What Should Be Considered When Transferring Shares
There are many reasons why shares change their holders. Well, they can be sold (hopefully at a profit), handed down to an offspring or donated to the successor who is going to take over your business. It is important, however, to perform such a share transfer properly because otherwise there could occur some disadvantage for the shareholder.
Registered and Bearer Shares
Basically, two types of shares can be distinguished: registered and bearer shares. The former are in the name of their holder, who is entered in the company’s shareholder register, along with his or her address and the number of the shares he or she has acquired. Thus, the company knows its shareholders. By contrast, bearer shares are not in the name of any particular holder, and until in 2015 the Financial Action Task Force (on Money Laundering) (FATF) imposed its reporting obligations, the company had not known who such shares had belonged to. Previously, bearer shares had been valued as they had been very easy to transfer by physically handing over share certificates. Another advantage had been their anonymity. Following Switzerland’s 2015 acceptance of the FATF recommendations, now it is also bearer share holders who have to be entered in the shareholder register. Consequently, nowadays bearer shares are not that important, and this is why STARTUPS.CH lawyers recommend choosing registered shares.
What Steps Should Be Taken When Transferring Registered Shares?
If a share transfer is not done properly, it may entail risks that usually come to light only in case of disputes. For instance, it may remain unclear when exactly the shares were transferred and who exactly they now belong to. Should a transfer fail to comply with any of the FATF reporting obligations, then the shareholder loses the right to attend the General Meeting and receive dividends until the transfer is correctly reported.
To transfer registered shares properly, we recommend you doing that using the following procedure:
- Purchase agreement: A written agreement should specify the seller and the buyer, the number of shares and the purchase price and date.
- Resolution of the Board of Directors (where, due to restricted transferability, the transfer is required under the Articles of Association to be approved by the Board of Directors).
- Share transfer through endorsement or written assignment: in case of endorsement, the transferee, the acquisition date, the transferor’s signature and the approval initials of the Board of Directors, if any, are recorded on the reverse side of the physical share. If there are no physical shares, a written assignment is made. Assignment can also be part of the purchase agreement.
- Entry in the shareholder register: the previous shareholder is deleted from and the new one added to the company’s shareholder register.
- Shareholder list if at least 25% of a company’s registered shares are purchased or the purchaser holds at least 25% of the voting rights (pursuant to a shareholder pooling agreement), the company must run a list of its economic beneficiaries, along with their names and addresses. It is up to the company if it keeps such records as part of the shareholder register or in the form of a separate list.
- FATF reporting obligations: any purchase falling under item 5 must be reported to the company within one month. What should be reported is the names of the individuals who are economic beneficiaries and their respective addresses. If shares are acquired by a legal person, its shareholders should be reported.
If you take these steps, you do need to fear any complications.
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