Background Information

The Merger Act is a cross sectional-statute of corporate and commercial law. It also affects foundations, sole proprietorships entered in the Commercial Register as well as corporate entities under public law. Because of the great number and the complexity of all these issues, the legislator has initiated a special Merger Act.

The Merger Act aims:
- to establish a comprehensive set of rules for the reorganization of corporate entities, as well as
- to expand the existing possibilities in this field.
The expansion of the existing possibilities helps the enterprises to adapt to the changing economic environment with a greater degree of flexibility. The Merger Act establishes a completely new regulation of the merger law, whereby the merger of legal entities of the same or of different legal forms is widely allowed. For the first time in Swiss corporate and commercial law, a regulation for spin-offs has been established. Furthermore, the Merger Act provides a general regulation for changing one corporate form to another: The so-called change of corporate form requires a fundamental compatibility of the corporate structures of both the initial and resulting legal form. The transfer of assets completes this variety of transactions; it is a flexible instrument allowing numerous applications.

In single chapters, the Merger Act regulates the following kinds of transactions:
- Merger: Upon merging, by virtue of a contractual agreement, two or more legal entities are merged without liquidation. The transfer of assets takes place with a universal succession. In return, the shareholders or partners of the transferring legal entity receive participation or membership rights in the acquiring legal entity. The transferring legal entity is then dissolved and its entry is deleted in the Commercial Register.
- spin-off: A spin-off means a transfer of certain parts of a legal entity (transferring legal entity) to another legal entity (acquiring legal entity). In return, the shareholders or partners of the transferring legal entity receive participation or membership rights in the acquiring legal entity.
- Change of corporate form: A change of corporate form, in the sense of the Merger Act, means changing a specific legal entity from one legal form to another. Here, the legal entity maintains its economic and legal identity as well as its economic rights and membership relations.
- Transfer of assets: By transfer of assets, a legal entity may transfer all or part of its assets to another legal entity. The membership relations are not affected.
For each kind of transaction, the Merger Act stipulates for which legal entities it is available.
For each kind of transaction, the Merger Act clearly outlines the necessary documents and procedures. The protection of the shareholders or partners is based on membership continuity as well as on restraint of extra burden. Further, specific provisions protect both creditors and employees. Creditor protection is guaranteed by obligations of security as well as by joint and several liability regulations. Furthermore, with the change of the legal entity, the Merger Act regulates the transfer of employment and especially the duty to inform and consult the employees. Other than specific protective measures for single groups entitled to a right, the Merger Act requires extensive publicity and transparency to maintain open channels of information.
For mergers, spin-offs, and changes of corporate form of small and medium enterprises (SME), the Merger Act simplifies procedures and disclosures to lower transaction costs and to preserve the increased need of confidence.
Especially when rescinding transactions, the responsibility of the persons involved are regulated for all transaction forms.
The Merger Act has made modifications to other fields of law as well. The most important are creating uniform rules to facilitate cross-border transactions and introducing identification numbers for all legal entities registered in the Commercial Register. Numerous fiscal adjustments ensure that the various kinds of transactions provided within the Merger Act can be accomplished in a fiscally neutral way.
Finally, the Merger Act also considers international aspects as seen in its respect for the notion of extensive compatibility with European regulations. For example, the amendments to the Private International Law Act (PILA) create uniform conflict of law rules for cross-border transactions.

Over all, the Merger Act is successful in reaching its objectives. From a practical point of view, the increased legal certainty is especially to be appreciated. It reduces the expense of legal enquiries and thus lowers transaction costs. Within the limits of a complete new regulation, however, certain weak points are unavoidable. For instance, from the entrepreneurs’ point of view, the protection of minority rights in the Merger Act seems to be somewhat exaggerated, which tends to reduce the intended flexibility. Furthermore, the easements for small and medium enterprises (SME) can sometimes put the creditors at a disadvantage. The experience with the last big revision of the corporate law shows clearly that only time will tell which additional problems might arise with regard to the Merger Act.

Suggested citation:
Hans Caspar von der Crone / Andreas Gersbach / Franz J. Kessler / Martin Dietrich / Claudia Fritsche / Katja Berlinger, www.fusg.ch - die Internetplattform zu Fragen des Transaktionsrechts, <http://www.fusg.ch/en/overview/background/index.php?datum=2003-08-22>, status: Aug. 22, 2003, visited May. 18, 2012.

past versions