Lindemann Law

Credit Suisse shares: Unveiling the imposed exchange ratio and shareholder options

Are you a Credit Suisse shareholder who missed the deadline on August 14, 2023, to file a claim under the Swiss Merger Act? Discover an alternative legal remedy that remains open to you.

1. What happened to Credit Suisse shares?

On 19 March 2023, the Federal Council, the Swiss Financial Market Supervisory Authority FINMA (“FINMA”), and the Swiss National Bank (“SNB”) decided that the takeover of Credit Suisse by competitor UBS was carried out on the basis of an exchange ratio of one UBS share for 22.48 Credit Suisse shares, valuing Credit Suisse at CHF 3 billion, whereas the closing price on March 17 indicated a market value of CHF 7 billion. As a result, the purchase price was 76 centimes per Credit Suisse share, while those Credit Suisse shares had closed at CHF 1.86 on the last trading day before the Federal Council’s announcement.

This deal, hastily negotiated under exceptional circumstances, deprived shareholders of their voting rights in the merger process.

2. What could “small” Credit Suisse shareholders do against it?

Thousands of small Credit Suisse shareholders have had the opportunity to file a lawsuit according to Art. 105 of the Swiss Federal Act on Merger, Demerger, Conversion and Transfer of Assets and Liabilities (the “Merger Act”) with the relevant competent Commercial Court in Zurich. This is not a class action, as Switzerland does not have this institution in its legal system, but rather some sort of pooling and aggregation of claimants.

According to article 105 of the Merger Act, if, in the event of a takeover, the shares are not adequately maintained, or if the compensation is inadequate, each shareholder may demand, within two months of publication of the merger, demerger or conversion decision, that the court sets an adequate “compensation” (“Ausgleichszahlung”, “soulte”).

The judgment has effect on all partners of the participating subjects, provided they have the same legal status as the plaintiff (Art. 105 paragraph 2 of the Merger Act).

The Merger Act (Art. 105 paragraph 2) provides for a two-month period from the publication of the Merger resolution, which took place on 12 June 2023, and was published on 14 June 2023 in the Swiss Official Gazette of Commerce (SOGC). The deadline for filing the lawsuit was therefore 14 August 2023.

3. Is there any other legal remedy for injured shareholders to obtain a better compensation?

The conditions for material expropriation might be met in this case, similar to the complete write-down of the AT1 instruments. According to Article 26 of the Federal Constitution of the Swiss Confederation, property rights are guaranteed, and any restriction equivalent to compulsory purchase must be fully compensated. Material expropriation occurs when the use of property is prohibited or severely restricted, depriving the owner of essential rights. Infringements that burden owners excessively could also constitute material expropriation. Credit Suisse shareholders’ rights were seriously infringed in this instance. A successful claim could entitle shareholders to full compensation.

4. What is the statute of limitation of material expropriation?

The statute of limitations for material expropriation compensation is five years from the definitive restriction on property rights. Therefore, this legal avenue remains open.

5. What are the benefits?

While this legal action primarily targets larger Credit Suisse shareholders due to higher legal costs than those based on Art. 105 of the Merger Act, it offers a significant advantage: full and complete compensation in the event of success. In contrast, the Merger Act only allows for an adequate balancing allowance (“Ausgleichszahlung” or “soulte”).

We are here to guide you through the practical implementation of this legal claim. Don’t hesitate to contact us; we’re here to assist you.

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