Lukas Wyss
lic. iur., LL.M.
Markus Pfenninger Dr. iur., LL.M.
Valentin Wiesner MLaw
The Swiss debt market is more active than the size of Switzerland might indicate and has been at-tracting an increasing number of local and global issuers over the past couple of years. While debt capital markets have remained lightly regulated in Switzerland for quite a few years, the Swiss regu-latory framework has recently undergone a major legislative overhaul aimed at aligning the Swiss regulatory framework to international regulations, particularly those of the EU. Consequently, the new FinSA entered into force on 1 January 2020 and introduced, amongst others, more stringent requirements on offerings of debt securities in Switzerland.
One of the core elements of the new regulatory framework is the establishment of a uniform pro-spectus regime that covers and harmonises disclosure requirements for different types of financial instruments. Moreover, issuers of debt securities that seek the admission of securities for trading on a trading venue in Switzerland will further need to comply with the requirements imposed by the relevant trading venue.
II. Debt Issuances
1. In General
The FinSA requires that any person making a public offer for the acquisition of securities in Switzer-land or any person seeking the admission of securities for trading on a trading venue in SwitzerSwitzer-land must first publish a prospectus. Pursuant to the FinSA, an offering is to be understood as an invitation to acquire a financial instrument containing sufficient information about the terms and conditions of the offering and the financial instrument. The information provided in an offering must be suitable to induce and enable its recipient to accept an offer. An offering qualifies as public offering if it is directed to the public, that is, it does not exclusively target a pre-selected and limited group of in-vestors. Ultimately, each offering should be evaluated on a case-by-case basis, weighing both quali-tative and quantiquali-tative criteria.
Similarly to the EU Prospectus Regulation, the FinSA provides for numerous exemptions from the prospectus requirement mainly based on the type of offering and the type of securities. Further, certain limited exemptions are available in the context of a mere admission to trading.
Exemptions based on the type of offering include, amongst others, offerings to professional clients, offerings to less than 500 (retail) investors, offerings with minimum investments or minimum de-nomination of CHF 100,000 and offerings not exceeding an aggregate volume of CHF 8,000,000 dur-ing a rolldur-ing twelve month period.
Exemptions based on the type of securities include, amongst others, certain equity securities, secu-rities issued or guaranteed by sovereign issuers, debentures as well as money market instruments with a term of less than one year and derivatives not offered in the framework of an issuance.
Moreover, no prospectus is required in the context of an admission to trading of securities already admitted for trading at a trading venue outside of Switzerland which is considered to be equivalent in terms of regulation, supervision and transparency. Likewise, there is no prospectus requirement for securities to be admitted for trading on a trading segment only opened to professional clients.
2. Prospectus Requirements
2.1. Scope
Generally, prospectuses must be drawn up in either an official Swiss language or in English. Issuers of debt securities may either prepare a standalone prospectus for each issuance or issue debt secu-rities on the basis of a base prospectus with the final terms being separately published.
In general, a prospectus must contain all information material for the investment decision of an in-vestor. In addition, the implementing ordinance to the FinSA contains a comprehensive list of infor-mation to be included in the prospectus. A prospectus will further need to include a summary con-taining all information and a disclaimer explaining that such summary shall not form the basis for the investment decision and that the liability for the summary is limited to misleading or incorrect information or information that is contradictory to the entire prospectus. Finally, it should be noted that the FinSA explicitly permits issuers to incorporate information in the prospectus (except for the summary) by reference.
A prospectus for the issuance of debt securities must generally be approved by an approval authority licensed by FINMA prior to a public offering or an admission of securities to trading in Switzerland.
Such pre-approval process encompasses a review of the completeness, coherence and comprehen-sibility of the prospectus in line with the requirements set forth by the FinSA. For certain types of securities, most notably bonds and derivatives with a term exceeding 30 days, the prospectus may also be approved after a public offering or an admission of securities to trading in Switzerland, pro-vider, however, that a licensed bank or securities dealer confirms that the essential information about the issuer and the relevant securities is available at the time the prospectus is published. This gives much greater flexibility to (Swiss and foreign) bond issuers when accessing the Swiss capital market.
The FinSA requires that whenever financial instruments other than equity securities or debt securi-ties with no derivative characteristics are offered to retail clients, a so-called key information docu-ment containing all information essential for the investdocu-ment decision of the client in an easily com-prehensible manner must be prepared. While issuers of bonds would typically be exempt from this
2.2. Form and Contents of the Prospectus
2.3. Approval of the Prospectus
2.4. Key Information Document
requirement, each issuance of securities in Switzerland should be evaluated on a case-by-case basis to determine whether or not such securities have a derivative component.
If an issuer wishes to list debt securities on a Swiss stock exchange, it must do so on a stock exchange authorised by the FINMA. FINMA has so far authorised two Swiss stock exchanges: SIX and BX. SIX is significantly larger than BX and serves as the main (debt) exchange in Switzerland. This chapter thus focuses on the listing requirements and procedures of SIX.
On SIX, debt securities are listed in three different segments (called standards), namely the "Stand-ard for Bonds", "Stand"Stand-ard for Derivatives" and "Stand"Stand-ard for Exchange Traded Products". Addition-ally, international bonds, i.e. bonds issued by a non-Swiss issuer, denominated in a currency other than CHF and already listed on another exchange recognised by SIX may also be admitted to trading (but not listed).
Switzerland has enacted a unique regulatory framework placing a strong emphasis on self-regula-tion. Accordingly, regulatory supervision in Switzerland is undertaken by FINMA as the supervisory body established by law as well as a group of private self-regulatory bodies which in turn are licensed and supervised by FINMA. The most important licensed self-regulatory body with regard to debt markets and exchanges is SIX Exchange Regulation, which has adopted numerous rules, directives and guidelines in connection with the listing of debt securities. The main requirements are set out in the SIX Listing Rules and the additional implementing rules that are derived therefrom and which provide for specific rules depending on the type of debt securities. The SIX Listing Rules and the additional implementing rules impose detailed requirements for both the issuer and the debt secu-rities, the most important of which are listed below.
3. Listing
3.1. Main Debt Capital Markets
3.2. Listing Requirements
An issuer of debt securities must typically comply with the following requirements:
− Track record: An issuer must have been duly incorporated and existed for at least three years prior to the listing. Certain issuers may be eligible for an exemption (e.g. an issuer of asset-backed securities).
− Financial record: An issuer must have produced annual financial statements complying with the applicable financial standards for the two complete financial years preceding the listing.
− Capital requirements: An issuer's reported equity capital must be at least CHF 25 million, in accordance with the financial reporting standard used in the listing prospectus. If an issuer is the parent company of a group, the requirement refers to consolidated reported equity capital.
− Accounting standards: An issuer of debt securities must generally apply IFRS, US GAAP, Swiss GAAP FER or a standard under the Swiss Banking Act as its accounting standard. An issuer incorporated outside Switzerland may also apply the accounting standards of its home coun-try, provided those are recognised by SIX.
− Auditors: An issuer must appoint auditors that fulfil the requirements set out in the Act on the Admission and Oversight of Auditors.
The requirements imposed on an issuer regarding track record, capital resources and annual ac-counts may be waived if instead of the issuer a third party that fulfils these requirements (guarantor) provides a guarantee commitment in respect of the obligations associated with the debt securities.
Debt securities must typically comply with the following requirements:
− Applicable law and jurisdiction: Debt securities listed on SIX must be governed by Swiss law or a foreign law recognised by SIX (i.e. the laws of OECD member states). Investors must also be able to sue the issuer in a state court which must be (at least alternatively) located in the country whose legal system is governing the debt securities.
− Denominations: The denomination of a debt security must enable an exchange transaction to occur in one round lot.
3.2.1. Main Requirements in Respect of the Issuer
3.2.2. Main Requirements in Respect of the Debt Securities
− Minimum capitalisation: The aggregate nominal amount of bonds must be at least CHF 20 million, exchange traded products must have a minimum capitalisation of CHF 1 million.
− Convertible debt securities: Convertible securities may generally only be listed if the under-lying equity securities have already been listed on SIX or another regulated market, or if they are being listed at the same time.
− Clearing and settlement: An issuer must ensure that the debt securities may be cleared and settled in the settlement systems recognised by SIX.
− Paying agent: An issuer of bonds or derivatives must ensure that services relating to interest and capital, as well as all other corporate actions, are provided in Switzerland. An issuer may assign these activities to a third party that has such capabilities (i.e. banks, securities dealers and other institutions subject supervision by FINMA or the Swiss National Bank).
SIX may grant exemptions from the above listing requirements if this is in the interest of the public or the exchange and provided that an issuer can demonstrate that the relevant requirement can be satisfied by other means.
An issuer (and the guarantor) of debt securities listed on SIX is subject to various ongoing obligations to maintain its listing, including the following:
− An issuer of bonds and derivatives must publish its annual reports (audited annual financial statements plus audit report) within four months after the end of the financial year on a website and provide a link to SIX. Reports must be freely accessible for at least five years.
− There are regular ongoing reporting obligations, depending on the type of debt securities (e.g. change of issuer's name, change of paying agent).
− Any potentially price-sensitive facts arising in the course of an issuer's business must be re-ported in a timely manner (ad hoc publicity).
3.3. Ongoing Obligations
Theodor Härtsch
lic. iur., MBA (IE)
Rafal Szala
After the record year 2018, in 2019 the Swiss M&A and acquisition finance market has slowed down.
There has been a decrease in both, the overall number of transactions (Handelszeitung: 489, KPMG:
402) and volume (Handelszeitung: CHF 70.3 billion, KPMG: USD 127 billion). The ten most significant transactions in terms of deal volume made up for more than 60% of the overall deal amount. The most significant sector – the life science and pharmaceutical industry – accounted for about 50% of the deal volume.
The downward shift in the market was due to global economic, legal and political reservations. Those uncertainties remain challenging in 2020 and the market is currently facing another major disruption due to the Covid-19 pandemic. While the current dramatic decline in economic activity and – sub-sequently – EBITDAs will potentially stimulate M&A activity in some sectors, the existing risk factors are still likely to cause the market to continue its decrease in 2020.
A striking feature of the Swiss market is that there are only few so-called "mega deals". In terms of deal volume, the vast majority of Swiss transactions range between a CHF two-digit million amount and a low CHF three-digit million amount.