First published in 2019 – Updated from time to time.
In 2019, Interlegal published its first joint book called Legal and Tax Issues Around the World – Starting and Growing a Business. It is the result of collective work with the accountants’ firms network EuraAudit. This article aims to introduce the legal environment of Switzerland for entrepreneurs who are interested in forming and financing their business in this country. Note that it is not equivalent to a complete professional analysis. Through this introductory guide, the network intends to help entrepreneurs to craft the questions they need to ask themselves in order to start, operate, and see their business thrive on the global stage. Therefore, Interlegal encourages entrepreneurs to obtain legal advice with Reymond Ulmann & Fischele’s firm on the issues arising from starting and running a business in Switzerland.
Switzerland has a very efficient legal and taxation process for companies.
For companies wishing to set up in Switzerland, there are 7 forms of company available, which are:
- an individual company;
- a simple partnership;
- a general partnership;
- a limited partnership;
- a limited liability company;
- a partnership limited by shares; and
- a company limited by shares.
Registered Companies and Partnerships
In order to start a company in Switzerland, there are no requirements in respect of nationality or residency.
However, for the foreign founding member of the company wishes to be an employee of the same company, i.e. draw a salary , they must either be a resident in Switzerland, or in the border area and also have another representative that is a resident in Switzerland. Either way, they must hold a work permit.
Classification of Registered Companies
In Switzerland, there are three most common forms for small to medium sized companies are:
- An individual company;
- A company limited by shares (SA); or
- A limited liability company (Sàrl)
Where a company is managed by several individuals, the limited liability companies and the companies limited by shares are the most appropriate and most common. To be registered, these two types of companies must be entered in the commercial register.
Memorandum and Articles of Association
The incorporation of a limited liability company or a company limited by shares is has a simple process.
It takes approximately 1 month to prepare the documents and go to a Swiss notary, who will then execute the public deed (an authentic notarial instrument). It is then necessary to prepare the articles of association, the contents of which set out the main constitution of the company, including the aim of the company and the modality regarding the social shares. The companies are then incorporated as soon as they are entered in the commercial register.
The liability of the shareholders is limited to each shareholder’s own assets, depending on their contribution to the issued shares. This liability only arises if the shares have been fully paid-up. This is the case for both the limited liability company and the company limited by shares.
In respect of the limited liability company, its shares are registered which also means that the members of that company are not and cannot be anonymous.
In respect of the company limited by shares, it gives more flexibility as the shares can be registered shares or bearer shares. However, the bearer shareholders have to register to the company and indicate who the beneficial owner is when their participation has reached at least 25% of the share capital or votes.
Public Offer of Shares
Any company wishing to have its shares listed publically on a stock exchange must comply with the stock-market legislation. In doing so, the company is subject to more strict regulations regarding restrictions to the transferability of the registered shares, the preparation of the accounts and the audit and a transparency regarding the important shareholders.
Public bids of acquisition and public exchange offers must comply with strict regulations in order to prevent risks of breaches toward minor shareholders concerning the change of the control and the progressive acquisition of the majority of the votes. Generally, the principles of loyalty, transparency and equal treatment must be observed.
The public bids of acquisition process can also be regulated by the Swiss Financial Market Supervisory Authority (FINMA).
For a limited liability company, a general meeting of the members is the process by which decisions are made in respect of the company.
In a company limited by shares, there are three company bodies: the Board of Directors, the External Auditors and the Shareholders. The Shareholders can attend a General Meeting, which has the power to determine and amend the articles of association; to elect the members of the board of directors and the external auditors and to approve the annual accounts and resolutions on the allocation of the disposable profit.
In a limited liability company, the shareholders run the company together, if the articles of association do not stipulate otherwise. The shareholders can also appoint and/or remove managing directors.
The board of directors is the executive organ of the company limited by shares. It represents the company externally. The board of directors is elected by the shareholders at the general meeting. There are no requirements of nationality or residency, but the company must be able to be represented by one shareholder who is resident in Switzerland. That individual must have the authority to represent the company. The board of directors can decide the organisation of the company and may delegate the business management to directors. The board of directors has the power to appoint and remove both members of the board of directors and peoples enabled to represent the company externally.
Financing of a Company
The foundation of a limited liability company requires a contribution of a minimum of CHF 20,000 of equity. The capital can then be increased, there is no upper limit.
The company limited by shares has a mandatory capital (share capital) that must at least amount to CHF 100,000. At least 20% of the capital must be paid up, but no less than CHF 50,000. That capital must not necessarily be paid up in cash. It can also be paid up as “in kind” contributions, such as real properties, equipment.
Commencement of Business
Certain steps need to be followed before the company can begin its commercial activity:
- Incorporation documents to be notarised;
- Entry into the commercial register;
- Provision of funds for the social capital; and
- Opening a bank account.
In the case of a limited liability company, the CHF 20,000 minimum contribution as equity capital is put aside. The fees that may be charged for advice in respect of setting up the initial company structure can be between CHF 600- 2,000. The notary fees for the establishment acts can cost between CHF 700 – 2,000. The fees for entry into the commercial register amount to CHF 600 as long as the social capital isn’t above CHF 200,000. In addition, the founder must pay stamp duty, that amounts to 1% of the social capital if the capital exceeds CHF 1,000,000.
Mergers and Acquisitions
The process of mergers and acquisitions are submitted to different regulators, depending on the national or international operations of the company.
Swiss law forbids the abuse of a dominant market position and it is provided by the law that the market share of big companies shall be subject to a review by a supervisory authority, so that it can be established whether the companies are going to create or reinforce a dominant market position that could phase out effective competition.
A limited liability company is fully liable for its own debts. Given the capital must be totally paid up, the members are not personally liable, unless the articles of association state they must make additional financial and material contributions.
For a company limited by shares, subject to particular rules, only the assets of the company are to be held liable for the obligations of the company. In the case of bankruptcy of the company, the members only lose their shares of the share capital.
Winding Up of Companies
The law provides in what circumstances a company can be dissolved:
- When the company is bankrupt;
- When the company is legally dissolved;
- When the company pursues an aim that is illicit or amoral;
- When there are defects in the organization of the company;
- By its own articles of association; and/or
- By a decision of the members at a general meeting.
Any of the above would result in liquidation of the company.
For more details, please contact Stefan BERARD, Reymond, Ulmann & Associés, firstname.lastname@example.org