Investment foundations: more flexibility for general meetings of investors

Initial situation

With regard to the convening and holding of general meetings of investors, Art. 3 para. 1 of the Swiss Ordinance on Investment Foundations (IFO) refers to certain provisions of Swiss corporate law. Previously, the reference expressly included only Art. 699, 700, 702, 702a and 703 of the Swiss Code of Obligations (CO). This meant that not only were the new provisions on convening and holding general meetings, which were introduced as part of the revision of Swiss corporate law that came into force on 1 January 2023, not taken into account, but there was also no reference to the provision on the universal meeting (Art. 701 CO), which is relevant for investment foundations with only one or a few investors. This omission had to be corrected – presumably after being pointed out by the legal profession – with the result that the reference in the IFO has been extended as of 1 July 2024.

Amendment of the IFO as of 1 July 2024

On 24 April 2024, the Federal Council decided to amend the IFO and to bring the amendment into force as of 1 July 2024. Art. 3 para. 1 IFO now refers to Art. 699–703 CO and stipulates that these provisions apply mutatis mutandis to the convening and holding of general meetings of investors.

The following provisions remain applicable:

• Method of convening the general meeting (Art. 699 CO): The general meeting of investors shall be held within six months of the end of the financial year and shall generally be convened by the foundation board.
• Content of the convening notice (Art. 700 CO): This provision regulates the timing and content of the convening notice.
• Preparatory measures / minutes (Art. 702 CO): The foundation board is responsible for determining who has the right to vote, although care must be taken in particular with regard to issues that only affect individual investment groups. The foundation board must also ensure that minutes are kept, including the prescribed minimum content.
• Right to make statements and to submit motions (Art. 702a CO): The foundation board may make statements and submit motions on any agenda item at the general meeting of investors.
• Resolutions and elections (Art. 703 CO): Unless the articles of association provide otherwise, the general meeting of investors shall pass resolutions and conduct elections by a majority of the votes represented. The number of votes is determined by the number of units held in the investment assets or in the investment group concerned.

As a result of the updated reference, the following provisions now also apply:

• Publication of the annual report (Art. 699a CO): The annual report must be made available to investors at least 20 days before the general meeting of investors.
• Right to place agenda items and to submit motions (Art. 699b CO): Investors holding (together) at least 5% of the investment assets may request that items be placed on the agenda or that motions be included. This quorum may be lowered, but not raised, in the articles of association or in the regulations. It should also be noted that in the case of agenda items concerning only one or individual investment group(s), often only the investors in the relevant investment group(s) are to be taken into account when calculating the quorum.
• Universal meeting and consent to a motion (Art. 701 CO): It is possible to hold a general meeting without complying with the applicable requirements for convening a meeting. In addition, resolutions may be passed in writing on paper or electronically. In practice, this is particularly suitable for investment foundations with only one investor or a small group of investors.
• Venue (Art. 701a and 701b CO): The foundation board may decide on the venue (or the venues). If this is to be abroad, a provision in the articles of association is required. It is unlikely that there will be a need for the designation of a venue abroad, as the investors in Swiss investment foundations must be domiciled in Switzerland.
• Use of electronic means (Art. 701c–701f CO): Investors which are not present at the general meeting of investors may now be permitted to exercise their rights by electronic means (so-called hybrid general meeting), or it is now possible to hold a purely virtual general meeting, provided the articles of association permit this. The law sets out the requirements for the use of electronic means and the procedure to be followed in the event of technical problems.

Prior to the amendment of the IFO, the practice of the Occupational Pensions Supervisory Commission (OPSC) already allowed investment foundations' regulations (articles of association, foundation regulations and organisational regulations) to provide for general meetings of investors to be held in accordance with the new provisions on the convening and holding of general meetings of shareholders that had come into force on 1 January 2023, but with the caveat that this was the responsibility of the investment foundation concerned, in particular because of the risk of the resolutions of general meetings of investors being challenged if they were adopted at virtual or hybrid general meetings or by circular resolution.

Assessment

The updated reference in the IFO harmonises the rules for convening and holding general meetings of investors with those for convening and holding general meetings of shareholders. This is welcome as it increases legal certainty for investment foundations and creates a modern regime.

The changes take into account technological developments and the need for greater flexibility in the area of investment foundations. Investment foundations can now enable their investors to participate in general meetings with less effort and in different ways (physically and/or electronically), which not only reduces the burden on investors but should also improve the quality of decision-making (through a higher participation rate) at general meetings of investors.