Talacker 41, 8001 Zurich, Switzerland, Phone: +41 43 443 72 00, Fax +41 43 497 22 70, info@amcham.ch 
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Switzerland - Why?
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Summary
In Switzerland, the following main forms of business are available:
  • Corporation:
    A company with a predetermined capital that is divided into bearer or registered shares. The shareholders' liability is limited to the nominal capital invested in the corporation.
  • Limited Liability Company:
    A company with a limited capital divided into quotas. The quotaholders' liability is in principle limited to the company's registered capital.
  • General Partnership:
    A partnership of two or more individuals in which the partners have unlimited liability and are generally bound by the acts of the other partners.
  • Limited Partnership:
    A partnership of one or more general partners (only individuals) with unlimited liability and one or more limited partners (individuals or corporate bodies).
  • Simple Partnership:
    A contractual relationship between two or more persons (individuals or corporations), mainly for the realization of a particular project. This type of relationship has characteristics similar to a general partnership but, in particular, its name is not protected by law.
  • Cooperative:
    A union of at least seven persons, without upper limit, which is organized as an entity. Used mainly by agricultural and large retail organizations.
  • Sole Proprietorship:
    Individuals can set themselves up in any business with no specific permission required.
    Instead of incorporating a company in Switzerland a business can be operated through a branch of a foreign company. Further, it should be noted that the legal form of a "trust" as known in common law does not exist in Swiss (civil) law.
    Preferred Form of Legal Entity
    The vast majority of the forms of business in Switzerland are organized as corporations. While historically, the limited liability company did not play an important role in Switzerland, this type of entity became more important in recent years.
    Applicable Law
  •  
  • Swiss Code of Obligations
  •  
  • Various ordinances
    I. Corporation
    (Aktiengesellschaft (AG) - Société anonyme (SA) - Società anonima (SA))
    A corporation must be incorporated by public deed through a notary public. It may be incorporated by one or several persons or entities acting as founders and initial shareholders (Incorporators), which need not be Swiss citizens or residents. The Incorporators may, by notarized power of attorney, appoint one or several proxies to incorporate the Corporation in their name and on their behalf. Accordingly, their presence in Switzerland is not required. If the power of attorney is notarized outside Switzerland, it must be accompanied by a so-called Apostille under The Hague Convention or superlegalized by a Swiss embassy or consulate certifying the capacity of the foreign notary.
    The Incorporator(s) adopt(s) the articles of incorporation and elect(s) the corporate bodies required by law (board of directors and, normally, the auditors). Thereafter, an application for registration is filed with the Commercial Register of the Company's place of incorporation, including (i) the notarized deed of incorporation, (ii) a certified copy of the articles of incorporation, (iii) declarations of acceptance from the initial board member(s) and the auditors, (iv) a confirmation by a Swiss bank that the initial share capital has been paid-in, (v) a board resolution concerning the constitution of the board of directors, and (vi) certain declarations required by law.
    The corporation becomes a legal entity only upon its registration in the Commercial Register. Notice of the registration is published in the Swiss Official Gazette of Commerce. The entire registration process normally takes approximately two to three weeks from the date of the incorporation meeting and the filing with the Commercial Register, but may be shortened to around three to five business days upon consultation with the Commercial Register.
    The law provides for additional requirements if:
  • contributions in kind are made;
  • the subscribed share capital is paid in by setting off claims against the Corporation (rarely possible in the incorporation process);
  • the Corporation intends, following its incorporation, to acquire assets from shareholders or from persons or entities which are affiliated with shareholders; or
  • special benefits are conferred on the Incorporators or other persons.
    In these cases, the Incorporators must render a written report (Incorporator's Report) in which they account for (i) the nature and condition of contributions in kind or acquisitions of assets and the adequacy of their valuation, (ii) the existence of a debt and its capacity to be set off, or (iii) the creation and adequacy of special benefits in favor of Incorporators or other persons. The Incorporators' Report must be reviewed by an accredited auditor who must confirm in writing its completeness and accuracy.
    The costs of incorporation include registration fees of the Commercial Register, notaries' fees and attorneys' fees. In addition, a federal stamp duty of 1% of the entire consideration exceeding CHF 1,000,000 paid or contributed to the corporation's equity (nominal capital plus premium) is due.
    The name of the Corporation may, in principle, be chosen freely, provided that it does not conflict with an existing name of another company, is not misleading, and is not purely descriptive. References in the name to any geographical areas (local, national, international) are allowed if they properly reflect the Corporation's area of activity and if they are not contrary to any public interests. In any event, it is recommended that a name be submitted to the Swiss Federal Office for the Commercial Register and the competent cantonal Commercial Register for approval before incorporation. Such approval can customarily be obtained in approximately a week.
    Swiss corporation law does not have a theory similar to the "ultra vires" doctrine: Under Swiss law, a corporation may effect not only business transactions that are expressly covered by the business purpose clause, but also any transaction the corporation's business purpose may possibly entail. Usually, the purpose clause contained in the articles of incorporation is drafted in a very general and broad manner.
    A Swiss corporation must have its registered office in Switzerland. There is no need, however, for a corporation to have office facilities and staff in Switzerland. A local trust company may be willing to maintain the requisite registered office for an annual fee.
    The minimum share capital of a Swiss Corporation is CHF 100,000. Upon incorporation (or a subsequent capital increase), the share capital must be fully subscribed, but not necessarily fully paid-in: in case of registered shares, the Incorporators (or the shareholders' meeting in the event of a capital increase) may elect to pay in as little as 20% of the nominal capital to be paid in at the date of incorporation (or subsequently at the occasion of a capital increase), but in no event less than a minimum capital of CHF 50,000. The Incorporators (or the shareholders' meeting) may choose to issue the shares at their nominal value or at a premium over their nom-inal value (capital surplus or Agio). Any Agio is booked in the legal reserves of the Corporation.
    In the event of a contribution in cash, the amount must be paid into a blocked account of a Swiss bank prior to the incorporators' meeting (or the respective board meeting in the event of a capital increase).
    Outside of a capital reduction or liquidation of the corporation, shareholders may not request redemption of their contribution. Conversely, the shareholders may not be obliged to contribute more than the issuance price for their shares fixed at the time of the incorporation (or the capital increase).
    A corporation's issued share capital may be increased by way of a shareholders' resolution and a subsequent board resolution implementing the capital increase and amending the articles of incorporation. The corresponding shareholders' and board meetings must be held in the presence of a notary public and the resolutions are recorded in a public deed.
    Swiss law provides for three different types of capital increase:
  • Ordinary capital increase:
    The shareholders' meeting resolves on the capital increase and empowers the board of directors to increase the capital within three months.
  • Authorized capital increase:
    By amending the articles of incorporation the shareholders' meeting may authorize the board of directors to issue new shares at its discretion up to a maximum of 50% of the existing share capital within a period of two years.
  • Conditional capital increase:
    The shareholders' meeting may resolve on an increase of capital by providing in the articles of incorporation that creditors of bonds or similar debt instruments as well as employees or shareholders may receive rights to acquire new shares if certain conditions are met. Such conditional capital may amount up to a maxi-mum of 50% of the existing share capital.
    In all three cases, the existing shareholders have a preemptive right, i.e., a preferential subscription right on the newly issued shares or rights, in proportion to their existing equity interest. The preemptive right may be suspended by shareholders' resolution.
    Corporations can have various classes of shares. Shareholders and shareholdings (except for shareholdings exceeding certain thresholds in listed Corporations, see I.H.1) do not have to be publicly registered or disclosed.
    The minimum par value of shares in a Swiss corporation is CHF 0.01. Shares may be issued in the form of registered or bearer shares.
  • Registered shares may be issued if at least 20% of their nominal value has been paid in. Registered shares are transferred by delivery of the endorsed share certificate(s), or electronically by book entry if the shares are organized as intermediated securities, and, in order to make such transfer effective vis-à-vis the corporation, by approval of the acquirer by the corporation's board of directors or a committee appointed thereby and entry of the acquirer in the corporation's share register. Shares not fully paid in may only be transferred upon consent of the corporation, which however may only be withheld if the acquirer's solvency is questionable and if the security requested has not been furnished. With respect to registered shares not listed on a stock exchange, the articles of incorporation may provide that the corporation may refuse its consent to a transfer of these shares for valid reasons as set forth in the articles of incorporation or if the corporation offers to acquire the shares at their intrinsic value. In case of registered shares listed on a stock exchange, the articles of incorporation may provide for a percentage limit (usually 2% to 5%) above which registration in the share register with voting rights may be refused. Furthermore, a corporation may refuse to enter an acquirer in the share register if such acquirer does not certify that he acquired the shares in his own name and for his own account.
  • Bearer shares may only be issued if their entire nominal value has been fully paid in. Bearer shares may not be subject to any transfer restrictions. Bearer shares are trans-ferred by delivery of the share certificate(s) if any such certificates have been issued, or electronically by book entry if the shares are organized as intermediated securities.
    The corporation may issue preferred shares with preferential rights vis-à-vis common shares that are expressly stipulated in the articles of incorporation. In particular, preferential rights may extend to cumulative or non-cumulative dividends, liquidation proceeds and, in the case of the issue of new shares, preemptive rights.
    A corporation may issue shares with increased voting power (Stimmrechtsaktien) by way of issuing shares with different nominal values and stipulating in the articles of incorporation that each share entitles its holder to one vote irrespective of its nominal value. However, the nominal value of the shares with increased voting power must be at least 10 % of the nominal value of the common shares; in other words, shares with increased voting power may not exceed 10 times the voting power of common shares. Shares with increased voting power must be fully paid in registered shares.
    Corporations may issue so called participation certificates (Partizipationsscheine), which have a nominal value and are issued against a contribution. The participation capital may not exceed twice the amount of the share capital. The participants have, unless otherwise provided for by the articles of incorporation, no voting rights and none of the rights associated therewith, such as the right to call a shareholders' meeting, the right to attend such meeting, the right to information, the right to inspection and the right to submit proposals to the shareholders' meeting. The participants essentially enjoy the same monetary rights (dividend entitlements, rights to liquidation proceeds and preemptive rights connected to new shares or participation certificates) as shareholders.
    Corporations may issue a security known as benefit certificates (Genussscheine), sometimes also translated as non equity shares or profit sharing certificates. Benefit certificates have no nominal value and no voting rights, but may confer on their holders a share of the profit (dividend), entitlements to liquidation proceeds or the right to subscribe for new shares.
    Corporations may acquire part of their own shares only if (i) free reserves in the amount of the purchase price are available and (ii) the total nominal value of these shares does not exceed 10% of its registered share capital. The limit is 20% if the corporation acquires own (registered) shares in connection with transfer restrictions set forth in its articles of incorporation.
    The statutory corporate bodies of a corporation are the shareholders' meeting, the board of directors and, normally, the auditors.
    The shareholders' meeting is the supreme governing body of the corporation. It has the authority:
  • to adopt and amend the articles of incorporation;
  • to elect and dismiss the members of the board of directors and the auditors;
  • to approve the annual financial statements (statutory and consolidated, if required) and to resolve on the allocation of profits and to declare dividends;
  • to vote on the compensation of the members of the board of directors, the management and board of advisors (Beirat), in case of a listed corporation;
  • to discharge the members of the board of directors; and
  • to pass resolutions concerning all matters which are reserved for the shareholders' meeting by statutory law, the articles of incorporation or any organizational rules of the corporation.
    The shareholders' meeting is usually called by the board of directors. Shareholders representing at least 10% of the share capital or shares with a nominal value of at least CHF 1,000,000 may request the board of directors to call a meeting. Shareholders' meetings must be held at least once a year; in particular, the meeting that approves the corporations' annual financial statements and the allocation of profits must take place no later than six months after the close of the business year. For corporations, Swiss law does not allow shareholder resolutions by written consent; rather, a meeting must be convened and held. However, shareholders may be represented at the shareholders' meeting by proxy. In case of listed corporations certain restrictions apply.
    Unless all of a corporation's shareholders are present at a meeting, a shareholders' meeting may not validly pass resolutions on matters which are not on the agenda, except for the convocation of an extraordinary shareholder's meeting, the initiation of a special investigation (Sonderprüfung) or the election of the auditors upon motion by a shareholder.
    Unless provided otherwise by statutory law, the shareholders' meeting adopts its resolutions upon a majority of the votes represented at the meeting. Higher thresholds for particular matters may be set forth in the articles of incorporation. As a rule, the votes are allocated in proportion to the share capital. However, corporations with share classes of different nominal value may allocate one vote to each share. In addition, the articles of incorporation may include a maximum limitation of voting rights per shareholder (e.g., 5 %).
    The business activities of a Swiss corporation are managed by or under direction of its board of directors. The board is responsible for the execution of the decisions of the shareholders' meeting, for keeping the corporate books and minutes, and, in general, for the proper management of the corporation's affairs. The board may consist of one or several members, who need not be shareholders of the corporation, nor Swiss citizens.
    Certain duties of the board of directors are inalienable and may not be transferred to other bodies of the corporation, nor may they be transferred to or made subject to approval of the share-holders' meeting. However, the CO permits the board of directors to delegate specific powers and duties, in particular day-to-day business operations, to an executive management. Such delegation must be based on the articles of incorporation and enacted by the board in organizational regulations. The regulations must contain provisions governing the corporation's executive bodies, the delegation of powers and duties, the supervision and control, the meetings and decision-making process of the corporate bodies and the reporting system. At least one member of the board of directors or one member of the executive management authorized to act for and validly bind the corporation must reside in Switzerland.
    Board members and members of the executive management acting in violation of their statutory duties may become liable to the corporation, its shareholders and (in bankruptcy) its creditors for damages. There are, however, few reported cases of directors' and officers' liability outside of insolvency. The liability is joint and several, but the courts may apportion the liability among the directors and officers in accordance with their degree of culpability. Switzerland is a fairly non-litigious environment, partly due to the fact that class actions are not permitted under Swiss rules of civil procedure and a plaintiff in a shareholder lawsuit generally has to bear court costs and has to reimburse the defendant for attorney's fees if he or she loses the case. Currently reform efforts regarding the latter are in course.
    Swiss law permits a corporation to contract out directors' and officers' liability insurance, and to pay the premiums for such insurance. Swiss statutory law, however, does not foresee the ability of a corporation to indemnify its directors and officers for any wrongdoing. Due to the aforementioned non-litigious environment in Switzerland, indemnification arrangements play a minor role for Swiss listed companies.
    Depending on the size of a corporation and other criteria:
  • the auditors have to be a governmentally supervised audit firm (staatlich beaufsichtigtes Revisionsunternehmen), an accredited audit expert (zugelassener Revisionsexperte) or an accredited auditor (zugelassener Revisor);
  • the auditors have to perform an ordinary or a limited audit.
    Corporations which are not required to obtain an ordinary audit may even waive to perform a limited audit, if the corporation does not exceed an average headcount of 10 full-time employees over the year and if all shareholders consent. To be eligible, the auditors must fulfill the qualifications and independence necessary for the performance of their duties. In the case of public or large private corporations, the auditors must meet extensive requirements regarding their independence. At least one member of the auditors must be resident or domiciled or have a business establishment in Switzerland.
    Swiss corporate law provides on one hand for disclosure requirements, which oblige to inform publicly about certain occurrences, in particular the reaching of certain thresholds regarding participations in a company. On the other hand, notification requirements which provide for the notification of the company only exist.
    The identity of the shareholders is not recorded in the Commercial Register.
    Corporations with shares listed on a stock exchange have to disclose, in their annual business report, the identity of shareholders or organized groups of shareholders with a title or beneficial interest of more than 5% of the voting rights of the corporation. If the articles of incorporation provide for a lower percentage limit for holding registered shares, such lower threshold also applies for the purpose of disclosure. In addition, the Swiss Stock Exchange Act, the associated implementing ordinance and the Listing Rules of the Swiss Exchange contain further disclosure and related obligations. The Swiss Stock Exchange Act in particular provides for a disclosure requirement if a threshold of 3% of the voting rights is reached.
    The acquisition of bearer shares of a non-listed company that are not issued as intermediated securities has to be disclosed towards to company within one month after the acquisition, regardless of the number of bearer shares acquired. Moreover, whoever, alone or in concert with third parties, acquires shares (bearer or registered shares) of a non-listed company, thereby reaching or exceeding the threshold of 25% of the share capital or the voting rights is required to disclose to the company the natural person on whose behalf he acts (beneficial owner) within one month following such acquisition. This notification requirement does not apply if the shares are issued as intermediated securities. The shareholders' meeting may decide that the mentioned notifications – provided that they concern bearer shares – have to be reported to a financial intermediary instead of the company. That way, the anonymity of holders of bearer shares remains guaranteed. As long as a shareholder has not complied with the disclosure obligation the membership rights (in particular the right to attend the shareholders' meeting) tied to the shares acquired are suspended. Pecuniary rights (in particular the right of dividend) tied to such shares may only be exercised after the shareholder has complied with his disclosure obligations. If the shareholder fails to comply with his disclosure obligation within one month from the date of the acquisition of the shares, the pecuniary rights are forfeited. If the shareholder complies with the disclosure obligation only at a later date, the shareholder shall be entitled to exercise the pecuniary rights arising as of such later date.
    Swiss law provides for an accounting and reporting law which is independent of a company's legal structure and distinguishes between the size of a company regarding the requirements for the accounting and reporting.
    The board of directors must prepare an annual business report. The business report consists of:
  • The annual financial statements (balance sheet, profit and loss statement and notes to the financial statements). The law provides for certain minimum requirements with respect to the presentation of the accounts.
  • The consolidated financial statements (consolidated accounts) if required by law.
  • Companies which are obliged to have an ordinary audit as well as listed corporations have to fulfil additional requirements.
    There is no general legal requirement for corporations to prepare quarterly or semi-annual reports. Only certain regulated companies (e.g. banks) and corporations listed on the SIX Swiss Exchange are required to prepare interim reports.
    The accounting has to comply with the recognized accounting principles provided by the Swiss Code of Obligations and has in particular to be transparent, verifiable as well as appropriate given the form and size of the company. Swiss accounting rules are less standardized than some of their foreign counterparts such as IFRS or US GAAP. Certain companies, in particular listed companies, are obliged to prepare financial statements in accordance with a recognized financial reporting standard. Listed companies are in addition, unlike other companies, obliged to comply with the so-called true and fair view principle. Swiss statutory law provides for the possibility of creating and dissolving so-called hidden reserves, i.e., off-balance-sheet reserves. The creation of hidden reserves is possible if they are created in the best interests of the corporation and the shareholders. The creation and dissolution of such reserves have to be notified to the auditors, but not to the shareholders. The notes to the annual accounts need to inform about the total amount of eliminated replacement and hidden reserves if they exceed the total amount of newly constituted reserves whereby the result achieved thereby is considerably more favorable.
    The parent corporation of a group of companies is obliged to prepare consolidated financial statements. However, this provision only applies to groups that exceed two of the following parameters in two consecutive fiscal years:
  • total assets of CHF 20,000,000;
  • sales of CHF 40,000,000;
  • an average headcount of 250 full-time equivalents over the year.
    If these criteria are not met, consolidated financial statements are nevertheless to be prepared if:
  • they are necessary in order to make the most reliable assessment of the economic position;
  • company members who represent at least 20 per cent of the share capital so require; or
  • a quotaholder of an LLC (see II. below) who is subject to personal liability or has a duty to pay in further capital so requires.
    The CO requires that a general reserve of 20% of the paid in share capital be established. Until this level is reached, 5% of the annual profit must be allocated to this general reserve. Thereaf-ter, certain other funds must be allocated to the general reserves. Furthermore, to the extent of not exceeding half of the share capital (20% for holding companies) the general reserve may only be used to cover losses or for measures appropriate to maintain the corporation in poor business periods or to prevent or mitigate the effects of unemployment. The articles of incorporation may provide for additional reserves to which a portion of the annual profit may be allocated.
    Corporations with shares listed on a stock exchange or with bonds outstanding must publish their approved annual and consolidated financial statements together with the Auditor's report. All other Corporations must disclose their annual financial statements, consolidated statements (if any) and Auditors' reports only to shareholders and to creditors who assert a legitimate interest.
    Shares of Swiss listed corporations are usually not printed as certificates but issued as uncertified securities and organized as intermediated securities. Share transfers are effected electronically by book entry.
    II. Limited Liability Companies (LLC)
    (Gesellschaft mit beschränkter Haftung (GmbH) - Société à responsabilité limitée (Sàrl)
     - Società a responsibilità limitata (Sarl))
    An LLC may be incorporated by one or several persons or legal entities acting as incorporators and initial quotaholders. By and large, incorporation procedures for LLCs are the same as for corporations.
    With respect to corporate name, business purpose and place of incorporation the same rules apply to LLCs as to corporations.
    The minimum capital of an LLC is CHF 20,000. Upon incorporation (or a subsequent capital increase), the capital must be fully subscribed and fully paid in. Capital contributions may be made in cash or in kind. A public offer for the subscription of quotas of an LLC is excluded by mandatory law.
    Cash contributions must be paid into a blocked account of a Swiss bank opened in the name of the LLC (under formation) prior to the incorporation (or the quotaholders' meeting in the event of a capital increase).
    The capital of an LLC is divided into quotas with a nominal value of at least CHF 100. All quotas are recorded in a register specifying the names of the quotaholders and the transfers of the quotas. The quotaholders of an LLC are also registered in the Commercial Register, which is open to the public.
    The assignment of a quota (and the contractual obligation to assign) is only valid if concluded in writing. Furthermore, the assignment needs to be approved by the quotaholders' meeting with the consent of two thirds of the represented votes and the majority of the issued quota capital. The quotaholders' meeting may refuse the approval without giving reason therefor.
    The articles of incorporation of an LLC may amend the requirement of consent of the quotaholders' meeting to an assignment. In particular, the articles of incorporation may waive the requirement, or contain a list of the reasons for which consent can be refused, or make an assignment subject to further conditions or even prohibit an assignment altogether.
    The quotas in LLCs are not negotiable and can, therefore, not be listed on a stock exchange.
    Apart from their obligation to pay in the issuance price of their subscribed quotas, the quotaholders are obliged to safeguard the interests of the LLC and, particularly, to preserve business secrets. Quotaholders acting as managing officers are bound by a statutory obligation to refrain from competing with the business of the LLC.
    The articles of incorporation may provide for an obligation of the quotaholders to make supplemental contributions into the LLC's capital (so called Nachschusspflicht), which must not exceed twice the nominal value of each quotaholder's quotas and may only be called in upon the event of particular statutory conditions. Furthermore, the articles of incorporation may provide for an obligation of the quotaholders to render additional services (so called Nebenleistungen), which serve the purpose of the LLC, its autonomy or the preservation of the composition of the quotaholders.
    For cause, any member may request the competent court for permission of his withdrawal. Conversely, the LLC may request the expulsion of a member for cause. The articles of incorpo-ration may specify the reasons for a withdrawal or an expulsion.
    The statutory corporate bodies of an LLC are the quotaholders' meeting and the managing officers and, normally, the auditors.
    The quotaholders' meeting is the supreme governing body of the LLC. It has the authority:
  • to adopt and amend the articles of incorporation;
  • to elect and dismiss the managing officers and the auditors (if any);
  • to approve the income statement and the balance sheet and to resolve on the allocation of profits and to declare dividends;
  • to discharge the managing officers;
  • to pass resolutions concerning all matters which are reserved to the quotaholders' meeting by statutory law, by the articles of incorporation or any corporate organizational rules of the LLC.
    Unless otherwise provided by law or the articles of incorporation, resolutions by the quotaholders' meeting are adopted by an absolute majority of the votes cast. The voting rights of each member are proportionate to the amount of their quotas. The articles of incorporation may grant a right of veto over certain, precisely described decisions of the quotaholders' meeting.
    All quotaholders are entitled and obligated to collectively manage and represent the LLC. Such functions may, however, be delegated to one or more quotaholders or to third parties in accordance with the LLC's articles of incorporation. At least one managing officer authorized to act for and validly bind the LLC must reside in Switzerland.
    Even though it is not required by law, the articles of incorporation may provide for the appointment of a (supervisory) board of directors and determine its specific powers and duties.
    With respect to the Auditors, the same rules apply to LLCs as to corporations (see I.G.3 above).
    Whoever, alone or in concert with third parties, acquires quotas, thereby reaching or exceeding the threshold of 25% of the quota capital or the voting rights is required to disclose to the company the natural person on whose behalf he acts (beneficial owner) within one month following such acquisition. With respect to the consequences for non-compliance with the disclosure obligation reference can be made to the explanations regarding the corporation (see I.H.2 above).
    Swiss law provides for an accounting and reporting law, which is independent of a company's legal form. Reference can be made to the explanations above (see I.1). With regard to reserves to be accumulated the same rules apply to LLCs as to corporations (see I.6 above).
    III. Corporations vs. Limited Liability Company
    The main advantages and differences of these two types of companies may be summarized as follows:
  • Possibility of having authorized and conditional capital: this can facilitate the financing of business operations with equity;
  • Ready transferability of shares: the corporation is the only available corporate form if the shares are to be listed on a stock exchange;
  • More detailed corporate organization: this makes the corporation more appropriate for larger business operations.
  • Lower capital requirement: this makes the LLC an ideal company for small business operations;
  • No statutory requirement to have a board of directors;
  • Lower administrative costs;
  • More flexibility in terms of restrictions which can be "hard-wired" by the articles of incorporation for the transfer of quotas: this may be an advantage, if the safeguarding of control over the company and the preservation of the composition of its equity holders is important;
  • Flexibility of the articles of incorporation: the form of the LLC permits additional duties to be imposed on the quotaholders (e.g., non-compete obligation, co-sale obligation).
    IV. Branch of Foreign Companies
    Instead of incorporating a subsidiary in Switzerland, a foreign company may also establish one or several branch offices. Branch offices have a certain organizational and financial independence from the principal office. The degree of independence should allow the branch office to be operated as a separate entity without substantial changes to its organization. In particular, independent management is an essential prerequisite for the establishment.
    A foreign company may establish a branch office in Switzerland if the following requirements are met:
  • The foreign company must demonstrate that it is lawfully existing and duly incorporated in its home country. The foreign company must provide the Commercial Register with a certified excerpt from the foreign commercial register; if no such register exists (e.g., as in the US), the foreign company must otherwise provide official evidence of its lawful existence, information about its share capital and a list of the persons who are entitled to act on behalf of the foreign company.
  • The foreign company must demonstrate that it has decided to establish a Swiss branch office, e.g., by providing a certified excerpt of the minutes of a meeting of the board of directors or a similar instrument certifying the decision to open a branch office and determining the name of the branch office as well as the persons who are authorized to represent it.
  • A certified copy of the articles of incorporation and by-laws of the foreign company must be filed with the Commercial Register.
  • The Swiss branch office must be given a name (see IV.B below).
  • The Swiss branch office must indicate the nature of its business.
  • The Swiss branch office must have one or several signatories authorized to act on behalf of the Swiss branch office (see IV.C below).
  • Depending on the legal form of the foreign company, the Swiss branch office must pro-vide further information.
  • The foreign company may enact additional rules applicable only to the branch office. Under certain circumstances, these rules are recorded in the Commercial Register.
    The establishment of a branch office must be notified to, and registered with, the Commercial Register. The corresponding application must be signed by a duly authorized person who is or will be vested with sole signatory authority and recorded as such in the Commercial Register at the place of the registered office or the branch office. It may also be signed by two persons vested with joint signatory power at the place of the registered office or the branch office.
    The branch office of a foreign company is limited in the choice of its corporate name. The name of the branch office must indicate:
  • the name of the company;
  • the place of the principal business office and the place of the branch office; and
  • an express designation of the branch office as such.
    Accordingly, a permitted name for a branch office would be "Acme Widget Co., Inc., Chicago, Zurich branch office". The use of a Swiss national language is not required. However, a different language may be used only if the designation as a branch office is not prejudiced. Translations of the name may be registered with the Commercial Register only if such translations have been registered with the foreign commercial register.
    If a foreign company establishes a branch office in Switzerland, it must record the persons authorized to act on behalf of the branch office in the Commercial Register. The entry in the Commercial Register may specify that authorized signatories may only act on behalf of the branch office, not on behalf of the principal office of the foreign company. At least one person, or two persons with joint signatory authority, recorded as being authorized to act on behalf of and validly bind the branch office, must be domiciled in Switzerland (but not necessarily be Swiss citizen). If needed, members of the board of directors of the foreign company without signatory powers with respect to the branch may also be registered with the Commercial Register.
    The Swiss branch office of a foreign company is subject to Swiss law. This implies, among other things, the following:
  • The scope of authority of the authorized signatories to act on behalf of the Swiss branch office is governed by Swiss law, not by the foreign law at the place of incorporation of the parent company.
  • The Swiss branch office of the foreign company may sue, be sued and be subject to debt collection proceedings at its place of business in relation to matters arising out of or in connection with the business of such branch office. Legally, however, the branch office is part of the foreign company.
  • The Swiss branch office is subject to the Swiss rules on the conflict of laws. Accordingly, certain agreements and undertakings entered into by the Swiss branch office may be subject to Swiss substantive law if the Swiss rules on the conflict of laws so provide.
    If the foreign company is liquidated or falls into bankruptcy, the effects of such liquidation or bankruptcy also extend to the Swiss branch office. If the foreign company decides to dissolve the Swiss branch office, it must provide evidence that the proper corporate body has made a decision to that effect. The Commercial Register may deregister the Swiss branch office ex officio if the business activities of the branch have ceased. The deregistration of the branch office from the Commercial Register requires the prior approval of the competent tax authorities.
    It may be advantageous to establish a branch office instead of a subsidiary if the Swiss busi-ness operations are only marginal, or if the foreign company does not wish to fully capitalize its Swiss business operations. The credit standing of the Swiss branch office directly depends on the capitalization of the foreign company. Accordingly, branch offices may be established with a very thin capital base, and with only a minimum organizational structure. In addition, there are no separate Swiss auditors required for a branch office, and the overall agency costs are lower than in the case of subsidiaries.
    On the other hand, it may be advantageous to incorporate a subsidiary in Switzerland if the business operations are conducted on a larger scale and are meant to be completely separate from the foreign operations in order to permit a certain insulation from liability. However, it should be noted that if a foreign company incorporates a subsidiary in Switzerland, dealings between the foreign company and the Swiss subsidiary must be effected at arms' length.
    V. Partnerships
    (Kollektivgesellschaft - Société en nom collectif - Società in nome collettivo)
    A General Partnership is an association of two or more individuals in a business firm, each partner being jointly and severally liable. The association is based on the partnership agreement which deals with the name, purpose of the business, capital contribution, profits and losses, management (quotaholders' powers), dissolution, etc. The name of the General Partnership must bear the family name of at least one of the partners, together with an addition that alludes to its status as a partnership (e.g., the suffix "& Co."). The General Partnership must be inscribed in the Commercial Register, giving at least the following details: name, residence, place of citizenship (Swiss residents only) and nationality of each partner; firm name and domicile of partnership; date on which business is started; and any provisions restricting a partner's right to represent the partnership. Changes in these details must be notified to the Commercial Register for publication. The partnership agreement governs the relationship between partners. Taxation is assessed on the partners as individuals and not on the partnership as such.
    The duty to keep accounts and file financial reports according to the provisions of the Code of Obligations on accounting and reporting standards only applies to general partnerships which have achieved sales revenue of at least CHF 500,000 in the last financial year. General partnerships that achieve less revenue only need to keep accounts on income and expenditure and on their asset position. For each financial year, the profit or loss and each partner's share there-of are determined on the basis of the profit and loss account and balance sheet. No statutory audit is required by law, and there are no publication requirements for partnerships.
    (Kommanditgesellschaft - Société en commandite - Società in acco­mandita)
    This is a business association of one or more general partners (only individuals) having unlimited liability, and with one or more limited partners (individuals or corporate bodies) who are liable only up to a specified maximum amount. The name of the Limited Partnership must include the family name of at least one of the general partners, together with an addition that alludes to its status as a partnership (e.g., the suffix "& Co."). The inscription in the Commercial Register is the same as for a General Partnership with the additional requirement that the amount of capital, for which the limited partners are liable, must be disclosed. With respect to accounting and reporting, the same rules apply to the limited partnership as to general partner-ships (see V.A above)
    (Einfache Gesellschaft - Société simple - Società semplice)
    A simple partnership is a contractual relationship in which two or more persons agree to com-bine their efforts or resources in order to achieve a common (economic or noneconomic) goal. Its members are jointly and severally liable in the event of default. Relations between members are usually determined by agreement but written agreement is not necessary. For its formation, at least two partners (individuals or corporations) must express (expressly or by implication) the desire to achieve a common purpose by joint endeavors or means. The joint venture may not be entered into the Commercial Register and does not have a special protected name. Accounting and audit are subject to agreement between the members. There are no disclosure requirements.
    VI. Cooperative
    (Genossenschaft - Société cooperative - Società cooperativa)
    A cooperative is a corporate entity consisting of an unlimited number of members (individuals or entities). At least seven members must be involved in the establishment as well as for the continuation of the cooperative. The cooperative has no fixed nominal capital.
    Each member has one vote in the general meeting of members. Its articles may provide for members' liability, but normally the liability of a cooperative is the amount of its existing capital. The inscription in the Commercial Register is necessary. With respect to the Auditors, the same rules apply to the cooperative as to corporations (see I.G.3 above). The board of directors must consist of at least three persons; a majority of them must be members of the cooperative.
    VII. Sole Proprietorship
    Individuals with a residence permit can set themselves up in any business; no specific permission is required. The business must be inscribed in the Commercial Register only if its annual receipts exceed CHF 100,000. With respect to accounting and reporting, the same rules apply to the sole proprietorship as to general partnerships (see V.A above). There are no legal audit or disclosure requirements.
    VIII. Frequently Asked Questions
  • Is it necessary that meetings of the board of directors or of shareholders are held in Switzerland?
    No. Meetings of the board of directors and shareholders can be held abroad, subject to tax considerations. However, in case of minority shareholders the shareholder meeting should take place at the registered office of the corporation.
  • What are the main advantages of corporations and limited liability companies?
    Corporations: the possibility of authorized and contingent share capital facilitates the financing of the business; more appropriate form for larger business operations.
    Limited liability companies: low capital requirement, no board of directors required, more appropriate form for small business operations.
    For more information see Section III.
  • How much of a corporation's share capital has to be paid in?
    In general, at least 20% of the nominal capital but in no event less than CHF 50,000 has to be paid in. Registered shares may be issued if at least 20% of their nominal value has been paid in. Bearer shares may only be issued if their entire par value has been fully paid in.
  • Is it necessary that the majority of the members of the board of directors are Swiss citizens?
    No, nationality does not matter, but certain residence requirements exist.
  • May the members of the board of directors and the management of a corporation be liable to shareholders or creditors?
    The members of the board of directors and the management are jointly and severally liable to the corporation, any shareholder and (in bankruptcy) any creditor of the corporation for damages caused by willful or negligent violation of their duties.