Introduction

Liechtenstein has traditionally been a very export-oriented economy and continues to be highly industrialised. Despite its tiny domestic market, the Liechtenstein economy has produced a number of companies that have developed to be world market leaders in their fields. With its slim bureaucracy and traditionally reliable financial policy, the Liechtenstein economy has grown steadily during the last decades. In this regard, Liechtenstein benefits from both its membership in the European Economic Area (EEA) and its bilateral Customs and Currency Union with Switzerland. As a consequence, Liechtenstein's economic framework still upholds its traditionally liberal economy but also adheres to current European standards, as Liechtenstein implements all relevant EU Directives under the Acquis Communitaire. As a result, Liechtenstein entities are entitled to participate in EEA-wide passporting in regulated areas. 

Liechtenstein offers flexibility and expediency when it comes to decision-making by its government agencies and the Financial Market Authority (FMA). The country's economy is also very innovative and pro-active; the enactment of the Blockchain Act and the establishment of the Regulatory Laboratory, a centre of competence at the FMA which deals with regulation and innovation in the area of fintech, are examples of this. In addition, Liechtenstein offers a high degree of political, economic and legal stability, making it an excellent place for entrepreneurs to settle.

Environment for Corporate Transactions

The vast majority of M&A deals involving Liechtenstein companies concern private equity investments and cross-border transactions. Conversely, transactions which involve public companies based in Liechtenstein regularly take place via foreign stock exchanges. 

Due to its membership in the EEA, Liechtenstein has implemented the relevant EU standards for cross-border transactions, such as cross-border mergers or migrations to other EU jurisdictions. In the area of public offers for securities, Liechtenstein is subject to the EU-wide framework for security prospectus which permits Liechtenstein issuers to passport a prospectus within the entire EEA. Vice versa, issuers in other EEA member states can publicly offer securities based on a prospectus approved in another EEA member state. 

Impact of New Legislation on Corporate Transactions

Taking into account the experiences of the COVID-19 pandemic, the Liechtenstein legislator decided to introduce more flexible provisions to enable swifter and less bureaucratic corporate decisions even in post-pandemic times. It is therefore envisaged to maintain such a flexible framework beyond the expiry of COVID-19 emergency legislation. This means that, unlike at present, in the future it will be possible to hold corporate meetings virtually under certain circumstances and to participate in such meetings electronically. Physical presence will not be mandatory any longer. In addition, the formalisation by a notary public of corporate decisions based on electronic means will also be possible. In this regard, it should be pointed out that Liechtenstein is going to implement the EU Digitalization Directive, presumably by 1 January 2024, which will accelerate digitalisation in the context of corporate and judicial affairs even more. 

The Notary Act

Quite recently, Liechtenstein introduced a modern law for notary services, the 2020 Notary Act. Under this law, it is also possible for lawyers to act as notaries public. In this capacity, they can assist contracting parties in the realisation of both local and international corporate transactions. Deeds drawn up by Liechtenstein notaries in relation to shareholder or board resolutions can also accelerate corporate transactions, as it is no longer required to have these deeds notarised by a government office or agency. Under certain circumstances, Liechtenstein notaries can also draw up deeds for transactions governed by foreign (non-Liechtenstein) law. 

Amendments to the Persons and Companies Act

The Liechtenstein legislator is in the process of enacting amendments to the Persons and Companies Act. The proposed changes include new rules that could impact the legal framework for corporate transactions – the absolute limitation period for the personal liability of board members will be reduced from currently 30 to ten years (beginning with the occurrence of the damage). This reduction of the limitation period will have a positive impact on the work of board members and other governing bodies, also in relation to decisions on corporate transactions.

Furthermore, amendments are planned in relation to shares with privileged voting rights. In general, each share has the same right to vote according to its nominal value or its quota of share capital. However, a company can deviate from this principle by establishing voting shares in its statutes, either by granting certain shares additional votes or by granting every share one vote independent of its nominal value or its quota of share capital. Henceforth, the existing provisions on majority votes will be amended to the effect that the consent of a shareholder with privileged rights will only be necessary in the future if the rights of these shareholders are to be lifted or amended. As minority shareholders with privileged rights were formerly able to block corporate decisions easily, the planned amendment will bring a more reliable and effective process of corporate decision-making.

The Liechtenstein legislator has further planned amendments for the pledge of bearer shares. Bearer shares were immobilised back in 2013 and since then, bearer shares have to be deposited at a custodian. This created difficulties for pledges and similar securities. Hence, it is planned to implement new provisions on the pledge of bearer shares in the Persons and Companies Act. In the future, it will be possible to use bearer shares as securities for corporate transactions again, which will have a positive impact, inter alia, on the financing of corporate transactions. 

Liechtenstein law also allows any form of a security (registered or bearer shares) to be represented in a book-entered security (Wertrecht). The registration of such securities is made by recording the new shareholder in the book of shares (Wertrechtebuch); a physical transfer of any share certificates or any type of endorsement of a document is no longer required in such a case. The book of shares can also be managed and kept on a blockchain basis which makes it possible to transfer the registered book-entered securities automatically by way of tokens. 

Implementation of 5th EU AML Directive

Liechtenstein's implementation of the Fifth EU Anti-money Laundering Directive ("5th EU AML Directive") will also have an impact on corporate transactions that lead to a change of control over a Liechtenstein company. As a result of such a transaction, the new ultimate beneficial owner (UBO) and persons with means of control over the Liechtenstein company must be registered in the Liechtenstein UBO Register within 30 days following the transfer of ownership. Also, the personal scope of application has been extended by the implementation of the 5th EU AML Directive. Henceforth, real estate agents, art dealers as well as persons who professionally hold third-party assets in custody or rent out premises or containers for this purpose, will be subject to due diligence and will have to comply with the pertinent obligations. This includes the identification and verification of the contracting party, the UBO and the beneficiaries; the establishment of business profiles as well as the risk-based monitoring of business relationships. 

The new Insolvency Act

Corporate transactions involving Liechtenstein companies under financial distress benefit from a new flexible framework which has been set forth by the new Insolvency Act. This law, which came into force on 1 January 2021, facilitates and permits various ways of restructuring an insolvent or distressed company. It therefore enables the performance of business transactions, including private sales of assets within insolvencies and similar proceedings. At the same time, the new law provides efficient measures in order to protect employees. The new Insolvency Act has further strengthened the rights of creditors by establishing a creditor committee and by increasing the publication of important procedural steps, as well as by eliminating the creditor classes. 

The Blockchain Act

With the enactment of the Blockchain Act (Token und VT-Dienstleistergesetz; TVTG) back in 2020, Liechtenstein was the first jurisdiction in Europe to provide a legal framework regulating fintech and distributed ledger technology services. It has turned out that this legal framework offers a solid, reliable and attractive platform for all parties involved in token transfers, as well as for service providers, especially start-ups, to provide their services both nationally and internationally. Service providers and parties involved in token transfer are subject to due diligence and have to comply with the pertinent obligations. Thus, combating money laundering and terrorist financing in the fintech sector is accurately guaranteed. The establishment of the Regulatory Laboratory, a centre of competence at the FMA which deals with regulation and innovation in the area of fintech, as a single point of contact and the open attitude of the government and the regulator especially foster the attractiveness of Liechtenstein as one of the main fintech places in Europe. 

Impact of Regulatory Laws

Under Liechtenstein law, only corporate transactions involving regulated entities require approvals or authorisations from Liechtenstein government authorities. This applies predominantly to the area of financial services (including banks, investment firms, insurers, asset managers, etc). In these areas the disposal or acquisition of a qualified participation (usually 10% of the shares or capital in regulated target companies) requires the previous approval of the Liechtenstein Regulator (FMA). Similar restrictions apply in relation to state-owned companies. 

Furthermore, for the direct or indirect acquisition of real estate property situated in Liechtenstein, advance approval of the Liechtenstein Real Estate Transfer Authority is required. Without such approval the underlying transaction is considered null and void by law. As a consequence, it is recommended to verify by way of due diligence whether a Liechtenstein target qualifies as a real estate company. Under Liechtenstein law, this is a company that has invested at least 50% of its assets in Liechtenstein real estate and related rights (such as servitudes or even long-term lease agreements). 

In a nutshell, Liechtenstein today presents itself as a highly attractive hub for corporate transactions, not only in the traditional industries but also in new and innovative sectors such as the fintech market.