The Swiss Parliament has approved the Investment Screening Act (ISA) which forms the basis of the Swiss FDI regime, on 19 December 2025. As no popular referendum had been initiated by the end of the respective deadline on 17 April 2026, the ISA will enter into force and the Federal Government is expected to publish the implementing ordinance later this year.
The purpose of the ISA is to prevent the acquisition of Swiss undertakings by foreign state “controlled” investors if this would threaten the public order or security in Switzerland. Acquisitions of Swiss companies operating in particularly critical sectors by foreign state-controlled investors are subject to approval. While the scope of the ISA is relatively lenient by international standards, the implications of the ISA will also have to be considered for capital market transactions with Swiss issuers.
1) Introduction
On 19 December 2025, the Swiss Parliament approved the Investment Screening Act (Investitionsprüfgesetz; ISA). Compared to international standards, the ISA has a relatively limited scope due to its focus on foreign state-controlled investors only. This point was intensely debated in the process of enacting the ISA and represents a middle-ground solution found between leaving the status quo, i.e. no ISA enactment, a position held inter alia by the Federal Council, and the more restrictive view taken by certain members of the Swiss Parliament.
2) Approval Requirement
2.1) Basic Principle
The ISA establishes a requirement to seek approval in case a foreign state-controlled investor (see section 2.2) assumes control through a takeover (see section 2.3) of a Swiss target undertaking (see section 2.4) which operates in a critical sector (see section 2.5).
2.2) Foreign State Controlled Investor
The following persons or entities fall under this definition:
I. a foreign government body; this would include a government agency or the central bank. It also encompasses natural persons such as the head of state or a member of the government.
II. an undertaking (Unternehmen; entreprise) with its head office outside Switzerland that is directly or indirectly controlled by a foreign government body.
III. a company (Gesellschaft; société) with legal capacity that is directly or indirectly controlled by a foreign governmental body. This is intended to capture entities that do not operate a business and hence are not considered an “undertaking“. While not entirely clear, this language probably also captures trusts, funds and similar structures such as e.g. sovereign wealth funds.
IV. a natural or legal person acting on behalf of a foreign governmental body. This language is intended as an anti-avoidance rule against potential circumvention by using a fiduciary or other agent.
Whilst the wording of the statute remains not entirely conclusive, the legislative materials (Legislative Message [Botschaft dated 15 December 2023] p. 40) are indicative of a rather broad scope with respect to the aspect of foreign control. Even cases where the government provides the funding for a takeover or where its prior approval is needed for an acquisition abroad could qualify. The latter introduces a “negative control“ element and is particularly relevant for China, which subjects its companies to foreign investment approval. This aspect will either have to be clarified in the implementing ordinance of the ISA to be drafted by the Swiss federal government or by guidance of the relevant Swiss agency SECO.
2.3) Takeover
A takeover is linked to a change of control where one or several investors gain control over an entity that was previously independent from the person acquiring control. The definition of “control” is borrowed from merger control concepts in antitrust law as set out in the Swiss Cartel Act.
Under this concept, control is generally understood as the ability to exert significant influence on the business affairs and management of a target undertaking, whether or not such influence is actually exercised. The usual method of acquiring control is through the acquisition of a participation of more than 50% of the shares or other voting securities of the target, whether directly or indirectly by acquiring a parent company. However, the legislative materials also clarify that in case of a widely held share ownership, for example in a public company, control may already be deemed to be given with share ownership of 20 or 30 percent.
The method of acquiring control, e.g. by share purchase agreement, statutory merger or simply by contract, is not relevant. Neither is it relevant whether shares of a legal entity (share deal) or a bundle of assets (asset deal) are acquired.
2.4) Swiss Target Undertaking
The notion of “undertaking” is again a concept from antitrust law focusing on economic rather than legal characteristics. It is meant to capture a participant in the economic process of supply or demand of goods or services. Its legal form or status (incorporated or not) is irrelevant.
An undertaking is “domestic” or Swiss if it is registered in a Swiss commercial register. Swiss beneficial ownership is neither required nor relevant. In fact, also foreign owned undertakings are subject to the new approval regime if they are registered in a Swiss commercial register. Hence, Swiss subsidiaries of foreign groups of companies will also be subject to the new ISA, even if the change of control occurs at parent level.
2.5) Critical Sectors
a) First Category
The first category comprises the most sensitive sectors, in which target undertakings must reach, during the two business years prior to the filing of the respective request, a threshold of 50 full-time employees or a worldwide average annual turnover of at least CHF 10 million.
This category includes undertakings active in (i) manufacturing goods or transferring intellectual property that are of critical importance for the operational capability of the Swiss Armed Forces, other institutions responsible for governmental security, space programs, whose exports abroad are subject to authorization under the War Material Act or the Goods Control Act; (ii) operating or controlling the Swiss electric transmission grids, large power plants or gas pipelines; (iii) supplying more than 100,000 Swiss inhabitants with water; or (iv) providing important security-relevant IT services for Swiss authorities.
b) Second Category
The second category is subject to a higher threshold of average worldwide turnover (for banks: gross profit) of at least CHF 100 million during the two business years prior to the filing of the respective request.
This category includes (i) hospitals; (ii) undertakings active in the areas of pharmaceutical and medical devices, vaccinations or personal medical protective equipment; (iii) undertakings operating or controlling domestic (a) harbors, airports or hubs for the transportation of goods and people, (b) railway infrastructure, (c) food distribution centers, (d) telecommunication networks or (e) important financial market infrastructures; or (iv) systemically important banks.
In addition, the Federal Council may add additional criteria for a maximum of twelve months if this is required to ensure public safety.
c) Practical Impact
It should be noted that the principal undertakings of many of the above critical sectors are state-owned in Switzerland. Hence, these sectors will in any event be closed to foreign investors for the time being and the ISA will not be relevant due to the lack of suitable targets. This applies in particular to electric transmission grids, large power plants, water supply utilities, commercial harbors and airports, the railway and its infrastructure as well as hospitals. However, many of these undertakings are issuing debt instruments through the capital market which might raise the question whether such debt issuances create any concern from an ISA perspective.
Certain sectors like telecommunications and food distribution centers are privately owned but highly concentrated with only a few undertakings that could be relevant as target undertakings. Others, however, like IT security, pharmaceuticals and medical devices and equipment, are much more fragmented and quite a few target undertakings could potentially fall within the scope of the new statute in case of a takeover by a foreign state-controlled investor. The same applies to companies producing so called “dual use“ goods, i.e. goods that can be used for both military and civil purposes. Further guidance by the Swiss Federal Government or SECO (see sections below) will be needed to clarify the scope of the new ISA in this respect.
2.6) Sanctions Regime
First and foremost, the ISA provides that until the approval is granted, the effectiveness of the takeover is suspended.
In addition, the Federal Council may order the necessary measures if a takeover has been completed without authorization. Such measures explicitly include the disposal of the respective target.
Further, in such a case, the combined entity may be fined up to 10 percent of the worldwide annual turnover of the domestic target.
3) Impact on Capital Market Transactions
3.1) Involvement of Foreign State-owned Banks in ECM Transactions
a) Overview
Standard equity capital market transactions encompass IPOs, rights issues, accelerated book buildings (ABB) and other share placements of listed companies. The typical element of these transactions is a “distribution” of shares or other equity-linked instruments with investors. “Distribution” means that the instruments are less concentrated and more widely held after the transaction than before. Hence, such capital market transactions typically have an outcome which contrasts with and lacks the features of a “takeover” in the absence of the taking of “control”.
However, in the context of a capital market transaction for a Swiss issuer involving a primary component, a syndicate of banks usually acts as underwriters and one member bank typically subscribes (and pre-funds at nominal value) all new shares to be issued on behalf of all syndicate banks. If that subscription reaches a “control” level, a more detailed look into the ISA may be warranted in case a state-owned foreign bank is involved and the Swiss issuer is active in a critical sector (see section 2.5 above).
b) A Relevant Scenario
This may be the case in the following hypothetical scenario: A listed Swiss pharma company (i.e. active in a critical sector) conducts a capital increase via a rights issue in the amount of 55% of its share capital to fund the acquisition of a foreign competitor. The syndicate involved in the rights issue includes a foreign state-owned bank. A Swiss member bank of the syndicate subscribes all newly issued shares at nominal value on behalf of the entire syndicate. While not legally excluded, it is virtually unheard of that a foreign bank performs this act. However, economically, the entire syndicate bears the risks and benefits of the transaction according to pre-agreed underwriting quotas. Given that the syndicate will exceed the relevant threshold of 33.33 % for a mandatory offer under Swiss takeover law (pre- and post-money), which – absent special rules in the articles of association – will trigger the following standardized exemption notification with the Swiss Takeover Board (UEK): Pursuant to article 40 (1) (b) FinfraV-FINMA, banks—acting alone or as a syndicate—are exempt from the obligation to make an offer in the context of a firm underwriting of an equity securities issue if they undertake to resell the number of equity securities exceeding the threshold within three months of the threshold being exceeded and the sale actually takes place within this period. Pursuant to article 40 (2) FinfraV-FINMA, a notification must be submitted to the Swiss Takeover Board when claiming this exemption from the obligation to make an offer. If the UEK has reason to believe that the conditions for a general exemption under article 40(1) FinfraV-FINMA are not met, it may initiate administrative proceedings within five trading days; otherwise, the exemption from the obligation to make an offer is deemed to have been granted. Thus, while providing a standardized exemption, Swiss takeover law still presupposes, as a rule, that such underwritten capital market transaction could be relevant for “control” purposes despite the underlying transaction being aimed at a “distribution” of shares.
As set out before and referenced in the legislative materials, “control” for the purposes of the ISA could already arise at 30% or even below in case of a dispersed shareholder base (see section 2.3). Thus, a similar issue as under Swiss Takeover law could theoretically arise under the new ISA in the hypothetical scenario described above. However, from a practical perspective, the difference is that only one or some of the syndicate banks will be foreign state-controlled and thus relevant for the “control” assessment whereas, under Swiss takeover law, all consortium member banks would count towards the control threshold given the typical “acting in concert” element of such structures. Also, no standardized threshold of “deemed control”, such as the 33.33 % under Swiss takeover law, is set out in the ISA. The control analysis under the ISA thus remains case-specific.
c) Assessment
In the hypothetical scenario set out above, the question remains whether one or some state-controlled members of the bank consortium, such as ABN Amro from the Netherlands, would “taint” the entire syndicate such that “control” under ISA would technically be given and which in turn would necessitate a filing with SECO. We clearly believe that this should not be the case. As mentioned above, capital market transactions of the type described above are intended to be a conduit for the “distribution” of stocks towards a more widely held share ownership of any given issuer. A stock ownership of syndicate banks is always merely technical for the purposes of facilitating a placement with investors. Given its purely technical role in such transactions, the banking syndicate does typically also not intend to exercise the voting rights attached to the new shares or otherwise exert influence over the issuer. In these transactions banks are acting like agents on behalf of their principals, which are the investors. Only in cases where a foreign-controlled bank would remain a significant shareholder, e.g. as a result of an unsuccessful placement, for an extended period and is willing and able to exercise voting rights, a different conclusion could be drawn in our view. Again, there is a parallel to Swiss takeover law which permits a holding period of three months under the above-described takeover exemption.
Thus, while relevant cases may be rare in practice, the possibility of an application of ISA to equity capital market transactions cannot be entirely discarded. In light of the lingering legal uncertainty with an involvement of a state-controlled bank in an equity capital market transaction, we propose a robust “underwriter exemption” in the implementing ordinance of the ISA. Issuers and banks should not have to worry about the Swiss FDI regime when they are trying to tap the capital markets.
3.2) DCM Transactions
As indicated above, many undertakings in critical sectors are issuing debt instruments through the capital market. “Control” under ISA is broadly defined and generally understood as the ability to exert significant influence on the business affairs and management of a target undertaking, whether or not such influence is actually exercised. The legislative materials also clarify that the method of acquiring control is not relevant and may also occur “simply by contract”.
The relationship between a creditor and a debtor is also based on a contract. Hence, one might argue that under very specific circumstances, a creditor might exert “control” over a debtor through providing debt and receiving in return certain rights, such as monitoring and information rights. Such a concept is already enshrined in other areas of Swiss law: the Federal Act on the Acquisition of Immovable Property in Switzerland by Foreign Non-Residents (ANRA or Lex Koller) provides that “acquisition of property” is also deemed if a person obtains “other rights that confer a status similar to that of the owner” (article 4 (1) (g) ANRA). Such other rights particularly include “the financing of the purchase […], where the terms of the agreement, the amount of the loan, or the debtor‘s financial circumstances place the buyer in a position of particular dependence on the creditor” (article 1 (2) (b) of the Federal Ordinance on the Acquisition of Immovable Property in Switzerland by Foreign Non-Residents).
However, absent any legal basis, we clearly take the view that from a Swiss FDI perspective, a bondholder may not be considered to be exerting “control” over a debt issuing undertaking.
3.3) PIPE Investments and Backstop Investors
Unlike the banks in a typical capital market transaction described above, investors are acting on their own behalf in a PIPE (Private Investment in Public Equity) transaction. Investments are proprietary and PIPE investors are typically also the beneficial owners of the stocks they acquire in a listed company. The analysis for PIPE transactions does not differ significantly from that of a private M&A transaction, except for the fact that the relevant aspect of “control” may be satisfied at lower thresholds, given that many shareholders of Swiss listed companies are either not registered in the share register, which is a prerequisite for participation, or, if registered, choose not to participate or turn in the proxy forms. Also, investors in PIPE transactions are often granted governance rights, such as board seat(s) or certain veto rights. As such contractual rights might reach some “control” level, such clauses will have to be analyzed and crafted carefully from an ISA perspective in case a state-controlled investor is involved and the Swiss target is active in a critical sector (see section 2.5 above).
The new Swiss FDI regime will be particularly relevant for Sovereign Wealth Funds (SWFs), but only if the investee company is in a critical sector (see section 2.5 above). While SWFs typically operate independently from the governments of their respective jurisdictions and while the states with which they are associated are typically not indicated as “beneficial owners” in public disclosures (see e.g. the notifications of beneficial owners of listed companies under the Swiss Financial Market Infrastructure Act), such funds will likely fall within the scope of the new ISA (see section 2.2 above). Unfortunately, the legislative materials have not been conclusive in respect of this question but it is expected that the implementing ordinance will clarify the matter.
Similarly, as part of capital market or PIPE transactions, the structuring and sequencing may result in a merely temporary exceedance of the “control threshold”, e.g. because the threshold is calculated based on the total number of voting rights of the issuer as recorded in the commercial register, even if the company‘s actual issued share capital is already higher. Similar to the practice of the Swiss Takeover Board which typically grants exemptions for such interim exceedances of the “control threshold” (especially if the mathematical result does not reflect the economic reality), an economic approach must in our view be applied under ISA disregarding any mere mathematical results which do not reflect the economic reality.
Thomas Reutter (thomas.reutter@advestra.ch)
Sandro Fehlmann (sandro.fehlmann@advestra.ch)