What is the main source of law authorising this entity form?
Federal Act on the Amendment of the Swiss Civil Code (Part Five: The Code of Obligations) (“CO”) (“Bundesgesetz betreffend die Ergänzung des Schweizerischen Zivilgesetzbuches (Fünfter Teil: Obligationenrecht“) (“OR“).
After several years of debating, the parliament enacted on 19 June 2020 a comprehensive revision of the law. The majority of the provisions will not enter into force before 2022 but some of the new rules are set forth below with the remark “Revision:”
Give a brief summary of this entity form, including
Does the entity possess separate legal personality?
The Ltd. has legal personality.
(Maximum) period of existence
There is no maximum period of existence.
The Ltd. is governed by its Articles of Association (“Statuten”; contained in the notarial deed of incorporation). It can additionally enact organizational regulations.
Liability of incorporators / shareholders
The company's assets are primarily liable.
Incorporators and all persons who assisted in the incorporation are personally liable towards the shareholders and the creditors if they commit certain tortious acts during the establishment of the Corporation.
Revision: the tortious acts are enumerated.
Shareholders are not personally liable for the debts of the company, save to the extent to which their shares are not fully paid-up. However, Members of the Board of Directors and all persons (bodies) involved in the management or the auditing may be held personally responsible for the damage they cause by breach of their duties (see Art. 754 et seq. CO).
Governing (mandatory) bodies are the Board of Directors (“Verwaltungsrat”) and the General Meeting of Shareholders (“Generalversammlung”). The Corporation must elect External Auditors (“Revisionsstelle”) if it reaches a certain size.
Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?
Under Swiss law it is possible for a Corporation to enter into cross border mergers (whereby assets, liabilities and contracts are acquired under universal succession) and cross border demergers (whereby assets, liabilities and contracts are acquired under universal succession) and conversions (changing into another form of legal entity). A Corporation may also migrate (change its corporate domicile) from Switzerland abroad or from a foreign country into Switzerland.
International restructurings as set forth above are possible only if and to the extent the relevant foreign legislation is permitting such transactions.
Can this type of entity be publicly listed or held?
Yes; a Company Limited by Shares can be listed on a Swiss, or as the case may be, on a foreign stock exchange (if specific criteria of free- float, market capitalization etc. are met). The relevant stock exchange in Switzerland is the SIX Swiss Exchange. The shares of a Company Limited by Shares can also be publicly held and traded in OTC markets (Market Makers in Switzerland mainly Zurich Cantonal Bank and Bernese Cantonal Bank).
Can this type of entity be used for a non-profit or charitable organization?
In principle, a Corporation can be used for non-profit organizations or charitable organizations. However, in view of the inherent striving for profit in this type of company, another legal entity, such as the foundation or association, is in most cases preferable.
Give a brief summary of the process of incorporation, formation, or organization, including
Main documents required
Documents required for a standard formation:
Involvement of notary, company register, governmental authorities
The formation of a Corporation requires public certification (Art. 629 CO). The notarisation is carried out by a public notary. The founders can be represented by a proxy holder with a notarized and apostilled proxy.
The Corporation must be registered in the Commercial Registry. It is registered in the canton in which it has its registered office.
Main costs, including registration and similar fees (excluding legal fees)
The main costs are:
- minimum capital to be paid-up: CHF 50’000, in general CHF 100’000 is recommended.
- fees for the public notary, the fees for draft tailor-made Articles of Association (generally CHF 3’000 to CHF 6’000)
- Swiss stamp duties in case of a share capital exceeding CHF 1’000’000.- (1%).
Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?
The corporate purpose must be stated in the Articles of Association and filed with the Commercial Registry.
Minimum number of incorporators / shareholders and residency requirements
At least one physical person or legal entity or other commercial enterprise.
There are no shareholders’ residency requirements.
Minimum number of directors (or other applicable officers) and residency requirements
At least one physical person.
The company must be able to be represented by one person with sole signature or two persons with joint signature who is/are resident in Switzerland. This person does not need to be a member of the board of directors ( “Mitglied des Verwaltungsrates”), nominating one or two signatories without any function is sufficient.
Minimum share capital, or equivalent, and payment requirements (including opening a bank account)
The share capital (“Aktienkapital”) must amount to at least CHF 100’000.-. It can be paid by wire transfer to a special blocked capital payment account. Under certain conditions, contributions in kind (“Sacheinlagen”) are also possible.
The minimum amount to be paid in is 20% of the nominal share capital, but at least CHF 50’000.
Revision: the revision allows the Corporation to have a share capital expressed in a foreign currency if it is equal to CHF 100’000.
Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?
Execution of the notarial deed of incorporation may be carried out by virtue of a notarized and, if applicable, apostilled power of attorney.
Is a tax identification number, or equivalent, required? If so, how is it obtained?
Yes, the Federal Tax Administration (“Eidgenössische Steuerverwaltung”) provides a tax identification number upon registration of the company.
What is the title of the applicable company registry?
Commercial Registry Office (“Handelsregisteramt”)
What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles, Ownership identification (direct and/or indirect ownership, 'beneficial owners'), Group structure, Share capital, Directors, Accounts, Insolvency, good-standing, liquidation, Liens and encumbrances on the shares, Liens and encumbrances on assets of the entity, Other (e.g. litigation, tax matters)
In the case of a Corporation, the following must be entered in the Commercial Registry. Some of this data is publicly available online:
Articles of Association and date of incorporation;
Changes of Articles of Association and date of the last version of the Articles;
The company name and the company identification number;
The registered office and legal domicile;
The legal form;
If limited: the duration of the company;
The objective of the company;
The amount of the share capital and the contributions made thereto, as well as the number, par value and type of shares;
The voting shares, if applicable;
If a participation capital is issued: its amount and the contributions made thereto as well as the number, nominal value and type of participation certificates;
In the case of preference shares or preference participation certificates: the related privileges;
If participation certificates are issued: their number and the rights attached thereto;
Restrictions of transfer of shares;
The members of the Board of Directors and their authority to sign on behalf of the company;
Officers, managers and other persons with signatory power and entitled to represent the company;
If the company does not carry out an ordinary or limited audit: a reference thereto and the date of the declaration of the Board of Directors;
If the company carries out an ordinary or limited audit: the auditors;
The legal means of publication and, where appropriate, other means of publication; the form of notifications by the Board of Directors to shareholders provided for in the Articles of Association;
In case of bearer shares: information on a public listing or that the shares are registered as book entry securities;
Status in bankruptcy proceedings and liquidation proceedings;
Additional information is provided in case of contributions in kind or if the capital was paid-in by way of set-off.
The following information is not published:
- Ownership identification (direct and/or indirect ownership, beneficial owners) Group structure
- Liens and encumbrances in the shares
- Liens and encumbrances in assets of the entity
- Other (e.g. litigation, tax matters)
What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?
Board of Directors ( “Verwaltungsrat”) with its Members of the Board of Directors (“Mitglieder des Verwaltungsrats”).
According to Art. 716 CO the general tasks of the Board of Directors are described as follows:
The Board of Directors may pass resolutions on all matters not reserved to the general meeting by law or the Articles of Association.
The Board of Directors manages the business of the company unless the responsibility for such management has been delegated to Officers and Management.
The non-transferrable duties of the Board of Directors are listed in Art. 716a CO:
The board of directors has the following non-transferable and inalienable duties:
- the overall management of the company and the issuing of all necessary directives;
- determination of the company’s organisation;
- the organisation of the accounting, financial control and financial;
- planning systems as required for management of the company;
- the appointment and dismissal of persons entrusted with managing and representing the company;
- overall supervision of the persons entrusted with managing the company, in particular with regard to compliance with the law, Articles of Association, operational regulations and directives;
- compilation of the annual report, preparation for the general meeting and implementation of its resolutions;
- notification of the court in the event that the company is overindebted.
- Revision: filing a request for a debt moratorium and, in case of a listed corporation, the providing of a compensation report.
How are the members of the executive body appointed, dismissed and replaced?
The competent body for the appointment, dismissal and replacement of members of the Board of Directors is the General Meeting (“Generalversammlung”).
Is it possible to appoint corporate directors or must all directors be natural persons?
No, Swiss law does not allow corporate directors; only physical persons may serve as members of the board of directors.
Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?
The CO does not provide for such a requirement. Therefore, many small and medium sized companies only have executive directors.
However, for listed companies various corporate governance rules set out the requirement to have also non-executive directors. Non-executive directors are appointed, dismissed and replaced the same way as executive members of the Board of Directors. If a company chooses to appoint non-executive directors they belong to the same body as the executive directors (one-tier board).
What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?
The body of shareholders is called the General Meeting (“Generalversammlung”).
Its main tasks/responsibilities are listed in Art. 698 CO.
The supreme governing body of a Company Limited by Shares is the General Meeting.
It has in particular the following inalienable powers:
- to determine and amend the Articles of Association;
- to elect the members of the Board of Directors and the external auditors;
- to approve the management report and the consolidated accounts;
- to approve the annual accounts and resolutions on the allocation of the disposable profit, and in particular to set the dividend and the shares of profits paid to board members;
- to discharge the members of the Board of Directors;
- to pass resolutions concerning the matters reserved to the general meeting by law or the Articles of Association.
- Revision: the tasks will be enlarged both for listed and for non-listed Corporations.
What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?
The General Meeting passes resolutions and conducts elections by an absolute majority of the voting rights duly represented unless otherwise provided by law or the Articles of Association.
The law provides a qualified majority requirement of two-thirds of the voting rights duly represented and an absolute majority of the nominal value of shares duly represented for the following resolutions unless otherwise provided by the Articles of Association:
- any amendment of the company’s objectives;
- the introduction of shares with preferential voting rights;
- any restriction on the transferability of registered shares;
- an authorised or contingent capital increase or the creation of reserve capital in accordance with Art. 12 of the Banking Act of 8 November 1934;
- a capital increase funded by equity capital, against contributions in kind or to fund acquisitions in kind and the granting of special privileges;
- any restriction or cancellation of the subscription right;
- a relocation of the seat of the company;
- the dissolution of the company.
Provisions of the Articles of Association can stipulate larger majorities than those described above but may only be introduced with the planned and contemplated majority.
Revision: the new Article 704 CO will enlarge this list.
Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?
Specific rules for listed companies:
- Higher accounting and financial reporting requirements for better information of the market about the asset, financial and earnings situation of the company;
- announcement of significant shareholders and their participation in the notes to the balance sheet;
- preparation of an annual remuneration plan with quantitative information on the remuneration, loans and credits paid by the company to the Board of Directors, the Executive Board and the Advisory Board and other rules in connection with the management’s compensation;
- Other special rules may apply.
What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?
Ordinary accounting is defined in the Articles 957 et seq. CO. The accounts are filed in the annual report (“Geschäftsbericht”). This contains the annual accounts (the financial statements of the individual entity; “Jahresrechnung”), comprising the balance sheet (“Bilanz”), the profit and loss account (“Erfolgsrechnung”) and the notes to the accounts (“Anhang”). The regulations for larger undertakings and corporate groups are reserved.
Following their approval by the competent management body, the annual accounts and consolidated accounts together with the audit reports must either be published in the Swiss Official Gazette of Commerce or sent as an official copy to any person who requests the same within one year of their approval at his or her expense where the undertaking:
- has outstanding debentures; or
- has equity securities listed on a stock market.
Other enterprises must allow creditors who prove a legitimate interest to inspect the annual report and the audit reports.
Is the entity permitted to determine its own financial year?
Is the entity subject to any statutory (external) auditor obligations?
As a general rule, yes. Small Companies Limited by Shares may opt under defined conditions to have no external audit and audit report.
Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?
There are no such requirements. In theory, the board of director needs to appoint a secretary (article 712(1) CO) but this rule is mostly ignored and not enforced.
What is the title designated for ‘ownership interests' (e.g. shares, quota, interests, membership)?
Shares (“ Aktien”), Participation Certificates (“Partizipationsscheine”) and Profit-sharing certificates (“Genussscheine”).
Are different classes of ownership interests possible? If so, what are some examples of different classes?
The shares can be differentiated as follows from a functional point of view:
Shares by transfer type:
- The shares may be either registered shares (“Namenaktien”) or
- bearer shares (“Inhaberaktien”). Due to the FATF’s pressure, bearer shares are only permitted under special circumstances.
Holders of registered shares do not enjoy anonymity. Registered shares are entered in the share register of the company concerned. This means that the company knows the names of its shareholders, their date of birth, their address and the number of shares they have acquired.
In the case of registered shares, there is also the possibility of a restriction on transferability. So-called registered shares with restricted transferability ( “vinkulierte Namenaktien”).
Shares with different voting and other rights:
- Ordinary shares ( “Stammaktien”); ordinary shares, which are designated as such, especially if they are accompanied by preference or shares with privileged voting rights.
- Preference shares ( “Vorzugsaktien” ); shares that include privileges granted by the Articles of Association, such as special dividend or subscription rights.
- Shares with privileged voting rights (“ Stimmrechtsaktien”); shares with a lower nominal value but equal voting power.
What documentation is required for the transfer of ownership interests?
While the actual transfer of the share certificate for the bearer share is sufficient to establish the transfer and (new) ownership, an endorsement (“Indossament”) is required for the registered share in addition to the transfer of the certificate. If no certificates are issued, formal assignments are required.
Due to new legislation in the anti-money-laundering area, new shareholders must, under certain circumstances, name the ultimate beneficial owner of the acquired shares.
Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?
In the case of registered shares, the respective owner must be registered in the share register of the company concerned upon a respective decision by the board of directors.
Are there any applicable stamp duties imposed when transferring ownership interests?
If no securities dealer participates in the transfer of shares, it is not subject to stamp duties.
How are shares issued? (including information on payment obligations, registration requirements)
The issue of shares requires their subscription and subsequent payment.
The share subscription is valid only where:
- the number, nominal value, type, class and issue price of the shares are specified;
- an unconditional commitment is given to pay up the capital corresponding to the issue price.
The minimum capital to be paid up is specified in Art. 632 CO in conjunction with Art. 621 CO:
- 20 % of the share capital or the nominal value of each share (taking into account the minimum capital of CHF 100’000.-; see OR 621),
- but at least CHF 50'000.-.
Attention: Bearer shares, if any, must always be fully paid up.
Further information on equity contributions, e.g., Non-cash payments on shares; (Share premium) contributions without issuance of shares, Can partially paid shares/ownership interests permitted and what are the restrictions on them?
Contributions in kind are possible if defined requirements are met.
Contributions without issuing shares are possible as a share premium (the payment exceeds the nominal value) or as a non-refundable cash contribution.
Any requirements with respect to share cancellation, share repurchase and other capital reductions
Requirements with respect to share (re)purchase:
- The Company Limited by Shares may acquire its own shares only where freely disposable equity capital is available in the required amount and the combined nominal value of all such shares does not exceed 10 per cent of the share capital.
- Where registered shares are acquired in connection with a restriction on transferability, the foregoing upper limit is 20 per cent. The company's own shares that exceed the threshold of 10 per cent of the share capital must be sold or cancelled by means of a capital reduction within two years.
Requirements with respect to capital reduction (and share cancellation):
- A reduction of the share capital is only permitted subject to special capital protection provisions (see Art. 732 et seq. CO). The main aim is to prevent creditors from being harmed by reducing the liability substrate.
Additional requirements exist for listed Corporations.
Any requirements with respect to distributions to shareholders?
Dividends (“Dividenden” ) may be paid only from the disposable profit and from reserves formed for this purpose.
The General Meeting as the supreme body of the Corporation has the inalienable task of deciding on the distribution of dividends.
Before distributing the dividend to the shareholders, the company pays the associated withholding tax of 35% thereon.
Revision: Interim dividends will be permitted under certain circumstances (art. 675a new-CO).
Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?
Yes. However, such shareholder agreements can be binding for the relevant shareholders only and not for the Corporation.
Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?
The costs are related to the following minimal activities to maintain the existence and legal good standing of the company:
Establishment of annual accounts and financial statements and tax returns based thereon. Yearly General Meeting approving the annual accounts and electing the Board of Directors and, as the case may be, the Auditor. Further, the Corporation has to maintain its organisation and its business address.
What are the general corporate tax rates? (Specify if there is a national versus local distinction).
Depending on the seat and the effective place of business the overall general corporate tax rate (Swiss Federal Tax, cantonal and communal taxes) can vary between 12% and 21% (2021). Various exemptions and special rules may apply.
Summary of any specific matters, e.g. recent or prospective major legal developments
General: Swiss Companies Limited by Shares are widely used in international structures, since such companies can acquire assets in and outside Switzerland, such companies can be held by foreign persons and legal entities and Switzerland has a broad network of bilateral and multilateral tax treaties avoiding double taxation and reducing or elimination non-refundable withholding taxes.