Limited company: One of the most common legal forms

A limited company (Art. 620763, Swiss Code of Obligations) may be formed by one or more natural or legal persons. These persons contribute a certain amount of capital that is divided into fractional amounts (the shares). 

Together with the limited liability company (SARL), the limited company (SA) is the most common legal form in Switzerland, since it also offers small businesses many benefits in terms of liability, regulation of capital, etc. Only the corporate assets are liable in a limited company. In the event of bankruptcy, therefore, the shareholders do not lose their share capital.

The shareholders’ agreement clarifies the situation when multiple parties are involved in the company. At least one shareholder is required when establishing a limited company. This may be a natural person or a legal person, or another trading company. The creation process is lengthy, and the costs are higher than those involved in setting up a partnership.

A limited company is founded by the registration of the company on the trade register, the notarial authentication of the establishment, the approval of the articles of association, the appointment of the board of directors and the verification certificate from the supervisory body.

The company name may be freely chosen, as long as it is not in use by another company. It is compulsory to add “SA”.

Unfavorable double taxation regime

In the case of an SA, the tax authorities differentiate between private and commercial. The SA is a legal person and is taxed separately, as any other person would be. This is inconvenient for shareholders: if the company is making a profit, it must pay corporate income tax. And if it then pays a dividend to its shareholders from these earnings, the shareholders themselves must declare this dividend as income. This is known as double taxation.

The share capital is also taxed twice over: the company must pay tax on the share capital, and on top of this, the shares must be declared as personal wealth by the shareholder.

Thanks to the second corporate tax reform, the inconvenience of double taxation has been reduced. The partial taxation of dividends at 60% on private wealth and 50% on business assets for shareholders has readjusted the tax burden. Companies that obtain financing via loans no longer have an advantage over those that seek engaged shareholders (Federal Department of Finance: Second Corporate Tax Reform (only in German)).

Share capital

The company's capital requirement (share capital) must amount to at least CHF 100,000 (Art. 621622, Swiss Code of Obligations). It must be at least 20% paid-up (discharged), but at a minimum of CHF 50,000 (Art. 632 Swiss Code of Obligations). This share capital does not necessarily need to be paid in cash. It can be paid in the form of benefits in kind (e.g. real property, machines, etc.).

The share capital can also be set in the most significant foreign currency in relation to the company's activities. It must have a minimum equivalent value of at least 100,000 Swiss francs at the time of incorporation. When the share capital is denominated in a foreign currency, the same currency must be used for both commercial accounting and financial reporting. The permitted currencies are determined by the Swiss government. Cryptocurrencies are excluded (OR 621).

On creation of a limited company, the founder or founders must open a deposit account with a banking institution. This should be a bank account in which the share capital of the company being formed is deposited pending registration on the trade register. A declaration of deposit is submitted in exchange for the payment of the funds, which remain frozen in the deposit account until the creation of the company is published in the trade register. In order to open a deposit account with a banking institution, you need to send a certified copy of the identification of the person signing the application, or a certified signature of the applicant.

After the creation of the company is published in the Swiss Official Gazette of Commerce, the funds are paid into the company's current account and the deposit account is closed. The transfer is made at the earliest on the first business day after publication in the Swiss Official Gazette of Commerce. The settlement of the funds by the bank is completed on presentation of a certified extract of the trade register showing the company's registration.

Multiple shareholders can invest freely in the company's share capital. The shares can be bearer shares and/or registered shares. Their nominal value can be lower than 1 centime, as long as it exceeds 0.

Since 1 July 2015, holders of one or more bearer shares (or participation certificates) must register with the company within one month. For shares that were bought before the effective date of this regulation, the deadline is one year (as of July 2015). Moreover, they must indicate to the company in question who the beneficial owner of the investment is, if their investment amounts to more than one quarter of the share capital or votes. This disclosure obligation also binds holders of shares acquired before 1 July 2015. These persons must also inform the company of any changes.

The administrative and management bodies of the companies must keep an updated list of the reported holders of bearer shares, as well as a list of the beneficial owners.

In the case of registered shares, the share is registered in the name of the owner. Moreover, this person must be registered on the company's share register. Registered shares change ownership by virtue of the signature of the party selling the share (the “endorsement”) and registration on the company's share register.

The founders may also influence the SA by issuing shares carrying extended voting rights. These are shares held in the name of the founder, with a lower nominal value but a full voting right. This implies that a shareholder who holds 1,000 shares with nominal value of CHF 10 may have more voting rights at the General Meeting than 100 shareholders who each hold shares worth CHF 100, even though the same sum (CHF 10,000) has been paid out in each case. 

The latest revision of the law on anonymous companies introduced a new provision, the capital fluctuation range: within this predetermined range, the board of directors is authorized to increase or decrease the company's capital for a maximum period of five years.

The Board of Directors

The Board of Directors represents the company to third parties. Unless otherwise provided for in the articles of association or the regulations of the organization, each member of the Board of Directors has the power to represent the company.

The Board of Directors may, however, delegate the power of representation to one or more of its members (officers) or to third parties (directors). Since 1 July 2015, all limited companies must be represented by one person whose place of residence is Switzerland. This person must have access to the share register, the list of reported holders of bearer shares, and the list of beneficial owners.

The Board of Directors is the primary management and organizational body of the SA. According to the Swiss Code of Obligations, the Board of Directors itself manages the company, or delegates the management to a third party (which is generally the case). However, in accordance with the law, the Board of Directors has seven primary duties that may not be taken away from it, and that it may not transfer (Art. 716a, Swiss Code of Obligations).

The names of the members of the Board of Directors are registered in the trade register. They are personally liable in the event of damages arising from dereliction of duty, whether this be intentional or due to negligence.

In recent years, corporate governance is a subject that has become increasingly important, even for SMEs. It relates to the way in which a company is managed – or the way in which it should be managed.

The statutory auditor and the management report

A limited company must have an external statutory auditor which must be appointed when the company is established. Each year, it must submit a report to the Board of Directors relating to the management of the company.

Each public limited company must, every year, establish a management report that includes the annual report and financial statements. The annual financial statements consist of the income statement, the balance sheet, and the notes to the accounts, which include additional information that must correspond with the minimum legal requirements.

The General Meeting

The Annual General Meeting of Shareholders is the primary body of an SA. The General Meeting determines the articles of association, elects the Board of Directors and the statutory auditor, accepts or rejects the annual report, and rules on the use of the company earnings. In the event that the balance sheet shows a loss, the Board of Directors must immediately convene the General Meeting and request measures to balance the accounts. If the company is insolvent, the Board of Directors – or the statutory auditor – must inform the court.

Furthermore, the general assembly can now be conducted simultaneously in multiple locations. It is permissible to participate and vote remotely using electronic means such as telephone, video conference, or other methods. In such cases, interventions must be broadcast live through audiovisual means to all meeting venues.

Last modification 10.07.2023

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