What is Swiss Corporation (Aktiengesellschaft)
Aktiengesellschaft, commonly abbreviated as AG, translates to "stock corporation" in English. It is a legal entity recognized under Swiss law, characterized by having its capital divided into shares. AGs are considered distinct legal entities, separate from their shareholders, and are subject to specific regulations outlined in the Swiss Code of Obligations. The example of similar legal structures in other jurisdictions can be Public Limited Companies (PLC) in Great Britain or Société Anonyme (SA) in France.
Requirements for Swiss Corporation (Aktiengesellschaft)
AGs are required to have a minimum share capital to ensure financial stability and protect creditors' interests. The minimum share capital for an AG in Switzerland is CHF 100.000 with a minimum deposit CHF 50.000. Share capital can be raised through contributions from shareholders in exchange for shares in the company. The minimum nominal value of one share is CHF 0.01. Shares in AG are transferrable without the consent of other shareholders if the Articles of Association doesn`t contain the other rules.
Governance
The Board of Directors is the governing body of the AG, responsible for decision-making and overall management of the company. It is a legal requirement that at least one member of the Board resides in Switzerland. Additionally, the AG must have a General Assembly of shareholders, which meets annually to approve key decisions such as the election of directors, the approval of financial statements, and profit distribution.
AG vs. GmbH
Comparing AG to GmbH, which is the other most common type of legal entities in Switzerland, it is possible to underline some advantages of AG:
Prestige and Perception: AGs often convey a sense of prestige, credibility, and stability in the business world. The AG structure may enhance the company's reputation, especially with international partners, clients, and investors. For example, Swiss banks are more willing to open accounts for AGs than for limited liability companies (GmbH) which gives more opportunities for entrepreneurs who choose AG.
Privacy: The information on shareholders in AG is not stated in the public register, so shareholders in an AG may remain anonymous. At the same time, GmbH does not provide such an option: information about the founders of the company is published in the state register.
Capital Formation: AGs can raise capital by issuing shares, making it easier to attract investment from a diverse range of investors. The ability to access capital markets enhances growth opportunities and facilitates expansion initiatives.
Transferability of Shares: Shares in an AG are typically freely transferable, allowing shareholders to buy, sell, or transfer ownership interests without significant restrictions. This liquidity feature enhances investor flexibility and facilitates ownership changes.
Audit Requirement: Unlike GmbHs, AGs must undergo an annual audit if they meet certain criteria regarding revenue, assets, or number of employees. This is another aspect where AGs face greater regulatory burden.
At the same time, the main disadvantages of AG are complexity and cost: establishing and operating an AG entails higher administrative complexity and costs than other business structures, such as GmbH. AGs must comply with stringent regulatory requirements, conduct annual audits, and adhere to corporate governance standards. Despite these disadvantages, AG remains one of the most popular forms of legal entities in Switzerland due to the above advantages.
Conclusion
In summary, while the AG structure involves higher costs and regulatory oversight, it offers several advantages such as better access to capital markets, greater prestige, and flexibility in share transferability. These benefits often outweigh the drawbacks for larger companies or those seeking to raise significant capital. However, for smaller businesses with fewer capital requirements, the GmbH may be a more cost-effective option.
The process of opening AG is illustrated in the below picture:
