Transfer of Assets: Executive Summary

The newly instituted transfer of assets allows a company or a sole proprietorship registered in the Commercial Register to transfer, by one single act (in universal succession), all or part of its assets and liabilities to another legal entity (including sole proprietorship and even individuals). This transfer of both assets and liabilities may also include legal relationships of the company, in particular, agreements with third parties.

The prime difference from the other transaction forms set out in the Merger Act is that members (shareholders, partners) are not directly involved in a transfer of assets. Other than with mergers or demergers, the members of the transferring entity only keep their positions in the transferring entity and do not receive any equity or membership rights of the receiving entity. If such rights are granted to the members of the transferring entity, the transaction must be qualified as a demerger, and the respective provisions must be followed. Usually, the entities involved in a transfer of assets do not need to hold a general meeting.

The practical importance and viability of the transfer of assets rests with its flexibility. First of all, the transfer of assets will be considered as an "omnibus clause": it may apply whenever a structural adjustment cannot be realized within one of the standard transactions of merger, demerger, or change of corporate form (transformation) because of formal obstacles.

On the transferring side, all forms of companies as well as sole proprietorships registered in the Commercial Register may utilize this transfer of assets. On the receiving side, no restrictions exist: there can be any legal entity, including sole proprietorships and even individuals.

With the new legal mechanism, the assets and liabilities specified in the transfer agreement pass easily to the acquiring party, especially because there is no need to consider special formal regulations that normally would apply to a transfer of individual assets or claims. Solely for the transfer of real estate, the Merger Act requires notarised recording, which, however, is facilitated insofar that when several properties are to be transferred, even if located in different cantons, one single notarised recording will suffice.

Procedurally, a transfer of assets requires the following documents and decrees.

• A transfer of assets is based on the transfer agreement to be concluded by the supreme administrative or management bodies of the involved legal entities. It must be drawn up in writing and must be notarised if real estate property is to be transferred. The transfer agreement necessarily must state the total value of the assets and liabilities to be transferred. A surplus of net assets is essential, which can impede transfers of assets for restructuring purposes. The consideration (if any) must also be stated in the agreement. It may be in the form of cash, assets, or shares (or combinations thereof).



• The inventory is the core of the transfer of assets (as also with the demerger). The inventory itself forms part of the transfer agreement. The items to be transferred must be described clearly enough to be allocated exactly to the involved parties. Real estate, securities, and intangible assets must always be itemised. The items being transferred must not form a “business” within their entity; individual assets can be transferred as well. Unallocated assets will remain with the transferring entity.



• Moreover, the employment relationships to be transferred must be listed. The primary weight of this list lies with the allocation of employment contract liabilities among the transaction parties and not with the significance for the employees; the Merger Act refers quite generally to art. 333 CO with respect to transfers of employment relationships.



• The transfer of assets does not require approval by the shareholders or partners, or by the general meeting of the transferring company. Ex post disclosure is sufficient: The shareholders or partners of the transferring company must be informed about the transfer of assets, including its conditions, at the general meeting or in an appendix to the annual financial statements and reports. If the transferred assets amount to less than 5 % of the transferring company’s total in the balance sheet, there is not even a duty of disclosure.



• After all, the transfer of (essential) assets can make it impossible for the transferring company to follow the company’s purpose as stated in the bylaws: With the transfer of all assets, this might even be the rule. In such cases, the transfer of assets requires an amendment of the bylaws (as to the company’s purpose) and thus the consent of partners or of shareholders in a general meeting.



• The transfer becomes legally binding only upon the entry in the Commercial Register. At this moment, assets and liabilities are automatically transferred to the acquiring entity.



• To protect creditors and employees, the transferring company, as original debtor, is jointly and severally liable with the absorbing company for the transferred liabilities for three years.