 Board’s Role Prior to the launch of a public takeover offer of the buyer, the board is actively involved in the negotia- tions with potential buyers. It is the task of the board of the target company to review the proposal of a potential buyer. At this stage, the board is guided by the question of whether it is in the best interest of the company to continue the takeover process. If the board concludes that the offer is not in the best inter- est of the company, it may abandon the negotiations. However, if the board decides to continue with the process, the shareholders will have the final decision on whether to accept the offer or not. Swiss takeover law further specifies the role of the board of a listed target company as soon as a pub- lic tender offer has been officially made. Specifically,
the board must prepare a report for the sharehold- ers setting out its position in relation to the offer. Fur- thermore, the board is not allowed to enter into legal transactions that might significantly alter the assets or liability of the company (eg, the sale or acquisition of assets representing more than 10% of the total assets or contributing to more than 10% to the profitability of the company). This limits the option to take defensive measures at this stage. However, certain defensive measures might still be taken by the board, such as actively looking for a “white knight” (always taking into consideration the principle of equal treatment of different bidders), PR communications or convening an extraordinary shareholder’s meeting to decide on defence measures. Shareholder litigation challenging the board’s decision to recommend a particular transaction is not com- mon in Switzerland. However, qualified shareholders (holding at least 3% of the voting rights of the target company) may be parties to proceedings before the Swiss Takeover Board and are eligible to challenge its rulings. There have been cases in which qualified shareholders challenged the rulings of the Swiss Take- over Board in the past, but this is often not necessary in friendly takeovers anyway. 11.4 Independent Outside Advice It is common for the board to obtain financial, legal or other advice in the context of an M&A transaction. This allows the board to ensure the availability of suf- ficient expertise and to act with due care. The Swiss Takeover Board imposes the obligation to obtain a fairness opinion if at least two members of the board of the target company are not free of con- flicts of interest. However, obtaining fairness opinions is also customary in business combinations where no conflicts of interests exist, as they allow the board to legitimise its position when rejecting or recommend- ing acceptance of a public tender offer.
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