Foreign Direct Investment: Switzerland’s New Investment Screening Act

Introduction

For many years, Switzerland has been one of the few advanced economies without a general mechanism for screening foreign direct investment (FDI). While most OECD member states have introduced cross-sector screening regimes, Switzerland has relied on its open investment policy, on sector-specific legislation and on the extensive public ownership of its critical infrastructure.

This is about to change. On 19 December 2025, the Swiss Parliament adopted the Federal Act on the Screening of Foreign Investments (Investment Screening Act, ISA). The ISA subjects acquisitions of control over Swiss companies active in particularly critical sectors by foreign state investors, including state-controlled companies, to prior approval. By international standards, the Swiss regime is deliberately narrow: private foreign investors are not caught.

The ISA is currently expected to enter into force in 2027.

Legislative history

The ISA goes back to a 2018 parliamentary motion (Motion 18.3021), which both chambers adopted in 2019 and 2020 against the Federal Council’s opposition.

The Federal Council’s consultation draft of 2022 was comparatively broad, covering acquisitions by foreign state investors in all sectors and by any foreign investor in particularly critical sectors.

Following predominantly critical responses, the Federal Council’s draft of December 2023 narrowed the scope to acquisitions by foreign state investors in particularly critical sectors. Remarkably, the Federal Council did not recommend adopting its own draft, considering the cost-benefit ratio unfavourable.

In Parliament, the National Council initially extended the scope to private foreign investors and added the supply of essential goods and services as a protected interest, whereas the Council of States reverted to the Federal Council’s narrow approach.

In December 2025, the National Council aligned itself with the Council of States and both chambers adopted the ISA.

Scope of application

The ISA applies to acquisitions of Swiss companies active in particularly critical sectors by foreign state investors.

Foreign state investors

A foreign state investor is defined broadly and comprises: (1) foreign state bodies at any level of government; (2) companies with their central administration outside Switzerland that are directly or indirectly controlled by a foreign state body; (3) entities with legal capacity to hold assets that are directly or indirectly controlled by a foreign state body; and (4) natural or legal persons acting on behalf of a foreign state body.

The rationale for limiting the scope to foreign state investors is that risks to public order or security are primarily associated with politically motivated transactions.

Acquisition of control

The ISA covers any transaction by which one or more foreign state investors directly or indirectly acquire control over one or more previously independent companies or parts thereof, in particular by way of merger, acquisition of a shareholding or conclusion of a contract. The concept of control follows Swiss merger control practice. There is no fixed shareholding threshold; control may also be acquired with less than 50% of the voting rights, for instance in listed companies with a widely dispersed shareholder base.

Domestic companies

All companies registered in the Swiss commercial register are caught by the ISA, irrespective of their legal form and of whether they are governed by private or public law. This includes Swiss subsidiaries of foreign groups of companies.

Critical sectors and thresholds

Approval is required only for acquisitions of companies active in the exhaustively listed sectors that reach the following thresholds (worldwide average of the two financial years preceding the application):

• At least 50 full-time positions or annual turnover of at least CHF10 million: manufacturers of military and dual-use goods of decisive importance for the Swiss Armed Forces, other federal security institutions or international space programmes in which Switzerland participates; operators of the electricity transmission grid, of major distribution networks and of power plants of 100 MW or more; operators of high-pressure gas pipelines; water suppliers serving more than 100,000 inhabitants; and suppliers of central security-relevant IT systems or services to Swiss authorities.
• Annual turnover (or, for banks, gross income) of at least CHF100 million: university hospitals and general hospitals providing centralised care; companies active in medicinal products, medical devices, vaccines or personal protective equipment; operators of significant transport hubs; operators of railway infrastructure; operators of significant food distribution centres; telecommunications network operators; and systemically important financial market infrastructures and banks.

The Federal Council may temporarily extend the approval requirement to further categories of companies (for up to 12 months, extendable once) and may exempt investors from states with which there is sufficient co-operation, with reciprocal exemptions to be sought. The preliminary draft of the implementing ordinance proposes to exempt investors from the EU and EFTA member states.

Substantive test

An acquisition must be approved unless there is reason to assume that it endangers or threatens public order or security. Relevant factors include whether:

• the foreign state investor has been involved in activities adversely affecting public order or security, or in espionage;
• the foreign state investor is directly or indirectly subject to sanctions under the Swiss Embargo Act;
• the Swiss target company’s services, products or infrastructure can be replaced within a reasonable period; and
• the foreign state investor would gain access to significant security-relevant information or to particularly sensitive personal data.

Approval may be granted subject to conditions or obligations that remove the threat.

Procedure

The Swiss target company may request a binding preliminary ruling from the State Secretariat for Economic Affairs (SECO) on whether its acquisition would be subject to approval. SECO issues the preliminary ruling, as a rule, within two months of receipt of a complete request.

If approval is required, the foreign state investor must apply to SECO before closing.

The review proceeds in one or two phases:

• Phase 1: SECO decides within one month of receipt of the complete application whether the acquisition can be approved directly or whether an in-depth review must be opened. This decision is taken in agreement with the co-interested federal administrative units and after consulting the Federal Intelligence Service. If no agreement is reached, an in-depth review is opened.
• Phase 2: SECO decides within three months, again in agreement with the co-interested federal administrative units, whether the acquisition is approved. The Federal Council decides in lieu of SECO if (a) SECO or a co-interested federal administrative unit opposes approval or (b) the decision is of significant political importance.

If no decision is taken within these deadlines, the acquisition is deemed approved. SECO may extend the deadlines in certain cases. In urgent cases, the Federal Council may approve an acquisition directly.

Only the foreign state investor and the Swiss target company have the right to appeal. Decisions of SECO and, by way of exception, of the Federal Council can be challenged before the Federal Administrative Court.

Until approval is granted, the civil-law effectiveness of the acquisition requiring approval remains suspended. If an acquisition requiring approval is completed without approval or on the basis of false information or in breach of conditions, this may result in measures to restore compliance, in particular divestment, and in administrative sanctions of up to 10% of the Swiss target company’s average worldwide turnover.

Practical implications for M&A transactions

While only a small number of acquisitions are expected to fall within the scope of the ISA, its practical implications will go well beyond these cases:

• The ISA introduces an approval requirement that must be factored into transaction planning whenever a state-linked buyer is directly or indirectly involved. Sovereign wealth funds as well as state-owned or state-controlled companies will typically qualify as foreign state investors. Where such investors participate in an acquisition structure, a careful control analysis along the investment chain will be required.
• Swiss companies whose activities are close to the sectors listed in the ISA can apply for a binding preliminary ruling to obtain certainty before starting a sales process.
• Where the ISA applies or might apply, FDI approval must or should be made a condition precedent in the transaction agreement; in critical cases, mitigation measures may be offered to obtain conditional approval. Public tender offers may be made subject to the condition that no authority prohibits the transaction.
• Long-stop dates should take into account that the entire screening process can take up to four months from the filing of the complete application or – in the event of deadline extensions – even longer.
• Since screening under the ISA is independent of merger control, takeover law and other regulatory proceedings (eg, with FINMA), it can be conducted in parallel with or sequentially to those proceedings, which requires careful planning.

Outlook

With the ISA, Switzerland is abandoning its long-standing reluctance towards general FDI screening; however, it is doing so with restraint. The focus on foreign state investors, the exhaustive list of sectors and the short deadlines set the Swiss regime apart from the far broader regimes in other jurisdictions. How the ISA will operate in practice will depend to a large extent on the implementing ordinance, in particular on the list of exempted states. Foreign state investors and Swiss companies in the sectors concerned are well advised to assess now whether future transactions may fall within the scope of the ISA.

Transparency of Beneficial Ownership: The New Federal Transparency Register

Introduction

From 1 July 2015, shareholders of Swiss corporations (Aktiengesellschaften) and members of limited liability companies (Gesellschaften mit beschränkter Haftung) were required to report their beneficial owners to the company, which had to keep an internal register.

With effect from 1 October 2026, these provisions of the Swiss Code of Obligations (CO) were repealed and replaced by the Federal Act of 26 September 2025 on the Transparency of Legal Entities and the Identification of Beneficial Owners (LETA) and the Federal Council’s implementing Ordinance of 12 June 2026 (LETO). The LETA introduces a central, non-public federal register of beneficial owners (the Transparency Register), maintained by the Federal Office of Justice. The reform implements the standards of the Financial Action Task Force and aims to give authorities rapid access to accurate, complete and up-to-date information on who ultimately stands behind a legal entity, in particular to combat money laundering and terrorist financing.

Scope and exceptions

The LETA applies to Swiss corporations, partnerships limited by shares, limited liability companies, co-operatives and certain collective investment vehicles (SICAVs, SICAFs and limited partnerships for collective investment), but not to associations and foundations. It also applies to legal entities under foreign law that have a branch registered in Switzerland, have their effective place of management in Switzerland, or own or acquire Swiss real estate. Trustees with residence or registered office in Switzerland are subject to specific identification and documentation obligations, unless they are subject to the Anti-Money Laundering Act (AMLA).

Listed companies and subsidiaries in which listed companies, directly or indirectly, hold a participation of more than 75% are exempt. The exemption of such subsidiaries marks a departure from the previous law, which provided for reduced reporting obligations in this respect.

Beneficial owner

A beneficial owner is any natural person who ultimately controls a company, either by holding, directly or indirectly, alone or in concert with third parties, at least 25% of its capital or voting rights, or by controlling it by other means. If no such person exists, the most senior member of the managing body – ie, the chair of the executive management (typically the CEO) or, in the absence of a separate executive management, the chair of the board of directors – is deemed, on a subsidiary basis, to be the beneficial owner. Special rules apply where a legal entity is controlled by a trust, a Swiss foundation or a Swiss association.

Control may be exercised through a participation or by other means, in each case directly or indirectly and alone or in concert with third parties. Indirect control through a participation requires a holding of more than 50% in one or more intermediary entities which, in turn, hold at least 25% of the legal entity. Control by other means exists, in particular, where a person can appoint or remove the majority of the board, veto key decisions (eg, on the purpose, strategy, budget or financing) or bring about profit distributions; it may be based on shareholders’ agreements, capital instruments such as options or convertible loans, the articles of association, representation or fiduciary relationships, or relationships between related parties.

The definition is thus considerably broader than under the previous law. In practice, consent requirements and veto rights in shareholders’ agreements or in the articles of association of limited liability companies may qualify as control by other means. Similarly, voting arrangements in shareholders’ agreements may constitute acting in concert; in that case, the 25% threshold applies to the jointly held participation, and each person acting in concert must be reported individually.

Obligations

Beneficial owners

Under the LETA, obligations are now imposed not only on the direct participation holder and the entity concerned, but also on the beneficial owners themselves. Specifically, if a person becomes a beneficial owner, he or she must report this to the holder of the participation through which he or she exercises control, and, where control is exercised by other means or through a chain of control, directly to the entity concerned. Beneficial owners, as well as third parties in the chain of control, must co-operate in the verification. In addition, beneficial owners have an ongoing obligation to report any change within one month.

Holders of participations in legal entities

Holders of participations who, alone or in concert with third parties, hold participations enabling control over a legal entity must report the beneficial owner to that entity within one month and co-operate in the verification. They must also report any change within one month.

Entity concerned

Many obligations fall on the entity itself. It must identify its beneficial owners, verify their identity and status with the diligence required by the circumstances, document the information, keep it accessible in Switzerland and retain it for ten years after a person has ceased to be a beneficial owner. It must report its beneficial owners to the Transparency Register within one month of its entry in the commercial register (or, for foreign entities, of becoming subject to the LETA). Furthermore, the entity must report any change within one month of becoming aware of it. The most senior member of the managing body (as defined above) is responsible for the notifications; this task may be delegated, but the responsibility remains. Subject to certain conditions, simplified procedures are available for limited liability companies held exclusively by natural persons and for single-shareholder corporations. Entities whose beneficial owners are all entered in the commercial register as holders of participations, directors or officers may report via the commercial register office.

Legal entities under foreign law

The rules apply by analogy to legal entities under foreign law, which must designate a representative or an address for service in Switzerland.

Transparency Register

Notifications must be made electronically via the federal EasyGov.swiss platform and are free of charge. Entries are declaratory and have no constitutive effect.

The Transparency Register is not public. Law enforcement authorities, the Money Laundering Reporting Office at the Federal Office of Police and the authorities responsible for administrative assistance in tax matters, among others, have full online access, while numerous other authorities, such as land registry offices, may access all data except deleted data. Financial intermediaries and advisers subject to the AMLA may consult the register for their due diligence with the use of this data being limited to this purpose. Entities may request a confirmation of their entry or an extract.

The Control Body (Kontrollstelle), a unit of the Federal Department of Finance, verifies, using a risk-based approach and by random sampling, whether the registered information is accurate, complete and up to date. The entity, its holders of participations, its beneficial owners and contracting third parties must provide the Control Body with the required information.

Transitional provisions

Transitional periods

Swiss entities whose beneficial owners are all entered in the commercial register as holders of participations, directors or officers must report by 1 October 2028. All other entities must report by the following deadlines:

• corporations subject to ordinary audit: 1 January 2027;
• other companies subject to ordinary audit: 1 February 2027;
• corporations not subject to ordinary audit: 1 March 2027; and
• all other companies and legal entities, including legal entities under foreign law: 1 April 2027.

Please note that if the commercial register entry is amended before the applicable deadline, the notification is due within one month of the first such amendment.

Notifications under the previous law

Notifications made by holders of participations under the previous law remain valid, provided that the persons reported also qualify as beneficial owners under the LETA. Corporations and limited liability companies must retain their previous registers of beneficial owners until 1 October 2036.

Sanctions

Measures

If information in the Transparency Register is inaccurate, incomplete or outdated, the Control Body takes the necessary measures. In the case of repeated or unremedied breaches, it may suspend the shareholder’s membership and dividend rights and, where the entity evidently has no business activity or realisable assets, order its liquidation under the rules on bankruptcy. This is a marked relaxation compared with the previous law, under which membership rights were suspended by law for as long as the participation holder failed to report the beneficial owner to the company, and dividend rights were even forfeited.

Criminal sanctions

Wilful breaches of the reporting obligations and false statements to the Control Body are punishable by fines of up to CHF500,000, and wilful non-compliance with a final order of the Control Body by fines of up to CHF100,000.

Practical implications

With the first deadline expiring one month after even a minor amendment to the commercial register entry, legal entities should map their ownership and control structures, review shareholders’ agreements and financing instruments for control by other means, and set up their EasyGov.swiss access early.

Gender Benchmarks for the Board of Directors: Large Swiss Listed Companies Face Their First Reporting Cycle

Article 734f of the Swiss Code of Obligations (CO) sets gender representation benchmarks for large listed companies. These are companies whose shares are listed on a stock exchange and which, in two consecutive financial years, exceed two of the following three thresholds: a balance sheet total of CHF20 million, revenue of CHF40 million and an annual average of 250 full-time positions. In these companies, each gender should make up at least 30% of the board of directors and 20% of the executive management.

Falling short of these benchmarks triggers no sanctions and does not affect the validity of board elections. Instead, the law provides for a “comply or explain” mechanism: a company that misses a benchmark must state in its remuneration report (1) the reasons for the shortfall and (2) the measures being taken to increase representation of the under-represented gender.

Transitional periods of five years for the board of directors and ten years for the executive management, both running from the entry into force of Article 734f CO on 1 January 2021, have so far deferred the practical effect of the rule. For the board of directors, the disclosure obligation applies from the financial year beginning on or after 1 January 2026. The first explanations at board level will therefore appear in the 2026 remuneration reports published in spring 2027 by companies whose financial year matches the calendar year.

Recent data suggest that the obligation will affect a significant number of Swiss listed companies. The schillingreport 2026, which examined the 100 largest employers in Switzerland as of 31 December 2025, found that the share of women on boards of directors has largely stagnated, edging up from 33% to 34% across the sample as a whole. Twenty-eight companies in the sample still fell short of the 30% board benchmark. Sixteen of these are listed companies, including one Swiss Market Index (SMI) constituent. At the executive management level, the share of women has plateaued at 22%, and 24 listed companies, six of them in the SMI, missed the 20% benchmark as of the cut-off date – a shortfall that would need to be explained only from financial year 2031.

Although the legal consequences for companies that miss the benchmarks are confined to disclosure, the practical implications may be significant. Institutional investors and proxy advisers analyse remuneration reports closely; many have adopted voting policies on board diversity. Companies offering merely generic explanations (such as a shortage of suitable candidates) might face critical questions at the general meeting and, potentially, opposition to the re-election of individual board members, in particular the chair of the nomination committee. The explanations will also be read alongside the company’s non-financial reporting under Articles 964a–964c CO, where applicable.

Boards of directors that have not yet reached the benchmark should therefore treat the explanation as a governance statement rather than a compliance formality. In practice, this means linking the disclosure to a documented succession plan, a skills and diversity matrix, and concrete, time-bound measures. The real test of Article 734f CO will be whether the first reporting cycle produces meaningful explanations or standardised wording – and how shareholders respond.