New Swiss Law Makes Shares More Affordable For The Average Investor

by Ulrika Lomas, Tax-news.com, Brussels

02 May 2001

A Swiss law has taken effect this week that allows companies to scrap minimum nominal share values so they can reduce the previous minimum value of share certificates, which stood at 10 Swiss Francs, down to 1 centime.

The new law, which brings Switzerland into line with other major European countries and the United States, intends to make shares much more affordable for individual investors by increasing the volume of shares on the market and lowering the face value of each individual share. Bank Leu trader, Eleanor Charrez, told the Swiss press: 'In the United States, around 60 per cent of people own shares and in Switzerland it's only around 20 per cent, making shares less heavy by splitting them will change attitudes.'

Reducing the minimum value of shares will allow more average investors to buy shares that were previously too expensive for them and should therefore improve market liquidity and attract more foreign investment to the country.

Barclays stockbroker, Justin Urquart-Stuart, explained: 'In itself, share splitting doesn’t make a company or investor any richer or poorer. What it does do is make the stock more liquid and more easy to trade. Switzerland has realised that to develop its market it has to encourage more liquidity and share splitting is a good way of going about it.'

Already several of the 279 companies listed on the Swiss Stock Exchange have declared plans to split their shares. For example, Roche Holding AG, from which one share cost 12,460 Swiss Francs last week will now sell its shares at 125 Swiss Francs each. Others planning to split their shares include Nestle, Swiss Re and Credit Suisse. According to spokesman Leo Hug, the exchange is expecting an increase in revenue as share-splitting will increase trading activity: 'that's the experience we've seen from other countries,' he said.

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