SWITZERLAND Law and Practice Contributed by: Marco Toni, Gilles Pitschen and Leonard Baumann, Loyens & Loeff
11.3 Board’s Role Prior to the launch of a public takeover offer of the buyer, the board is actively involved in the negotiations 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 interest of the compa- ny, 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 public tender offer has been officially made. Specifically, the board must prepare a report for the shareholders setting out its position in relation to the offer. Furthermore, 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 defence measures might still be taken by the board, such as actively looking for a “white knight” (always taking into consider- ation 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 common in Switzerland. However, quali- fied shareholders (holding at least 3% of the vot- ing rights of the target company) may be parties to proceedings before the Swiss Takeover Board
scholars whether this includes only the share- holders’ interests (shareholder approach) or if the interests of other stakeholders must also be considered (stakeholder approach). Despite these discussions, in business combinations, a company’s interests should not only encompass value growth and fair shareholder compensation but also the interests of other stakeholders. It is up to the directors to weigh these different inter- ests in a way that seems appropriate. The principle of equal treatment of the share- holders must always be observed, as long as this does not contradict the company’s best interests. For Swiss 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 so that all shareholders may sell their shares for the same price). Swiss takeover law further stipulates the principle of equal treatment of dif- ferent bidders. Extensive exclusivity agreements with individual potential buyers not allowing the board of the target company to negotiate with other potential buyers may likely be unlawful in light of this principle. 11.2 Special or Ad Hoc Committees Swiss listed companies often establish a spe- cial or ad hoc committee in the context of M&A transactions. The establishment of such a com- mittee is a way to avoid conflicts of interest but can also be beneficial in streamlining the trans- action process. Even if certain tasks might be delegated to the special or ad hoc committee, important strategic decisions (eg, granting due diligence to a party or the decision to defending the company) must be passed by the full board, excluding the principal directors with conflicts of interest.
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