Minder Initiative: Federal Council issued first draft ordinance

in Legal, 19.06.2013

On 14 June 2013, the Federal Council issued the first draft ordinance (VgdA) implementing the constitutional amendments of the Minder Initiative which was approved by the Swiss voters on 3 March 2013. Interested parties are expected to submit their observations until 28 July 2013. It is foreseen that the Federal Council will finalize the VgdA not later than by end of November 2013 so that the VgdA will come into force on 1 January 2014. The VgdA will remain in force until the date on which the new legislation implementing the Minder Initiative on the level of the Swiss Parliament comes into force.

The Federal Council tried to remain close to the wording of the Minder Initiative but took also the opportunity to clarify certain issues which were debated heavily over the last few months:

Compensation Committee:Only member of the board of directors are eligible for the Compensation Committee.
Compensation Report:The VgdA introduces the concept of a Compensation Report to be prepared annually by the board of directors and to be examined by the Auditor. The Compensation Report will replace the notes to the financial statements required so far under Art. 663b bis SCO.
Approval of Compensation:The shareholders vote annually on the aggregate sum of the fixed compensation of the board of directors, executive management and advisory board for the period until the next general meeting of the shareholders.
The shareholders vote annually on the aggregate sum of the variable compensation of the board of directors, executive management and advisory board for the past financial year.
In case of disapproval, the board of directors may submit a different proposal at the same general meeting. If there is no such proposal or if such new proposal is disapproved, the board of directors has to call for a new general meeting within three months.
The articles of association may provide for a different solution subject to certain conditions.
Prohibited Compensation:VgdA prohibits termination or other payments, advance payments and premiums for the acquisition or sale of business but does not further define the scope and meaning of these expressions.
Pension Funds:The obligation to use their voting rights in the interest of their insured person applies only to shares directly held by such pension fund.
Penal Provisions:Only violations with intent (Vorsatz) are penalized and only members of the board of directors, management and advisory board are subject to the penal provisions. Responsible persons of the pension funds are only subject to a monetary penalty.

The transitional provisions contained in Art. 26 – 33 VgdA provide for an implementation step-by-step. However, the corporations for which VgdA is applicable have to bear in mind that the following provisions apply as of 1 January 2014 and have therefore an impact on their first general meeting of the shareholders after 1 January 2014:

Prohibitions:Termination or other payments, advance payments and premiums for the acquisition or sale of business are prohibited. Compensation plans have to be reviewed to make sure that they comply with new legislation.
Corporate bodies and custodian banks no longer allowed to act as representatives.
Delegation of management only to natural persons.
Independent Representative:The board of directors has to elect an independent representative of voting rights for the first general meeting of the shareholders in 2014.
Election: Chairman, members of the board of directors and compensation committee as well as independent representative to be elected in the first general meeting of the shareholders in 2014.
Compensation Report:At the moment it is not clear whether the compensation report has to be prepared already for this first general meeting of the shareholders. But the board of directors has to prepare a compensation report and have it examined by the Auditor definitely for the general meeting of the shareholders in 2015. It has to be disclosed and published in accordance with Art. 696 SCO and 958e SCO.

Please find attached to this document a more detailed compilation of the new provisions of the VgdA, a comparison between the VgdA and the requirements of the Minder Initiative as well as an overview on the transitional provisions.

New rules based on Minder initiative and ordinance of 14 June 2013 from KPMG Switzerland