Investor Information

Explanation of the term preferred stock or participation certificate

It is possible that a company in Switzerland may also provide for so-called participation capital (often named preferred stock) in addition to its share capital. This capital is divided into participation certificates, which have a face value. They represent an investment in the company that is an asset. A participation certificate is a security.Participation certificates are bearer instruments through which investors participate in the assets and business successof a company. Participation certificates are similar to preference shares because some of the shareholder’s rights are also due to the holder of the articipation certificate.

In terms of assets, the participants are equal to the shareholders. There might be even higher dividend permissions connected with those participaton certificates that with ordinary shares.

The Swiss Code of Obligations expressly states that participants in the distribution of balance sheet profits and liquidation results and in the acquisition of new shares must not be put in a worse position than shareholders. So there is a so-called community of fate between the participants and the shareholders, which is also reflected in the subscription right of the participants. Article 656g para. 2/3 of the Swiss Code of Obligations states that participants who participate in an increase in participation and / or share capital are protected from diluting their property rights in the same way as shareholders..

The Code of Obligations provides for the equalization of the rights of the participation certificate with the share and is therefore largely subject to the law of the share. As a result, the stock corporation’s participation certificates can not be used to circumvent either the stock corporation’s nominal value regulations or those for the repurchase of own shares.With the participation certificate the same property rights as with the share are connected. The difference, however, is that there are no voting rights associated with the participation certificates. The participant is thus an asset to the shareholder, but not equal in terms of membership rights. As mentioned, he may not be affected by the shareholders in his position (community of fate).

Since 1963, participation certificates have been issued in Switzerland. They are also called “non-voting shares” (often called preference shares).

Code of Obligations Art. 656a ff.