Many entrepreneurs hesitate to convert the legal structure of their company to a public limited company (SA) as soon as the generated revenues or raised funds allow it. This significant step presents advantages for stakeholders and investors. However, the limited liability company (Sàrl) is becoming increasingly popular.
In 2019, the Swiss economic fabric consisted of 601,392 companies, of which slightly more than half were sole proprietorships. The remaining companies were, for the most part, registered as public limited companies (SA – 118,191) or limited liability companies (Sàrl – 118,121). Once clearly preferred by entrepreneurs for its less restrictive regime, the Sàrl is now challenging the SA. A new phenomenon, according to Anne Mirjam Schneuwly, PhD in corporate law and lecturer at the University of Zurich: "Traditionally, the SA has been considered the safest legal form in the eyes of creditors and investors". Indeed, a minimum of CHF 100,000 is required to launch an SA, while CHF 20,000 is sufficient for an Sàrl.
In recent years, the Sàrl has been gaining increasing interest. "Until 2008, the starting capital for an Sàrl could not exceed two million. The repeal of this limit has made this legal form more attractive for creditors and investors. Today, an Sàrl does not necessarily imply low capital", explains Anne Mirjam Schneuwly. However, the system of an Sàrl implies the involvement of the stakeholders - the associates - in the company’s management. In the context of an SA, shareholders are merely required to provide funds.
Defining your objectives
For a company in search of significant amounts of funding or looking to finance its growth, the SA appears to be the most judicious choice. This legal form boasts greater flexibility and guarantees the anonymity of its shareholders, who will have no difficulty selling their shares if they wish. "For a young company that needs to attract talent, this system also offers the possibility of compensating its employees by offering them easily transferable shares", notes Michele Vitali, head of the start-up financing division at LEXR study.
The freedom that shareholders have thanks to the SA legal structure is accompanied, however, by a certain loss of control over the company's stakeholders. "A company that wants to keep control over the number of associates that make it up, or that wants stakeholders to be involved in the management and daily life of the company, will be better off opting for the legal form of the Sàrl", adds the Zurich specialist.
With the removal of the capital ceiling, the Sàrl is now also suitable for companies that want to demonstrate their solvency to future creditors. "The stakeholders can decide to impose an obligation of additional contributions, which can correspond to twice their initial investment", explains Anne Mirjam Schneuwly. Thus, a shareholder who contributes CHF 10,000 can agree to release CHF 20,000 in case of need or insolvency to increase the confidence of external creditors and investors.
A delicate transition
For Sàrls wishing to convert to an SA, the main challenge will be to raise the necessary funds and provide proof of this to the notary and then to the commercial register. "Raising the minimum capital for the conversion remains the most important obstacle, but administrative procedures – which require the mandatory intervention of a notary and an auditor – can easily increase costs from around CHF 4,000 to CHF 5,000. However, it should be noted that this amount can be drawn from the CHF 100,000 required for the share capital", says Michele Vitali.
The framework governing these statutes may deserve attention for possible reform, particularly in terms of the freedom for stakeholders and investors to transfer their shares. "This constraint penalizes the Sàrl, which is less attractive for entrepreneurs who want to have the freedom to dispose of their shares and transfer them without unanimous agreement from the other parties", warns Anne Mirjam Schneuwly.
The Fribourg jurist also questions the possibility of a new legal form, similar to the "Limited" company in force in the United Kingdom, which would require only a symbolic initial capital of around CHF 1. "Raising CHF 20,000 remains a potential obstacle, especially for a single-person micro-enterprise." However, Michele Vitali expresses some reservations on this subject: "Since the startup capital serves to ensure financial stability in the face of creditors, a company founded on this model will have a hard time attracting the necessary capital to operate".
On the theme
Sàrl and SA: what are the differences?
1. The amount of capital: for the Sàrl, the minimum required is CHF 20,000. For the SA, the minimum is CHF 100,000, but only a portion of this capital (CHF 50,000 or 20%, whichever is higher) must be covered at the time of the company's creation.
2. The anonymity of stakeholders: registration with the commercial register is mandatory for both Sàrl and SA. However, in the case of Sàrl, the names of all partners must be listed in the commercial register. Each transfer of shares must also undergo an authorization procedure by all stakeholders and notification to the competent authorities. The SA is only required to provide the names of the members of the board of directors. Shareholders can remain anonymous and transfer their holdings freely.
3. Stakeholder responsibility: in case of debt or bankruptcy of the company, the personal assets of shareholders in an SA are not requisitioned beyond the amount of their initial investment. In the case of an Sàrl, the partners are also responsible up to the amount of their initial contribution (or up to the amount of any additional mandatory payments if the company provides for them). Personal assets are generally not mobilized to pay off the company's debts, except in cases of gross negligence. Such a situation can arise in an Sàrl where the partners engage in management activities.
Last modification 03.05.2023