Markus Vischer
Dr. iur., LL.M.
Michael Kündig MLaw
Dario Galli MLaw
In Switzerland, private companies can either be acquired by way of purchasing the target company's assets by an APA or by way of purchasing the shares in the target company by an SPA. Put simply, if the transaction is structured as an asset purchase the buyer acquires the target company (or a part thereof) directly by taking over its assets (in a narrow sense, such as cash, inventory, equipment, real estate, accounts receivable, or intangible assets) but also liabilities, legal positions, and employees, together the assets (in a wider sense), whereas in case of a share deal the buyer acquires the target company only indirectly by taking over the legal entity which owns the target company. Asset pur-chases can be conducted either the traditional way, that is, with individual transfer of all assets to be transferred or through an instrument of transfer of assets under the Merger Act. Because these two legal instruments partially differ in terms of the content of the APA as well as the closing of the transactions contemplated by the APA, it is important to distinguish them.
It should be noted that an additional distinction has to be drawn between the signing and the closing of an APA. "Signing" means the signing of the APA, i.e. the creation of a legal obligation. On the other hand, the term "closing" is understood as the consummation of the transactions contemplated by the APA; only upon closing, the buyer becomes the new owner of the acquired assets.
II. Asset Deals
1. In General
In private company asset purchases the APA is executed at the signing. As the case may be, also other documents, such as the disclosure letter, are executed at the signing. The main substantive clauses in an APA are:
− Definitions;
− Object of the sale: assets;
− Consideration (including purchase price adjustment, if applicable, and VAT treatment);
− Closing (including conditions precedent and closing mechanics);
− Representations and warranties;
− Remedies (including limitations);
− Employee and employee benefits matters;
− Further covenants (including transition arrangements, non-compete, no leakage/actions be-tween signing and closing, confidentiality and public announcement);
− Miscellaneous provisions (including taxes, costs, amendments, notices, governing law and jurisdiction/arbitration).
The validity of asset purchase agreements is, in principle, not subject to any particular form. How-ever, in practice, most APAs are concluded in writing. Further, the legal formalities for an APA depend on the object of the sale (e.g. transfer of real estate or IP right; see chapter on Acquisition of Real Estate, section 2 and chapter on Intellectual Property, section 4).
2. Asset Purchase Agreement 2.1. In General
2.2. Form
Customarily, the parties explicitly agree in the APA on the representations and warranties (commonly referred to as "R&W") relating to the sold assets and covering, inter alia, the following areas:
− Title to the assets (in a narrow sense);
− Enforceability and authority, and no conflict;
− Spin-off balance sheet;
− Condition and sufficiency of assets;
− Taxes;
− Employee and consultants as well as employee benefits;
− Compliance with legal requirements, and governmental authorisations;
− Contracts.
Usually, the parties agree to limit the representations/warranties given under the APA. Common limitations are:
− Disclosure against representations/warranties;
− Knowledge qualifications in representations/warranties;
− Requirement of a notice of breach of representations/warranties;
− Time limits for bringing representation/warranty claims;
− De minimis rules (exclusion of smaller representation/warranty claims);
− Thresholds or deductibles;
− Statute of limitations;
− Caps on the liability of the seller for representation/warranty claims.
In a Swiss law governed APA the prevailing sole remedy in case of breaches of representations/war-ranties provided by the parties in the APA is damages (normally irrespective of any fault of the seller), sometimes preceded by the right of the seller to remedy the defect in question. Less common is the
2.3. Representations and Warranties 2.3.1. In General
2.3.2. Limitations on Representations and Warranties
2.3.3. Remedy
right of the buyer to reduce the purchase price. The statutory right of the buyer to rescind the ac-quisition agreement is normally contractually excluded.
For most representations/warranties the time limit is usually between 12 and 24 months, most often 18 months. However, for certain representations/warranties the time limit is usually between five and ten years, such as relating to title to assets, tax and environmental issues.
At the closing, the parties effect the transactions contemplated by the APA. Put simply, the buyer pays the purchase price and the seller simultaneously transfers the assets to the buyer. Further, the buyer assumes the assets. Usually, the parties record the completion of the closing in a closing mem-orandum.
Typically, the parties agree in the APA that the obligation of each of the parties to effect the trans-actions contemplated by the APA shall be subject to the satisfaction or waiver (to the extent a waiver is permitted by law) by each party of certain conditions precedent.
Conditions precedent can include, inter alia:
− Governmental approvals (for example, by competent competition authorities or banking or insurance regulators);
− Third party consents.
Normally, the parties include a covenant in the APA to use best efforts to ascertain that the condi-tions precedent are fulfilled until a certain date (so-called long-stop date, or drop-dead date). They normally also agree on the consequences if this date is not met, that is, by providing for withdrawal rights of the parties.
2.3.4. Time Limits for Claims under Representations/Warranties
3. Closing 3.1. In General
3.2. Conditions Precedent
If an asset purchase is performed the traditional way, there is principally no automatic transfer of assets; however, exceptions may apply (e.g. in the field of labour law or tenancy law). This means that the parties are required to transfer each and every sold asset in accordance with the respective formalities laid down by Swiss law.
If an asset purchase is performed through a transfer of assets as provided for by the Merger Act, all assets listed in an inventory attached to the transfer agreement are transferred by operation of law to the buyer upon registration of the agreement with the competent register of commerce. It is still disputed and therefore unclear whether this principle also applies to contracts to be transferred.
The Merger Act further provides that both the seller and the buyer are jointly and severally liable for debts incurred before the transfer of assets for three years.
Irrespective of whether an asset purchase is performed through a transfer of assets as provided for by the Merger Act or the traditional way, where the seller (as the employer) transfers in an asset deal the company or a part of it to a buyer, the seller is obliged to inform and/or consult employees or their representatives. However, the parties to an APA are not obliged to obtain employee consent to an asset deal (see also chapter on Corporate Restructuring, section 3.1).
With regard to the acquisition of a private company’s assets, CartA might be applicable in some cases (see chapter on Competition Law, section 4). If a planned concentration of undertakings reaches or exceeds certain turnover thresholds, it is subject to pre-merger control, i.e. the parties (usually the buyer) must notify COMCO about it. In any event, pre-merger control must be obtained irrespective of any turnover thresholds if one of the involved undertakings has been held in a final decision to be dominant in a market in Switzerland, and the concentration concerns this market, an adjacent or an
3.3. Transfer of Assets in Particular 3.3.1. Traditional Asset Deal
3.3.2. Transfer of Assets Pursuant to the Merger Act
4. Employees
5. Regulatory Aspects of Asset Deals
5.1. Competition Law
upstream or downstream market. Failure to comply with the notification duty triggers fines of up to CHF 1 million, and the underlying agreements are null and void.
Under Swiss law, the notification or clearance of a governmental agency is not required when a for-eign owned (or forfor-eign controlled) company acquires a private company's assets with its registered seat in Switzerland; however, in its decision dated 3 March 2020, the Swiss Parliament tasked the Swiss government with proposing a draft bill for the introduction of investment controls and the set-up of a respective licensing authority. Depending on the business area however, again restrictions may apply (for example, residential real estate, national defence, banking, insurance, electricity, or other areas of national importance).
5.2. Foreign Investment Control
Urs Schenker
Prof. Dr. iur., LL.M.
Rafael Zemp
lic. iur., MBA Insead
In Switzerland, public takeover offers are governed by the FMIA and the regulations promulgated thereunder, including the Ordinance on Takeover Offers of the Swiss Takeover Board, which sets forth detailed rules on PTOs.
Swiss public takeover rules are applicable to Swiss companies whose shares are listed on a Swiss stock exchange (i.e. SIX and BX). Swiss public takeover rules are not applicable to shares that are traded over the counter or on other private trading platforms. Foreign companies whose shares are traded on a Swiss stock exchange are subject to the Swiss public takeover rules, to the extent that the main listing is on a Swiss stock exchange.
The TOB applies the Swiss takeover rules to all public offers for the purchase of shares of listed com-panies. Public offers are offers addressed to a large number of counterparties, regardless of how such offer is communicated. Share repurchases also fall within the scope of Swiss takeover rules if a listed company announces the repurchase publicly. However, a simplified procedure without the