18 March 2011 | By Andrew Pugh
22 November 2010
8 March 2011
4 September 2006
18 March 2011
31 January 2005
Yahoo! first announced it was relocating its European headquarters in March 2008. The 18-month project saw the internet giant move from its Shaftesbury Avenue offices in Central London to Rolle on the shore of Lake Geneva, in the Swiss canton of Vaud.
Yahoo! Europe then became Yahoo! Sarl (Société à Responsabilité Limitée). Its general counsel Grainne Brankin was part of the team leading the project, working with the company’s chief of staff and also its HR and tax directors.
Unsurprisingly for a company with revenues topping $6.5bn (£4.1bn), the scope of the project was enormous, encompassing everything from property deals and asset transfers to employment contracts and data privacy laws.
“We looked at everything you could imagine,” says Brankin. Such was the level of micro-management that at one point Brankin was even involved in helping Yahoo! employees find schools for their children.
One of the biggest challenges facing Brankin - and most firms that decide to relocate to Switzerland - was adjusting to the unique laws and regulations in the country’s cantons. The 26 cantons are free to set their own tax rates, which can vary from 6 per cent to 24 per cent of net income. The level of autonomy means a company could pay 50 per cent less tax by moving 30 miles down the road.
Cantons enjoy far more independence than, say, US states, and are the biggest driver when it comes to attracting multinational corporations. They also have autonomy when it comes to areas such as social security contributions, business permits, residency requirements and construction rules.
The relocation itself was part of a wider project to reduce the number of corporate entities the company had in Europe and reorganise its internal operational structure. The relocation project allowed it to have all senior management in Europe based in the same office for the first time. The corporate side was one of the most demanding areas.
“We did various share and asset transfers within the group and entered into new inter-company arrangements,” says Brankin. “In addition, we had to address the corporate governance aspects of establishing our new Swiss company.”
This saw Brankin drafting board protocols and company bylaws, as well as a range of contract signature policies and processes. Much was handled in-house as it was driven by operational needs, but local Swiss advice was also used.
“Linked to the corporate matters, we had to comply with our obligations to the canton in which we are established, and make sure the inter-company agreements and restructure were executed in a way that was tax-efficient and supported the fiscal efficiency we wanted to obtain through the relocation,” says Brankin. “This saw close involvement with the company’s tax department and its advisers.”
Then there were the commercial contracts, including the impact of the operational changes, which required amendments to things such as advertiser contracts and establishing new templates for suppliers under Swiss law. But this is where Swiss law is helpful - drafting can be done in English and the federal laws are also clearly drafted and available in English, making the process relatively user-friendly.
With cantons taking the lead in pitching for companies to move to Switzerland, Brankin warns that dealing with officials can be something of a culture shock for US and UK companies. In place of the generally impersonal nature of these nations, Brankin and her team found themselves holding face-to-face meetings with local politicians and civil servants.
“If you’re arranging something like a deal to buy land, you need to physically go there and meet the local mayor,” she says. “You really have to make personal contact - they’re typically not very impressed by US corporate culture, and want to see you in person. That’s where you need to be sensitive to cultural differences.
“Expect a lot of contact with government officials. They are quite welcoming, but you do have to make that opening and show a willingness to engage. It’s very different from London.”
The legal team also found itself becoming reliant on local counsel in Switzerland, after speaking with other companies that had moved there. In the previous few years the likes of EA, Cisco Systems, Kraft Foods and Google had all established European headquarters in Switzerland.
“Swiss property regulations can be very specific to the canton and there are some laws relating to foreign ownership, so building or purchasing office space requires specialist advice,” Brankin says.
It is a similar situation with employment law. “Generally, Switzerland is a favourable jurisdiction for employers,” she says. “It allows English documentation and a great deal of freedom to chose contract terms, but local advice was required to make sure we didn’t miss small local differences. In many cases we’ve decided to keep our company policies even though they’re not required under Swiss law, such as our anti-discrimination policies.”
Another sensitive area was data protection.
“We did extensive work to make sure we understood how operating in Switzerland could affect our obligations and practices in relation to data protection and privacy,” says Brankin. “Switzerland generally follows EU law and regulations in this respect, and is a ’safe harbour’ country under EU law, as it provides similar protections for privacy. The Data Commissionaire in Switzerland often follows EU case law for decisions.”
Around 5 per cent of the London workforce was originally asked to relocate.
“We were nervous about approaching people,” admits Brankin. “We were asking people in London to move to the other side of Europe and had no idea how they would respond. The response was amazing - 100 per cent of staff that were asked to relocate agreed.”