The Swiss Company Act

The legal framework in Switzerland's economic field is governed by the Constitution which monitors fundamental rights such as property rights, the right to pursue gainful activities, trade freedom, and it establishes how competencies are shared between the Federal Council, cantonal and municipal administrations. At federal level, legislation is drafted and approved only in compliance with parliamentary procedures, a mechanism based on the two fundamental elements of Swiss democracy: the popular initiative and the referendum, procedures that ensure a high degree of stability in the legislation.

Basic constitutional rights apply equally to foreign citizens. Those who have the right of residence and temporary work permit in Switzerland have the right to set up a company under the same conditions as those established for Swiss citizens, to acquire shares in a Swiss company, to establish a branch and to conduct economic activities on Swiss territory . Foreign citizens who don’t have a resident permit can set up and develop their own business in Switzerland if it is effectively run by a Swiss citizen.

When establishing a business, special government approvals are not required, membership in an industrial or commercial federation is not obligatory, and approval from any trade or business association is not required.

In general, all business areas are open to investment and no limit is imposed on foreign participation. There are, however, some restrictions in sectors where the state still has a monopoly such as railways or postal services. Even in these sectors, progress has been made towards liberalization, a process agreed upon under the bilateral treaties between Switzerland and the EU.

The Swiss Code of Obligations

The company formation procedure is regulated by the Swiss Company Act, which falls under the Swiss Code of Obligations. The act contains laws and regulation regarding the company formation procedure and it is based mainly on the French Napoleonic Code. Swiss companies must be registered with the Swiss Commercial Registry, which can be found in each Swiss canton.

The Swiss Code of Obligations is part of the Swiss Civil Code and it was first adopted in 1911, being effective from January 1912. After the Code was revised in 2011, requirements for bookkeeping and accounting depend on the company’s financial size, not on the company’s legal form. The first version of the Swiss Code of Obligations inspired similar legislation in other countries as well, such as Germany, Turkey or Italy.

Important provisions included in the Swiss Company Act

The Swiss Company Act has been revised and modified in 2008, setting up new provisions regarding the incorporation of Swiss GmbHs. As there are several types of companies which can be established in Switzerland, the GmbH is not the only business structure mentioned in the Swiss legislation. Other types of companies mentioned in the Swiss Company Act are the Swiss corporations, sole proprietorships or partnerships.

However, the act provides flexibility when it comes to GmbHs even though some restrictions apply regarding the residency of the company’s directors and the existence of a general meeting. Other requirements are mentioned in the Swiss Code of Obligations regarding corporations.

Business licenses or other types of licenses are usually not required, but there are some industry sectors where they are mandatory, such as banking, insurance, collective investment or the management of funds. Because the Swiss banking and finance sector is considered to be one of the safest and most efficient in the world, Swiss authorities maintain a close supervision of this sectors, thus the requirement for companies to require special licenses to activate in this field.

The Swiss Employment Act

Both the employment act and the Swiss Company Act are stipulated under the legislation provided by the Swiss Code of Obligations, which explains why both acts practically go hand in hand. The Swiss labor law doesn’t require an employment contract, but it may be mandatory for foreign workers in order to be able to obtain a Swiss work permit. Employment agreements can be completed written or verbally.

Even though the labor legislation is relaxed and it doesn’t impose a complex set of strict rules, it is recommended to sign employment contracts under the regulations provided by the Swiss Code of Obligations and the Federal Law on labor in industry, trade and craft industry.