At the end of December 2007, less than a year after the introduction of the transparency bill and before the minor revision of corporate law came into force on January 1, 2008, the Federal Council submitted the draft and report on the major revision to the National Council and the Council of States.
Improving corporate governance primarily means strengthening shareholder rights. The bill put forward by the Federal Council therefore envisages some drastic reductions in the thresholds for exercising a range of shareholders' rights. The bill also envisages substantial enhancements to the rights of shareholders of unlisted companies to be informed on certain issues, especially remuneration. In addition, companies could transfer responsibility to the general meeting for determining directors' remuneration and the distribution of employee stock options. According to the new bill, in future, directors would have to be re-elected annually.
According to the law as it stands, the general meeting can authorize the board to increase capital but not to decrease it. One of the key innovations of the major revision of corporate law is the introduction of a so-called capital band. This would empower the general meeting to authorize the board for a maximum period of three years to increase or decrease capital as often as it saw fit within a defined bandwidth. According to the Federal Council’s bill, the par value of a share could be set at any value, providing it is greater than zero.
The bill creates the legal framework for the widespread introduction of electronic means of communication to convoke and hold the general meeting.
In particular, the bill proposes that shareholders should be able to exercise their rights at the general meeting electronically. In addition, under certain circumstances, it may be possible to hold virtual general meetings at which the shareholders are not physically present.
Following the revision of audit law and in line with the general trend towards "same business same rules", accounting and reporting legislation will no longer look at companies solely in terms of their legal form. Instead corporation size will be the deciding factor. The bill's approach to accounting and reporting is based on the principle of "fair presentation". The intention is to present the commercial situation of the business in such a way that third parties can form a reliable judgment of it. However, the formation of hidden reserves remains permissible provided they are not arbitrary and accounting is not based on a recognized standard. Accounting and reporting in line with a recognized standard is only compulsory for public corporations, large cooperatives and foundations.
Now it's up to the National Council and the Council of States and their advisory committees. It seems likely that some years will pass before the proposals are finally adopted and implemented.
