Share Transfers in Light of New Measures Against Fraudulent Bankruptcies: Progress and Limitations

The Federal Act on Combating Fraudulent Bankruptcies and the amendment to the Commercial Register Ordinance came into force on January 1, 2025.

These new rules aim in particular to better regulate the transfer of shares in so-called “shell” companies and to strengthen the supervision by the commercial register offices. They codify certain principles established by case law.

The transfer of shares in a company with no activity or assets but still registered in the commercial register, known as a “transfer of share mantle,” is often used to avoid the costs of setting up a new entity.

However, under the new rules, this practice becomes legally uncertain and potentially subject to sanctions. While these provisions represent a step forward in combating fraudulent bankruptcies, many uncertainties remain regarding their implementation. Strengthening the role of commercial register offices is a positive development, but their actual means of action remain limited.

   1.   Stricter Regulation of Share Transfers in Shell Companies

Articles 684a and 787a of the Swiss Code of Obligations (CO) now stipulate that the transfer of shares or of capital contributions in a company without activity, without realizable assets and over-indebted is null and void. If the event of suspicion of such a transfer, commercial register offices must request the company’s latest financial statements and refuse registration if the suspicions are confirmed.

Here are a few examples that could arouse such suspicion:

• Multiple elements of the company being changed simultaneously or successively (e.g., purpose, registered office, complete renewal of the board of directors);
• The company shares its registered address with an entity that has previously been refused registration,
• The parties involved having already been subject to such refusals.

   2.   Complex Implementation for Commercial Register Offices

The legislator has tasked commercial register offices with monitoring these transfers, but do they have the necessary resources?

Several factors may hinder their effectiveness:

• The required financial statements may be outdated and may not clearly reveal a lack of activity.
• Proving the absence of realizable assets remains legally challenging.
• A registration refusal cannot be based solely on a company’s “shell” status without formal evidence of an illicit transfer.
• The examination power of commercial register offices is limited to clear violations of public order provisions.

It remains to be seen whether the current mechanism will effectively prevent abuses and whether the offices will engage in this analytical work.

Notably, in cases of suspicion, the commercial register may only require financial statements, which may not be sufficient to make a determination. Do these offices also have the necessary technical expertise to draw any conclusions from them?

Moreover, practices may also vary from one canton to another.

   3.   Ambiguous Interaction with Article 934 CO

The implementation of these new provisions is further complicated by Article 934 CO, which requires the deletion of an entity that has no activity or assets, even if it is not over-indebted. Strangely, this provision could allow the registration of share transfers that are otherwise prohibited under the new CO articles, raising doubts about the effectiveness of the new rules.

   4.   Conclusion

While these new rules provide a stricter framework, they remain imperfect and raise numerous questions regarding interpretation and application.

In practice, it may prove difficult to establish the absence of realizable assets, and the uncertainty surrounding the interaction with Article 934 CO calls into question the real effectiveness of the new regime.

In conclusion, before proceeding with a transaction, a prospective buyer would be well-advised to verify the actual activity and financial situation of the target company to avoid any setbacks, or even the outright nullity of the transaction.