Offshore
Legal, Trust And Corporate Law Changes In Switzerland – An Overview
The author of this article, a familiar face in the Swiss and wider world of private client advisory work, gives this summary of important developments in the Alpine state, such as regulations of external asset managers, changes to forced heirship rules on inheritance, and the impact of new technology.
We carry this brief commentary on several important
developments in the Swiss wealth management industry from a
private client practitioner, Cécile Civiale Vuillier. She is the
chief executive and group head of private clients for
TrustConsult (Suisse) SA, based in Geneva. She is also
involved with the Society of Trust and Estate Practitioners
(STEP). (This news service attended the TrustConsult conference
in Monaco earlier this year. See here
for a report.
Cecile Civialle Vuillier
Switzerland has been through several major changes, such as the
start of new
regulations on the external asset management sector from
the Swiss Financial Market Supervisory Authority (FINMA), the
financial watchdog. The country’s prominence as an international
financial hub means that developments in the Alpine state cause
ripple effects elsewhere. (We have recently examined FINMA’s
stance on cryptocurrencies,
among other issues.)
The editors of this news service are pleased to share these views
and invite responses. The usual editorial disclaimers apply.
Email tom.burroughes@wealthbriefing.com
Switzerland continued to build on its strengths as an
international private wealth hub with a focus on cross-border
wealth management, despite turbulence in the banking sector
following the collapse of Swiss banking giant Credit Suisse.
The trend
The wealth industry is undergoing a paradigm shift fuelled by
changing demographics, generational wealth transfer, and rapidly
expanding digitalisation. For generations, Switzerland has been
the go-to destination for offshore wealth. Private banks are as
synonymous with the Alpine state as chocolate, watches, and
cheese. But recent situations appeared to come the way of Swiss
banks as Russian oligarchs were sanctioned and fears emerged
about the demise of Credit Suisse.
Nevertheless, Switzerland will remain a strong force in wealth
management thanks to its deep-rooted banking expertise and its
safe-haven status, but sanctions against Russia (putting
Switzerland in sync with the position of the European Union), and
the collapse of Credit Suisse [now part of UBS] have shaken the financial
centre.
The technologies
Digital technology has revolutionised the industry with the rise
of online platforms and robo-advisors. This tech can make wealth
management services more accessible, affordable, and transparent
in terms of products and pricing. Even so, clients still value
the personal touch and human interactions that come with working
with a relationship manager or advisor. This is particularly the
case for more complex or emotional decisions related to their
wealth and family. Finally, it is essential to note that
technology such as ChatGPT is not a substitute for human
expertise and oversight.
The development
Inheritance law in Switzerland has gone through important
amendments. A degree of modernisation was needed as life
expectancies increased and different forms of family life became
commonplace. The new rules apply to the estates of all persons
passing away from 1 January 2023 onwards.
The changes are as follow:
-- Reduction in the descendants’ forced heirship;
-- Abolition of the compulsory share allotted to parents; and
-- Impossibility of spouse or registered partner to lay claim to
forced heirship while divorce proceedings are ongoing or during
dissolution of a registered partnership.
Swiss trust law
As recently as 15 September 2023, the Federal Council
acknowledged the results of a consultation on the introduction of
trusts into Swiss law, revealing insufficient political consensus
for such a move. The proposed tax rules were rejected by the
participants in the consultation, leading the Federal Council to
suggest parliament’s rejection of the motion. Consequently, the
introduction of a domestic Swiss trust Law seems unlikely in the
foreseeable future.
Changes to Swiss corporate law
New provisions of the Swiss Code of Obligations on corporate law
came into force on 1 January 2023. These provide greater
flexibility for share capital and equity distributions, improve
corporate governance by enhancing shareholder rights and
modernise the requirements for shareholders meetings (largely
reflecting the temporary regimes adopted during the Covid-19
pandemic).
Regulation of trustees and external asset managers
2023
These signalled the end of the transition period for existing
portfolio managers and trustees to operate in Switzerland without
a full licence. At the start of 2023, FINMA had received just
under 1,700 licence applications, with just over 1,500 of these
from portfolio managers, and the remainder from trustees. As of
today, FINMA had granted about 888 licences to portfolio
managers, 43 licences to trustees and eight licences to
institutions acting as portfolio managers and trustees.