SWITZERLAND Law and Practice Contributed by: Daniel Haeberli and Simone Gloor, Homburger
• 98% squeeze-out procedure – the bidder can request a squeeze-out of the remain- ing shareholders if it has obtained more than 98% of the voting rights in the target. The squeeze-out procedure must be initiated within three months from the end of the addi - tional acceptance period by filing a squeeze- out action against the target. The considera- tion to be paid to the minority shareholders in the squeeze-out is the same as in the offer, and there are no appraisal rights (the court does not review the adequacy of the consid- eration and offer price). The 98% squeeze-out procedure is typically completed within six to eight months following the offer. • 90% squeeze-out merger – as an alterna- tive to a 98% squeeze-out, the Swiss Merger Act allows a bidder holding more than 90% of all of the target’s voting rights to effect a squeeze-out merger between the target and a (newly incorporated) Swiss wholly owned subsidiary of the bidder. In this scenario, the minority shareholders do not receive the absorbing company’s shares, but instead receive cash or any other form of considera- tion (such as shares in the bidder company). The compensation for squeeze-out shares must be equal to the value. Appraisal rights increase the risk of litigation and a delay to the merger if the minority shareholders block the registration of the merger in the commer- cial register. If the squeeze-out merger occurs six months after the end of the acceptance period, when the best-price rule no longer applies, the bidder may offer considera- tion exceeding the offer price to the minority shareholders. However, a squeeze-out merger can only be carried out if 90% or more of the shareholders in the target company resolve to allow this. This means, in practice, that the bidder cannot be certain of obtaining 100%
of the voting rights in the target company through a tender offer.
10. Jurisdiction-Specific Features 10.1 Other Acquisition Finance Issues The typical security package of an acquisition loan involves taking security over the target company’s shares, which is provided by a share pledge. If the target company is incorporated in Switzerland, the transfer of the title in the tar - get shares under the share purchase agreement is effected by endorsing the share certificate(s) of the target company in the name of the pur- chaser. To perfect the share pledge in registered shares, the new shareholder and pledgor of the shares has to duly endorse in blank the share certificate(s). As the share pledge is typically a condition for funding the purchase price, it should, in theory, be perfected before transferring title in the target shares. However, this is not practical as the pur- chaser can only grant the pledge after obtaining title in the shares. To solve this “chicken and egg” problem, the necessary endorsements for the transfer of title and perfection of the pledge are prepared by disclosing the so-prepared share certificate(s) for the financing parties’ review during the closing meeting. If the endorsements on the share certificate(s) are to the financing party’s satisfaction, it may confirm that the con- ditions to funding are fulfilled at the same time as funding of the purchase price is released, and the transfer of title in the target shares is com- pleted. However, if there is no physical closing, the perfection of the target share pledge is often a post-closing condition.
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