Types of Dividends

Swiss law recognizes various types of dividends (Art. 674 et seq. CO). Ordinary dividends are decided at the sole discretion of the Annual General Meeting, following approval of the financial statements and the auditor’s report; they may be distributed only after allocations to legal and statutory reserves have been made, based on the net income shown on the balance sheet.

The special dividend is in addition to the dividend for the current fiscal year and is based on the distributable assets from prior fiscal years; it is subject to specific conditions, including a special report from the auditor (Art. 675 CO).

Interim dividends are based on the profit for the current fiscal year, which has not yet ended: this is generally permitted when audited interim financial statements from less than six months ago show distributable profit. In practice, advance dividends take the form of a loan to shareholders, which is offset against the upcoming regular dividend.

Shapes

Dividends may be paid in kind provided that the applicable rules—such as equality and allocation to reserves—are followed. The General Meeting approves them by a simple majority, based on a balance sheet dated within the past six months and presented by the Board of Directors.

Equality Among Shareholders

Dividends must be distributed equally among shareholders of the same class of stock, based on the paid-in par value of their shares, without taking into account the share premium (Art. 660 CO). Any violation of this rule must be the subject of an action for annulment; otherwise, the shareholder loses the right to claim payment of the unpaid dividend (Federal Supreme Court decision 4A_98/2020 of January 21, 2021).

Penalties

A violation of the rules results in the revocation (Art. 706 and 706a CO) or even the nullity of distribution resolutions. Amounts already paid out must then be returned in accordance with the action for restitution under Article 678 of the Swiss Code of Obligations (CO), brought by the company or by a shareholder on behalf of the company. The Board of Directors or the auditor may also be held civilly liable.