Section VI - Reduction of Capital; Special Provisions for Co-operative Banks

Art. 11

1. The reduction of capital of banks that are organised as corporations or limited partnership corporations is governed by the corresponding rules of the Code of Obligations, without prejudice, however, to the following provisions:

a) the general meeting may not vote a reduction of the capital unless a special auditing report shows that the creditors' claims are fully covered, despite a reduction of capital, and that the liquidity remains assured;

b) the reduction of the capital may be carried out at the expiry of a two month period from the day the resolution, together with the notice to creditors, was published according to the by-laws of the bank, and after the creditors who filed their claims within that period have been paid or secured;

c) the book profit which may result from the reduction of the capital stock must be transferred to the reserve fund unless it is needed for write-offs of doubtful assets or for provisions for such assets.

2. The provisions of paragraph 1 apply by analogy to the reduction of the authorised capital of a limited liability company or the reduction or cancellation of participation certificates in a co-operative company.


Art. 12

1. Banks that are organised as co-operatives may not redeem the participation certificates of retiring co-operative members before the annual financial statements of the fourth business year after the resignation has been announced. Every other form of invalidation of the membership is equal to a resignation.

2. The participation certificates of retiring co-operative members remain pledged for the commitments of the co-operative bank until their redemption.

3. The redemption may only take place if the creditors' claims remain covered and liquidity is assured.


Art. 13

1. New commercial banks may not be constituted as co-operative banks.

2. Where an existing co-operative bank subsequently becomes a commercial bank, the Banking Commission will fix a time limit for the conversion into a joint stock company, a limited partnership corporation or a limited liability company.

3. In case of doubt, the Banking Commission decides whether an institution falls under the classification of commercial banks.


Art. 14

1. In order to avoid liquidations, the Federal Council is authorised to issue provisions facilitating in general or special cases the conversion of a co-operative bank into a company limited by shares or a limited partnership corporation. After due consideration of the interests of the co-operative members and creditors, the Federal Council may depart from the provisions of the Code of Obligations and the Federal Bankruptcy Act.

2. The shares that are issued after the conversion of the participation certificates are exempt from the issue duty of Articles 18-20 of the Federal Stamp Duty Law of October 4, 1917, provided that it has already been paid on the converted participation certificates, that the shares are distributed only among the former co-operative members, and that the par value of the shares does not exceed the capital paid in on the converted participation certificates.

3. No Federal or cantonal change of ownership or registration duty may be charged for the transfer of the co-operative assets to the joint stock company.

4. The provisions of paragraphs 1, 2 and 3 apply by analogy to the conversion of a co-operative bank into a limited-liability company.

Prepared by: M. J. Wharton.

KPMG Fides unofficial translation of Swiss Federal Law - Banks And Savings Banks.
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