Setting up a company in Switzerland: different types of companies

Under the freedom of trade and industry, every person in Switzerland (including foreigners, provided that they have a regular work and residence permit) may exercise any industrial or commercial activity, without any special official authorisation.

Swiss civil law distinguishes between partnerships (sole proprietorship, limited partnership, general partnership) and legal entities (public company and limited liability companies). A foreign investor can chose the most appropriate type of company, according to her or his activities and strategic objectives. She or he may also establish a branch in Switzerland, as well as establish a joint venture or a strategic alliance. An interesting possibility for venture capital is also the new limited partnership for collective investments and capital.

The time required for setting up a company is different, but it usually does not take more than three weeks and the procedure can often be performed via the Internet.

Sole Proprietor

This type of business is carried out by a sole proprietor and has to be registered in the commercial register if it produces at least CHF 100,000 gross income per year. It is not a legal entity (i.e. the proprietor is personally liable for his/her business without any limitation) and the proprietor is subject to taxation. This form of business organisation is commonly used for smaller enterprises.

Simple Partnership (Einfache Gesellschaft)

An ordinary partnership is based on a contract of association between two or more partners and is a very loose formation without being a legal entity. Each partner is individually subject to taxation rather than the partnership itself. For business debts, each partner is personally liable with his/her own private assets. An ordinary partnership cannot be entered into the commercial register. This form of business organisation is often used for activities of short duration or for specific projects only (consortia or joint ventures).

Main use: joint ventures; consortiums in the construction or banking industry; shareholders under a shareholders’ agreement; founders of a company until the company has been duly established.

General partnership (Kollektivgesellschaft KG)

To form a general partnership, two or more individuals enter into a contract of association in order to operate an enterprise based on commercial principles. A general partnership has a trade name and must be registered in the commercial register.

Although it can acquire rights, incur liabilities, take legal action and be sued, the general partnership is not in itself a legal entity. Liability for debts is not limited to the capital of the partnership but is extended to the private assets of the partners in the form of joint and several liabilities.  Only individuals can set up this form of business organisation and liability is limited to the capital of the company. Especially used for small family businesses or businesses run by a few trusted partners (might achieve better credit-worthiness than legal persons due to partners’ liability).

Limited partnership (Kommanditgesellschaft)

A limited partnership has two kinds of partners. One must be liable for the business without any limitation, while others are only liable to the extent of their capital contribution. Only individuals can be partners with unlimited liability, whereas partners with limited liability may also be legal entities, such as corporations. Since the limited partnership is derived from the general partnership, other characteristics (such as rights and duties) are the same as described in the section above.

Unlimited partners with unlimited liability (at least one) and limited partners with limited liability up to the fixed amount as registered in the commercial register (at least one).

Unlimited partners must be individuals, limited partners may be individuals, legal entities or general or limited partnerships Also similar use as with general partnerships, used in situations where not all partners are willing or able to be actively involved in business or for small businesses in the form of general partnerships looking for private investors.

Limited Liability Company (Gesellschaft mit beschränkter Haftung, GmbH)

A limited liability company is a legal entity with fixed capital. The minimum capital is CHF 20,000 and this has to be fully paid in cash or in-kind. For the formation of a limited liability company, at least one founder is required. Each partner (individual or company) participates with a capital contribution (minimum CHF 100 per share) and must have a name and domicile registered in the commercial register. The management and representation of the company may be transferred to people who are not partners, but at least one of the managing officers must be domiciled in Switzerland. All partners and managers may be non-Swiss citizens.

The legal form of a limited liability company is especially intended for small and medium sized companies and so requires an equity capital of only CHF 20.000 for its formation.

As is the case with joint stock companies, the limited liability company has sole liability for its debts; recourse against the equity holders is not possible. Unlike a joint stock company, however, the articles of incorporation can impose obligations requiring the equity holders to pay in additional ancillary obligations. If the limited liability company is unable to continue to function without an injection of capital or new equity capital is required for specific activities, the equity holders are obliged, if such an obligation was agreed upon, to provide the new capital (to a maximum of twice the value of the existing capital). Typical examples of ancillary obligations set out in the articles of incorporation are the obligation to supply or purchase goods and the obligation to perform certain services for the benefit of the company.

In the absence of any rules to the contrary, the general management of a limited liability company is delegated to all of its members. By contrast, shareholders of a joint stock company are not automatically empowered to act in the name of the company and require separate authorization to function as a member of the board of directors or a duly authorized signatory.

The law allows comprehensive restrictions on the transferability of quota shares. Unlike a restriction on transferability contained in a shareholders’ agreement, a restriction on transferability provided for in the articles of incorporation of a limited liability company is also binding on the company and can therefore be more easily enforced. In addition, the articles of incorporation of a limited liability company can impose a non-competition clause on to its members.

In a limited liability company resolutions of both the general meeting and of the general management can be adopted by written consent.

Only individuals may be elected as members of the board of directors. The board of directors has to include at least one member resident in Switzerland.  Shareholders are entitled and obliged to manage the company without being appointed (principle of self-management). The articles of association may provide that the managers are appointed and dismissed from office at the shareholders’ meeting.

The board of directors/management of limited liability companies has the same non-delegable and inalienable duties as the directors/management of a corporation except for the appointment and dismissal of management.

The principle of non-delegable duties of the management may be overridden as the articles of association may provide for a mandatory or optional presentation of certain decisions for the approval of the shareholders’ meeting.

A shareholder may for valid reasons bring an action in court for permission to withdraw from the company. The articles of association may also grant shareholders a right to withdraw and may make this dependent upon certain conditions.  The law provides for a mandatory right of expulsion by way of the company bringing an action in court. The articles of association may go further and permit the shareholders’ meeting to expel shareholders for valid reasons.  The special squeeze-out provisions of the Merger Act also apply to limited liability companies.

Public Company (Aktiengesellschaft, AG)

The most common form of a company in Switzerland is the public company. The minimum capital is CHF 100,000 and at the time of incorporation the founders must pay at least the 20% of the nominal value of the capital (with a minimum of CHF 50,000). The capital of the company is represented by shares. Each share must have a minimum nominal value of CHF 0.01.

Shares can be either registered or bearer. Whereas the former have the name of the shareholder, the latter protect the confidentiality of the investor and can be freely transferred. In order to issue bearer shares all minimum capital must be paid.

Capital contribution can also be in kind. In this case, the following items can be contributed:

• Goods;
• Equipment and machinery;
• Assets;
• Real estate;
• Participations and interest in other companies;
• Patents and trademarks.

The public company is a very flexible form of business organisation and it is often chosen by foreign investors because of the ease in which shares can be transferred.  For the formation of a public company at least one founder is required, which can be either an individual or a company. The management and representation of the company may be carried out by people who are not shareholders, but at least one of the managing officers must be domiciled in Switzerland. Shareholders and managers may be non-Swiss citizens.