The Swiss Federal Statute on the Acquisition of the Real Estate by Non-Residents of Switzerland (the "Lex Friedrich") restricts the acquisition of real estate by individuals or legal entities non domiciled in Switzerland. The restrictions also cover the purchase of a controlling share in a company if:

  • the objective of the target company merely consists in the acquisition and administration of real estate ("Immobiliengesellschaft"); or
  • the real estate situated in Switzerland which is held by the company exceeds 1/3 of the company's assets valued at market value.

In the event of applicability of the Lex Friedrich, the respective transaction is subject to prior approval by the responsible state authority. Approval may be granted particularly if the real estate is used for the purposes of carrying out the business of the target company.

The mentioned provisions often are of crucial importance in takeovers for several reasons. First, the consequence in the event of violation of the Lex Friedrich is severe as, inter alia, the purchase of the shares is null and void if an approval was required but no application filed. This means that it must be carefully established whether the value of the real estate held by the target company meets the threshold and one should apply for a negative clearance unless it is very clear that the threshold is not reached. Secondly, the implications of the Lex Friedrich must be taken into account at an early stage of the acquisition project because the negative clearance or the approval will inevitably be a condition precedent for the closing of the transaction and the proceedings for approval are formal, lengthy and involve authorities of different levels (and in certain circumstances also of different cantons).

The Swiss Government now intends to relax the Lex Friedrich. No approval shall be needed for the purchase of real estate on which business offices shall be built up or used for such purpose. The exemption shall also extend to the purchase of shares in a company which holds real estate provided that it serves such purposes. A bill implementing the proposed amendments will now be drafted. It is unclear, when the bill will be published and when the revised Lex Friedrich will enter into force.

The content of this article is intended to provide general information on the subject matter and is not a legal advice. An individual matter requires legal advice according to the specific circumstances.