On December 3, 2021, the Federal Council announced that the indirect counter-proposal to the popular initiative «The Responsible Business Initiative – Protecting human rights and the environment», including the provisions of an implementing ordinance (the Ordinance), would enter into force on January 1, 2022. The new statutory provisions, on reporting of non-financial matters and the new due diligence and transparency obligations regarding minerals and metals from conflict areas and child labor will apply for the first time to the financial year beginning one year after the entry into force of the new provisions. This means that companies must apply the new provisions for the first time with respect to the financial year beginning in 2023. The first reports based on the new statutory provisions must therefore be issued in 2024/2025 with respect to the financial year beginning in 2023.
Based on the results of the consultation procedure, the Federal Council has tightened the new statutory regime in certain areas and made clarifications in others.
For example, the Federal Council has limited the exemption applicable to SMEs such that SMEs are only exempt from the new due diligence and reporting obligations if they do not offer products or services that were «patently» manufactured or provided using child labor (Art. 8 of the Ordinance). SMEs are companies which, together with the domestic and foreign companies they control, fall below two of the following thresholds in two consecutive financial years: A balance sheet total of CHF 20 million, sales revenue of 40 million and 250 full-time positions on an annual average.
Furthermore, the general exemption from the due diligence and reporting obligations in relation to recycled metals has been removed. The Ordinance continues to provide for certain exemptions with regard to recycled metals (e.g., no requirement for a notification procedure, no risk management and no audit by an auditing company), but according to the revised provisions, a supply chain policy, a system to trace back the supply chain must nonetheless be established and a report must be prepared with regard to recycled metals (art. 12 para. 3 of the Ordinance). This is in contrast to Regulation (EU) 2017/821, which in relation to recycled metals requires only that companies make their origin determination of the metals public and describe what measures they have taken with regard to this determination.
The new Ordinance requires companies to establish a notification procedure that enables all interested persons to express substantiated concerns about the existence of a potential or actual adverse effect in connection with minerals and metals from conflict and high-risk areas or child labor (Art. 14 of the Ordinance).
The Federal Council has extended the list of the internationally recognized equivalent regulations that companies must adhere to in order to be exempt from the due diligence and reporting obligations with regard to child labor. For this purpose, companies must now apply both ILO Conventions no. 138 and 182, the ILO-IOE Child Labor Guidance Tool for Business and either the OECD Due Diligence Guidance for Responsible Business of May 30, 2018 or the UN Guiding Principles on Business and Human Rights. According to the initial draft Ordinance, in addition to the application of ILO Conventions no. 138 and 182, the application of either the ILO-IOE Child Labor Guidance Tool for Business or the OECD Due Diligence Guidance for Responsible Business of May 30, 2018 would have been sufficient for an exemption from due diligence and reporting obligations.
In other areas, the Federal Council has made clarifications in the Ordinance itself and in the explanatory report to the Ordinance. For example, the Ordinance now clarifies that companies subject to consolidated reporting are exempt from separate reporting (Art. 17 para. 1 of the Ordinance).
In the explanatory report to the Ordinance, the Federal Council has made clear that the documentation required by the Ordinance (cf. Art. 3, 5, 7, 12, 13, 14 of the Ordinance) does not need to be published and hence, business secrets can be kept protected.
The revised explanatory report to the Ordinance also clearly stipulates that due diligence obligations may generally be prioritized and graded according to the associated risks. In particular, risks should be assessed according to the probability of their occurrence and severity of the possible harmful effects, and the measures to be taken are to be prioritized accordingly. The first draft of the explanatory report contained this principle only with regard to the system to trace back the supply chain in relation to child labor.

New ESG due diligence and reporting obligations enter into force

On April 14, 2021, the Federal Council opened the public consultation procedure on the Ordinance on Due Diligence Obligations and Transparency Regarding Minerals and Metals From Conflict Areas and Child Labor (the Ordinance). The consultation period will last until July 14, 2021. The Ordinance will enter into force at the same time as the new legal provisions.
Ordinance on Due Diligence Obligations and Transparency Regarding Minerals and Metals from Conflict Areas and Child Labor (VSoTr)
With regard to the sections on conflict minerals and child labor, the new statutory provisions contain delegation norms that mandate the Federal Council to issue implementing provisions. No similar delegation norms are included in the section on «transparency on non-financial matters» (CSR reporting). Accordingly, the Ordinance covers the sections on conflict minerals and child labor of the new statutory provisions only.
The Ordinance defines exemptions from the due diligence and reporting obligations in the areas of minerals and metals (art. 2 and 3 of the Ordinance) and child labor (art. 4 and 5 of the Ordinance), exemptions from the due diligence and reporting obligations due to compliance with internationally recognized and equivalent regulatory frameworks (art. 6 of the Ordinance) and contains more detailed provisions on the due diligence obligations (art. 7 &#8211; 13 of the Ordinance). In addition, the Ordinance defines certain terms (art. 1 of the Ordinance) and contains provisions regarding the consolidation of the reporting (Art. 14 of the Ordinance).
Exemptions From the Due Diligence and Reporting Obligations in Connection With Minerals and Metals
Pursuant to Art. 964quinquies para. 2 of the Counterproposal, the Federal Council shall determine annual import quantities of minerals and metals up to which a company is exempt from the due diligence and reporting obligations. Although the wording of the delegation norm only refers to import quantities, the Federal Council specified both import and processing quantities in the annex to the Ordinance. These limits are based on the thresholds foreseen in the Regulation (EU) 2017/821 on conflict minerals. In the context of a group, import and processing quantities of all group entities are to be taken into account for the determination whether the thresholds are reached.
The import and processing of recycled metals is not subject to the due diligence and reporting requirements, regardless of any thresholds. In this case, the relevant company must, however, document and prove that the metals originate exclusively from recycling or are extracted from scrap. Not covered by this exemption are (unprocessed) minerals or by-products of ores that do not contain tin, tantalum or tungsten.
Exemptions From the Due Diligence and Reporting Obligations in Connection With Child Labor
The Federal Council defines in the Ordinance under which conditions companies do not have to verify whether there is a reasonable suspicion of child labor. For this purpose, the Ordinance provides for three steps:
If a company, together with controlled companies, falls below two of the following thresholds in two consecutive financial years:
<ol>
<li>a) total assets of CHF 20 million;</li>
<li>b) revenues of CHF 40 million;</li>
<li>c) 250 FTEs on annual average;</li>
</ol>
it does not need to perform any further examination.
If a company reaches or exceeds these thresholds, the company must assess whether the countries from which it sources products or services present low, medium or high child labor risks. Pursuant to the statutory provisions, the risk assessment would in principle apply to all countries in the supply chain. Since this is de facto very difficult to implement even when applying due care, the risk assessment may, pursuant to the explanatory report to the Ordinance (the Explanatory Report), be limited to the country of production according to the indication of origin («made in»). The risk analysis must be carried out annually. For purposes of the risk analysis, the companies may consult the UNICEF Children&#8217;s Rights in the Workplace Index (UNICEF Index), which currently covers 195 countries. If the country of origin presents low risks (risk classification «basic» according to the UNICEF Index), the relevant company does not have to perform any further examination.
If the assessment shows that medium or high risks exist (risk classification «enhanced» or «heightened» according to the UNICEF Index), a company must confirm whether there is a reasonable suspicion of child labor in relation to a specific product or service. A suspicion of child labor is reasonable if based on one or more concrete indications or perceptions there is ground to assume that a product has been manufactured or a service is being provided with the use of child labor. However, not every activity performed by a person under the age of 18 automatically constitutes child labor. Whether a certain activity constitutes child labor depends on the age, type of work, and working conditions. ILO Convention No. 138 provides that each member ratifying the Convention must specify a minimum age for admission to employment. Under certain conditions, ILO Convention No. 138 permits light work for schoolchildren and work in the context of vocational training.
The company is only exempt from the due diligence and reporting obligations in the area of child labor if the examination does not reveal any concrete, justified suspicion of child labor.
Exemptions From the Due Diligence and Reporting Obligations Due to Compliance With Internationally Recognized Regulatory Frameworks
Art. 5 of the Ordinance specifies the conditions under which companies are exempt from the due diligence and reporting obligations due to the compliance with internationally recognized and equivalent regulatory frameworks.
Companies operating in the minerals and metals sector must comply either with (i) the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Conflict Minerals Guidance) of April 2016, including all annexes and supplements, or (ii) Regulation (EU) 2017/8214, in each case in their entirety, prepare a report in accordance with the chosen regulatory framework, and mention in the report the internationally recognized regulatory framework applied.
Companies that offer products or services that are suspected of having been produced using child labor must apply ILO Conventions No. 138 and 182 and either (i) the «ILO-IOE Child Labour Guidance Tool for Business of December 15, 2015» (ILO-IOE Child Labour Guidance Tool) or (ii) the «OECD Due Diligence Guidance for Responsible Business of May 30, 2018», all in their entirety, prepare a report in accordance with the chosen regulatory frameworks, and mention in the report the internationally recognized regulatory frameworks applied.
According to the Explanatory Report, the references to the regulatory frameworks are «static» and not «dynamic» references, i.e., changes to the regulatory frameworks are not automatically authoritative, but require an amendment to the Ordinance.
Due Diligence Obligations, Audit
Furthermore, the Ordinance contains specifications on the due diligence obligations, i.e., on the design of the supply chain policy (art. 7 and 8 of the Ordinance), on the system to trace back the supply chain (art. 9 and 10 of the Ordinance), on the identification and assessment of risks (art. 11 of the Ordinance), on the risk management plan and measures (art. 12 of the Ordinance) as well as on the audit regarding compliance with the due diligence obligations in the minerals and metals sector by an auditor (art. 13 of the Ordinance).
According to the Explanatory Report, the due diligence obligations (including the reporting obligations) constitute an ongoing, repetitive process. The due diligence obligations are best efforts obligations and not strict performance obligations. Therefore, the due diligence obligations do not prohibit the import of minerals and metals from conflict and high-risk areas or of product or services with justified suspicion of child labor. Rather, consumers, equity and debt providers, and actors and organizations of civil society should act as sanctioning body.
Art. 7 and 8 of the Ordinance contain the formal and material requirements for the supply chain policy.
Art. 9 and 10 of the Ordinance specify the requirements for the system to trace back the supply chain. In this context, the system should ensure that traceability is guaranteed to the best extent possible (duty of care). Since the verification of the supply chain in connection with child labor can be more difficult to perform in practice than performing the due diligence obligations regarding minerals and metals, according to the Explanatory Report, a risk-based approach is to be selected for complex supply chains, i.e., the system and the intensity of the backtracing of the individual supply chains are to be prioritized and graded depending on the risks.
Art. 11 of the Ordinance contains further explanations on the identification and assessment of risks. According to the Explanatory Report, the risks must be identified and assessed, taking into account in particular the probability of occurrence and the level of harmful effects. Also the obligation to identify and assess the risk is best efforts obligation only.
The risk management plan in accordance with Art.12 of the Ordinance shall represent the response to the identified and assessed risks. Among other things, it should contain a strategy regarding prevention and mitigation of the identified risks. For the preparation of the risk management plan, the companies should follow, in particular, Annex I of the OECD Conflict Minerals Guidance and the ILO-IOE Child Labour Guidance Tool. Based on the risk management plan, the companies should take measures to eliminate, prevent or minimize the risks in the supply chain.
Consolidation in reporting
Companies required to prepare consolidated financial statements must prepare a consolidated report.
A company domiciled in Switzerland which is controlled by a legal entity domiciled abroad that prepares an equivalent report does not have to prepare a separate report. In this case, the Swiss company must indicate in the notes to the financial statements which other legal entity included it in its report and publish the report of the foreign company.
Entry into force
As mentioned, we currently expect the Ordinance to enter into force on January 1, 2022. Should a referendum be raised against the new reporting and due diligence obligations, the entry into force of the new reporting and due diligence obligations together with its implementing provisions would be delayed.

Publication of Ordinance on New Due Diligence and Transparency Obligations

<h4>II. Elements of the New Transparancy and Due Diligence Obligations</h4>
The new rules on transparency and due diligence obligations deviate substantially from the Responsible Business Initiative. In particular, the new rules do not contain a liability regime.
The key elements of the new obligations are:
<h4>Non-Financial Reporting Obligations</h4>
Companies of public interest (i.e., listed companies, banks, insurance companies and other supervised companies in the financial sector) that together with controlled companies in Switzerland and abroad (the Group) (i) have at least 500 FTEs on annual average, and (ii) exceed either total assets of CHF 20 million or revenues of CHF 40 million, must report annually on non-financial matters. The proposed provisions in article 964bis et seq. of the Swiss Code of Obligations on transparency in non-financial matters are based on the Non-Financial Reporting Directive of the European Union.
The report must contain information necessary to understand the Group&#8217;s business development, performance, position, as well as the impact the Group&#8217;s activity has on environmental (including CO2 targets), social, employee, human rights and anti-corruption matters (the Non-Financial Matters).
According to a non-exhaustive list, the report has to include a description of the following matters:
<ul>
<li>the business model and policies pursued, including due diligence applied, with respect to the Non-Financial Matters,</li>
<li>the measures taken, together with an assessment as regards their effectiveness,</li>
<li>the main risks in connection with the Non-Financial Matters resulting from the Group&#8217;s own operations and, where relevant and proportionate, from its business relationships, products or services, and</li>
<li>the main key performance indicators with respect to compliance with such Non-Financial Matters.</li>
</ul>
In accordance with the principle of comply or explain, a reporting company may elect not to report in relation to matters with respect to which the Group does not pursue policies if the report provides a clear and reasoned explanation therefor. Further, the report may be based on national, European or international reporting standards, such as the OECD guidelines for multinational enterprises, the standards of the Global Reporting Initiative (GRI) or others.
The board of directors must approve the report, as must the shareholders&#8217; meeting. The report does not have to be audited. It is published electronically and must remain accessible for at least ten years.
<h4>Due Diligence Obligations in Connection with Conflict Minerals and Child Labor</h4>
Companies with place of incorporation or head office in Switzerland that import or process minerals or metals containing tin, tantalum, tungsten or gold from conflict or high-risk areas are subject to special due diligence and related reporting obligations with respect to their supply chain. The same obligations apply to companies that offer products or services where there are reasonable grounds to suspect that they were produced or provided using child labor. Under certain circumstances, the Federal Council may define exceptions.
These obligations again follow the blueprint of EU regulation, specifically Regulation (EU) 2017/821, and the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. They are divided into the following five categories:
<ul>
<li>implementation of a management system with a defined supply chain policy and a system to trace back the supply chain,</li>
<li>identification and assessment of actual and potential risks of adverse impacts of their supply chain;</li>
<li>implementation of a risk management plan that provides for measures to prevent or mitigate such risks;</li>
<li>independent third party audits regarding compliance with these obligations and</li>
<li>issuance of an annual report on compliance with these obligations. The report must be made available electronically within six month after the end of the financial year and must remain accessible for at least ten years.</li>
</ul>
<h4>Fines for Violation of Reporting Obligations</h4>
Non-compliance with the transparency and due diligence obligations is subject to criminal liability. Anyone who makes false statements in, or fails to provide, a required non-financial report will be fined with up to CHF 100,000.
<h4>III. Entry into Effect</h4>
If no optional referendum is requested within 100 days after official publication of the Counterproposal in the Swiss Federal Gazette, the new transparency and due diligence obligations will enter into effect once the implementing ordinance has been finalized. In this case the reporting and due diligence obligations will need to be observed for the first time with respect to the financial year commencing one year after the entry into effect of the Counterproposal. For financial years that correspond to the calendar year, this would therefore likely be financial year 2023.
Swiss companies affected by the new rules, are well advised to start taking preparatory steps to be able to comply with the additional reporting and due diligence obligations upon their effectiveness.
Irrespective of the entry into effect of the new transparency and due diligence obligations, as part of the Swiss corporate law reform approved by the Swiss Parliament on June 19, 2020, new reporting obligations will be introduced for companies that, directly or indirectly through a controlled entity, extract minerals, oils, natural gas or primary forest wood and which are subject to an ordinary audit pursuant to art. 727 para. 1 of the Swiss Code of Obligations. These companies will have to publish a special report with respect to cash and in-kind payments to governmental authorities. Only payments that result from business activities triggering the new transparency requirements and that in the aggregate amount to CHF 100,000 or more per financial year must be reported. The board of directors must approve the report. The report must be made available electronically within six month after the end of the financial year and must remain accessible for at least ten years.
Companies trading the natural resources listed above are not subject to the new transparency obligations. The Federal Council is, however, authorized to declare the transparency rules applicable to trading companies as well.
On September 11, 2020, the Federal Council announced that the entry into force of these transparency obligations, as well as the rules on gender representation in boards of directors and executive management of listed companies, will enter into force already on January 1, 2021, a year earlier than the remainder of Swiss corporate law reform. Pursuant to the applicable transitional provision, the reports must be published for the first time in respect of the financial year starting one year after the entry into force of the new rule, i.e., with respect to the financial years starting from January 1, 2022 onwards.

Responsible Business Initiative Rejected

Corporate / M&A

Addex Pharmaceuticals

On December 16, 2021, allosteric modulation company Addex Therapeutics Ltd in Plan-les-Ouates, Geneva (SIX: ADXN) announced that it has entered into a definitive agreement with Armistice Capital LLC, a healthcare-focused institutional investor, pursuant to which Addex agreed to sell 3,752,202 shares in the form of 625,367 American Depositary Shares («ADSs») at a gross purchase price of USD 6.50 per ADS, which is equivalent to CHF 1.00 per share. Each ADS represents six shares. Additionally, Addex has agreed to issue to Armistice Capital ordinary warrants to purchase up to 1,538,462 ADSs, as well as pre-funded warrants to purchase up to 913,095 ADSs in a concurrent private placement. The closing of the offering is expected to occur on or about December 21, 2021, subject to the satisfaction of customary closing conditions.
The gross proceeds to Addex, before deducting placement agent fees and other offering expenses, will be USD 10.0 m. Addex intends to use the net proceeds from this offering to advance its clinical and preclinical pipeline.
Homburger advises Addex in this transaction. The Homburger team is led by partner Frank Gerhard (Corporate / M&amp;A) and includes associates Karin Mattle and Romain Fakhoury (both Corporate / M&amp;A).

Homburger advises Addex Therapeutics Ltd on new PIPE transaction

Capital Markets

On September 17, 2021, On Holding AG, a Swiss-based athletic shoe and performance sportswear company, announced the successful initial public offering (IPO) on the NYSE. The offering comprised 31,100,000 firm shares, of which 82% were offered by On Holding AG and 18% were offered by the selling shareholders, and an over-allotment option granted to the underwriters of an additional up to 4,665,000 shares. Trading of the shares on the NYSE commenced on September 15, 2021 under the ticker symbol &#8220;ONON&#8221;.
Goldman Sachs &amp; Co. LLC, Morgan Stanley &amp; Co. LLC, J.P. Morgan Securities LLC, Allen &amp; Company LLC, UBS Securities LLC, Credit Suisse Securities (USA) LLC, Robert W. Baird &amp; Co. Incorporated, Stifel, Nicolaus &amp; Company, Incorporated and Telsey Advisory Group LLC acted as underwriters in connection with the IPO.
Homburger acted as Swiss legal counsel to the underwriters. The Homburger team was led by partner Dieter Gericke and included associates Lorenzo Togni, Karin Mattle and Francesco Bernasconi (all Capital Markets; Corporate / M&amp;A). Partner Stefan Oesterhelt provided tax advice.

Homburger advised the Underwriters on the IPO of On Holding AG on NYSE

Homburger advised the lead investor in the Series C funding of Oviva, a digital health tech scale-up, on all matters of Swiss law. Oviva’s USD 80 m Series C funding round brings its total raised to date to USD 115 m. Oviva combines expert advice from dietitians with digital tools to help people who deal with diet-related health challenges.
The Homburger team comprised partner Frank Gerhard (Corporate / M&amp;A) and senior associate Karin Mattle (Corporate / M&amp;A).

Karin
Mattle

Homburger advises Addex Therapeutics Ltd on new PIPE transaction

Homburger advised the Underwriters on the IPO of On Holding AG on NYSE

Homburger advises lead investor in the USD 80 m Series C financing round of Oviva

New ESG due diligence and reporting obligations enter into force

Publication of Ordinance on New Due Diligence and Transparency Obligations

Responsible Business Initiative Rejected

The Shareholder Rights and Activism Review: Switzerland

The Shareholder Rights and Activism Review: Switzerland

The Shareholder Rights and Activism Review: Switzerland

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Homburger advises Addex Therapeutics Ltd on new PIPE transaction

Homburger advised the Underwriters on the IPO of On Holding AG on NYSE

Homburger advises lead investor in the USD 80 m Series C financing round of Oviva

New ESG due diligence and reporting obligations enter into force

Publication of Ordinance on New Due Diligence and Transparency Obligations

Responsible Business Initiative Rejected

The Shareholder Rights and Activism Review: Switzerland

The Shareholder Rights and Activism Review: Switzerland

The Shareholder Rights and Activism Review: Switzerland

Join the Team

Karin Mattle

Career

Languages

Bar Registration

Teams

Karin
Mattle