In order to incorporate in Switzerland, it is required to provide a minimum required share capital, even from the early stages of the company formation process. Among the most popular business structures for company formation in Switzerland are the limited liability company (the GmbH) and the public limited company (AG, a business structure most suitable for the Swiss corporation). Both business structures can also be used to established several types of Swiss companies. However, in both cases it is necessary to pay up a minimum required share capital.

Defining the share capital

The share capital of a company represents the value of all the contributions of the associates, which may be individuals or legal entities. Associates' contributions may be: in cash (money), in kind (property), in receivables or in industry (in work or service). In-kind contributions must be economically viable; they are admitted to contribute to the incorporation of a company and are paid by transferring the corresponding rights and by effectively delivering the goods in use for the company.

Contributions in form of receivables have the legal status of contributions in kind, not being admitted to joint stock companies constituted by public subscription, or for joint stock companies and limited liability companies. In addition, the work or service benefits can’t be contributed to the formation or increase of the share capital.

Minimum required share capital

Swiss corporations are required to have a minimum capital of 100,000 CHF, divided into shares with a minimum face value of 0.01 CHF. Upon the incorporation of the company, the founders must pay up at least 20% or 50,000 CHF of the minimum required share capital. Private limited liability companies are only required to have a minimum share capital of 20,000 CHF.

The shares of public companies must be subscribed at the time of incorporation. Contributions to the share capital may be in cash or in kinds, however if the contribution is made in kind, the company must have access to the respective assets immediately after the company was registered in the Swiss Commercial Register. The Articles of Association must include a description of the property, its value, the shareholder who contributed with it and the name of the shares issued in return for the contribution. A company may accept contributions in kind to the share capital only after the approval of at least 2/3 of the shares represented at the incorporation meeting.

The share capital can be increased within 2 years from the formation of the Swiss company if this procedure is authorized by the general meeting of shareholders. The board of directors decides when and to what extent the share capital of a company may be increased.

The general meeting of shareholders can also include in the Articles of Association a conditional capital increase. Conditional capital is usually issued to secure conversion rights and options in connection with convertible bonds or warrant issues, or simply to create shares for the company’s employees.  The increase of share capital takes place at the same time and to the same extent with the exercise of the respective rights.

Types of company shares

According to the Swiss corporation law, there are several categories of shares that can be issued.

  1. Bearer shares can be issued only after the full payment of the issue price. These shares are transferable without restrictions. This type of shares is commonly used in Switzerland because most shareholders prefer to protect their identity.
  2. Registered shares are subscribed as called by the company and they don’t require full payment on their issue. They care be transferred by assignment or endorsement, usually without any restrictions. These shares must be kept into a share ledger that includes the name and address of the shareholder. However, the Articles of Association may provide for subsequent conversion of registered shares into bearer shares.
  3. Registered shares with restricted transferability are issued in order to prevent unfriendly takeovers. Restrictions on transferability may be included into the Articles of Association, but the restrictions are limited under the law.
  4. Preferred shares can be issued by the general meeting of shareholders or converted from existing common shares. Holders of preferred shares can enjoy certain privileges, such as cumulative or non-cumulative dividends, preferential right to subscribe to new shares or priority in the liquidation procedure. These shares must be provided by the Articles of Association or adopted through the votes of at least 2/3 of the all represented shares.
  5. Voting shares may not represent the same amount if share capital contribution. They provide the shareholders that represent a financial minority with decision making powers in the company. Issue of voting shares is allowed in the ratio of 1:10 to ordinary shares.
  6. Profit sharing certificates may be issued by the general meeting of shareholders to persons that have an interest in the company, due to previous contributions to the capital or to employees. Profit sharing certificates don’t have a par value and are not issued in exchange for contributions that are characterized as assets. They grant rights to a share in profits, to a share in the liquidation procedure or the right to subscribe to new shares.
  7. Certificates of participation are non-voting shares, meaning that the holders have the same rights as the shareholders except for the right to vote. The participation capital must not exceed the double amount of the share capital.

Whatever business structure entrepreneurs may choose to open a company in Switzerland, it is strongly recommended to request consultation and legal advice from a firm specialized in company formation in Switzerland.

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