INCORPORATING IN SWITZERLAND
LIMITED LIABILITY COMPANY (GmbH/SARL)
STOCK CORPORATION (AG/SA)
ADVANTAGES OF INCORPORATION IN SWITZERLAND
Highly credible business location
Favourable income tax rulings can be negotiated
Reasonable formation and maintenance fees
Bearer shares can be issued
Minimal ongoing compliance requirements
Shareholder(s) can be individuals or companies
Minimum of one Director
No information required by the authorities prior to incorporation
No restrictions on where company meetings can be held
Public & private companies can be incorporated
Incorporation available in every Canton
Ready-made companies available
SETTING UP A CORPORATION IN SWITZERLAND
The following steps should be taken to form a corporation.
Each corporation should have a corporate goal, usually economic, which must be specified in the bylaws. The bylaws are the internal rules of the corporation which are elaborated by the founder. Some of these rules, such as the headquarters location, the corporate goal, the amount of the capital stock, the number, the value, and the type of shares, and the management, are mandatory and should figure in the bylaws. Others, which are facultative, should be included in the bylaws in order to be valid (for instance the length of the company’s life or the ability of converting bearer shares into registered shares).
B) ORGANIZATIONAL MEETING
An organizational meeting of the shareholders is held during which the founders adopt the bylaws, subscribe to all the initial shares, elect the members of the initial board of directors and the auditors, and have the minutes of the meeting notarised. The company must have at least three shareholders (who may act in a fiduciary capacity), but this requirement has no practical consequences after the formation of the corporation. A minimum of 20% of the nominal value of the share capital or CHF 50,000 (whichever is higher) should be paid in cash or in kind. The share capital is transferred to a blocked account at a Swiss bank to be held in the name of the company until the company is registered.
C) HEADQUATERS, REGISTRATION AND NAME OF COMPANY
The company must be registered in the Commercial Register at the site of its headquarters. The headquarters site should also be specified in the bylaws. A registration application must be prepared and signed by all board members and signatories and sent to the Commercial Register together with the notarised minutes of the founders’ meeting and additional required information. This information includes the corporation’s legal address, a statement of acceptance of office and duties by the board members and auditors, disclosure of the nature of the initial capital contribution of the founders (whether in cash or in kind), major assets to be acquired and a statement of non-violation of the Statute on Acquisition of Real Estate by Foreigners. The corporation becomes a legal entity when it is entered in the Commercial Register In most cases, the corporate name includes the element “Société anonyme” or the abbreviation “SA”. If the name is to include a geographic term or a designation of a similar nature (for example, “European”, “International”, “Swiss”, “Switzerland”, preliminary approval by the Federal Commercial Register is required.
The minimum share capital of a stock company is CHF 100,000, of which at least 20% of each share and, altogether at least CHF 50,000, must be paid in. If the share capital is not wholly paid, the company retains a receivable due from each shareholder for the part that they have not paid.
Shares may be issued in the shareholder’s name (registered shares) or to the bearer (bearer shares), which should be wholly paid. A corporation can issue both types. Par value of each share must be at least CHF 10. Although each share is allowed one vote, the bylaws can establish that the right is not accorded proportionally to the par value. The par value of other shares may not exceed ten times the par value of shares granting privileged voting rights.
Swiss corporate law also provides for other equity instruments, such as participation certificates, which are similar to shares but lack voting rights. Within the limits allowed by law, a company may restrict the transferability of its registered shares.
A) SHAREHOLDERS’ MEETINGS
A general meeting of shareholders must be held annually within six months after the close of the business year. The shareholders vote on the approval of the annual report and financial statements, pass resolutions on the agenda and elect the directors and auditors for their statutory term. Extraordinary shareholders’ meetings can also be convened by the board of directors or the auditors. One or more shareholders who represent 10% of the capital can also convene an extraordinary shareholders’ meeting.
Although the bylaws can increase the majority requirements, the decisions of the shareholders usually require a 50% majority. However, certain decisions, such as a modification of the corporate goal, require a two thirds majority.
B) BOARD OF DIRECTORS
The board of directors may consist of one or more individuals elected by the shareholders. Each director must be a shareholder of the company (either directly or in a fiduciary capacity) or the representative of a corporate shareholder. The majority of the directors must be Swiss citizens, domiciled in Switzerland.
The directors and corporate managers are liable to the company for any damage caused by their intentional or negligent failure to perform their duties. The corporation, individual shareholders, and, in case of bankruptcy, the corporation’s creditors may sue board members for these violations.
The board of directors is responsible for preparing the corporation’s annual report to shareholders. It contains the annual financial statements (profit and loss statement, balance sheet and notes) and a report on the course of the business and the financial status of the corporation. Under the law, active disclosure (publication) is required only for companies with publicly quoted shares or bonds.
At its initial meeting, the board of directors determines the corporation’s internal structure (election of chairman, officers, designation of the holders of signatory power, etc.).
All corporations must be audited annually. Elected by the shareholders’ meeting, the auditors can either be an independent person or a company and must be domiciled in Switzerland. The auditors, which should be independent of the company, examine the books and the annual financial statements in order to submit their report at the shareholders’ meeting.
Type of Company AG GmbH
Political Stability Excellent
Common or Civil Law Civil
Disclosure of Beneficial Owner No Yes
Migration of Domicile Permitted Yes
Tax on Offshore Profits Varies
Language of Name Latin Alphabet, but translation to Swiss official language may be required
Minimum Number of Shareholders Three Two
Minimum Number of Directors One One
Bearer Shares Allowed Yes if share capital
fully paid up No
Corporate Directors Permitted No No
Company Secretary Required No No
Standard Authorised Share Capital SFr 100,000 SFr 20,000
Registered Office/Agent Yes Yes
Company Secretary No No
Local Directors Yes Yes
Local Meetings Yes Yes
Government Register of Directors Yes Yes
Government Register of Shareholders No Yes
Annual Return Yes Yes
Submit Accounts Yes Yes
RECURRING GOVERNMENT COSTS
Minimum Annual Tax/Licence Fee Varies Varies
Annual Return Filing Fee Nil Nil
The country is a federal republic and is officially known as the Swiss Confederation. The total area is 41,295 sq. km. On the north, Germany borders the country, to the west by France, on the south by Italy and on the east by Austria and Liechtenstein. Lake Constance and the Rhine form part of the northern border, with the Rhône, which rises in the central Swiss Alps, also forming part of the eastern boundary. The Jura Mountains form the west border, and Lake Geneva and the Italian Alps the south. The capital is located at Berne.
Switzerland is divided in to 26 Cantons and every Canton and every community has a different taxation system.
The total estimated population is 7,250,000, with two thirds of the inhabitants living in the lowland parts of the country. The heaviest population concentrations are in the large industrial centres of Zürich, Basel and Geneva.
The two dominant principles of the Swiss Constitution of 1874 are federalism and democracy. The constitution provides that the Cantons shall exercise all powers of government not delegated to the Federal Government.
The three major sectors of the Swiss National Government are the Federal Council, the Federal Assembly and the Federal Tribunal. The executive body is the seven-man collegiate Federal Council, which is elected for a four-year term by the national legislature.
INFRASTRUCTURE AND ECONOMY
Switzerland has a prosperous and stable modern economy with a per capita GDP approximately 10% higher than other Western European countries.
The Swiss have a highly developed communication system that offers state of the art telephone, fax, telex, telegram and courier services. Swissair, as the national air carrier, offers direct services to many cities world-wide, and domestic air travel is excellent, offering frequent services to most cities.
Switzerland is one of the most multilingual countries in Europe. German, French, Italian and Romansh, a Rhaeto-Romance offshoot of Latin, are the official languages in Switzerland.
TYPE OF LAW
PRINCIPAL CORPORATE LEGISLATION
Schweizerisches Obligationenrecht (Swiss Code of Obligations)
Bundesgesetz über Schuldbetreibung und Konkurs (Swiss Federal law on Debt Collection and Bankruptcy)
Bundesgesetz über die direkte Bundessteuer (Federal Law on Direct Taxation)
Bundesgesetz über die Banken und Sparkassen (Swiss Federal Act on Banks and Savings Associations)
Bundesgesetz über die Anlagefonds (Federal Act on open ended Investment Companies)
Bundesgesetz über die Internationale Privatrecht (Federal Act on Private International Law)
TYPE OF COMPANY FOR INTERNATIONAL TRADE AND INVESTMENT
Aktiengesellschaft (AG) - Stock Company
Gesellschaft mit beshränkter Haftung (GmbH) - Limited Liability Company
PROCEDURE TO INCORPORATE
Submission to the Commercial Register of the following documentation:
Public Deed of Incorporation executed before a Notary Public
Articles of Incorporation
Confirmation by a Bank that the share capital is held in an account
Consent to act forms signed by the proposed directors
Declaration of the applicants
Application to the Commercial Register covering the above documentation, and including the notarised signature of the person appointed to represent the company
RESTRICTIONS ON TRADING
Unless suitably licensed a company incorporated in Switzerland cannot undertake the business of banking, insurance, assurance, reinsurance, fund management, collective investment schemes or any other activity that would suggest an association with the banking or finance industries.
POWERS OF COMPANY
A company incorporated in Switzerland has the same powers as a natural person.
LANGUAGE OF LEGISLATION AND CORPORATE DOCUMENTS
Swiss official language, but foreign language translations can be obtained.
REGISTERED OFFICE REQUIRED
Yes, must be maintained in the Canton of incorporation.
SHELF COMPANIES AVAILABLE
Owing to the costs associated with incorporation and the paid up share capital requirements, shelf companies are not available.
TIME TO INCORPORATE
Subject to the proposed name being approved by the Commercial Register, and the criteria for incorporation being strictly adhered to, a company can be established in two weeks time.
A name that is identical or similar to an existing name. A major name that is known to exist elsewhere. A name that may imply government patronage. A name that in the opinion of the Registrar may be considered undesirable.
LANGUAGE OF NAME
The name of a body corporate or trust entity may use any language using the Latin alphabet, but the Public Registry may require a translation in to an official Swiss language.
NAMES REQUIRING CONSENT OR LICENCE
Bank, building society, savings, insurance, assurance, reinsurance, fund management, investment fund, Switzerland, state, country, municipality, principality, Red Cross and their foreign language equivalents.
SUFFIXES TO DENOTE LIMITED LIABILITY
Aktiengesellschaft - AG.
Gesellschaft mit beshränkter Haftung - GmbH.
DISCLOSURE OF BENEFICIAL OWNER TO AUTHORITIES
AG None, GmbH information is available in the commercial register. Bank character references on the beneficial owners must be provided to the local representatives/trust management company.
AUTHORISED AND ISSUED SHARE CAPITAL
AG: This type of limited liability company has a minimum authorised share capital of SFr 100,000, of which all of it has, in practice, to be issued and fully paid up. When the share capital exceeds SFr 250,000 a capital duty of 1% is payable on the amount over SFr 250,000.
GmbH: The minimum authorised capital is SFr 20,000 but the company does not have shares; instead, the owners’ equity participation is registered in the Commercial Register. SFr 10,000 must be paid up on incorporation.
CLASSES OF SHARES PERMITTED
AG: Registered shares, bearer shares and preference shares.
GmbH: Equity participations only.
BEARER SHARES PERMITTED
The Cantons have preserved many of the rights they held as sovereign political bodies. Nevertheless, the constitution delegates considerable authority to the Federal Government, including the power to conclude treaties and alliances, to levy taxes and to regulate foreign trade. However, each Canton has its own taxation. There are many Cantons with favourable taxation levels and some Cantons with higher unemployment rates or small populations (mountain regions) have particularly low levels of taxation.
DOUBLE TAXATION AGREEMENTS
Double tax agreements exist with Australia, Austria, Belgium, Brazil, Canada, Denmark, Egypt, Finland, France, Germany, Great Britain, Greece, Hungary, Iceland, Indonesia, Ireland, Italy, Japan, Malaysia, The Netherlands, New Zealand, Norway, Pakistan, Portugal, Singapore, South Africa, South Korea, Spain, Sri Lanka, Sweden, Trinidad and Tobago and the USA.
FINANCIAL STATEMENT REQUIREMENTS
Companies are required to keep financial records. Although there is no requirement to file financial statements at the Registry, they must be presented to the shareholders and filed with the tax authorities.
Minimum of one who must be a Swiss citizen and resident in Switzerland. If more than one is appointed the majority must be Swiss citizens and resident in Switzerland. Corporate directors are not permitted.
There is no requirement under Swiss Law for a company secretary to be appointed.
AG: On incorporation the minimum number of shareholders is three.
GmbH: On incorporation the minimum number of founders is two.
Switzerland offers special tax concessions and substantial tax incentives which either entitle the beneficiaries to lower tax rates, or exempt certain types of income from income tax, and in most cases offer a reduced capital tax.
In several cantons, holding companies qualify for total exemption from income tax, and for a reduced capital tax (approximately 0.17% in Lausanne).
Holding status applies to companies whose corporate aim and effective activity is to durably hold and administer financial participations in affiliated companies.
Dividends from a qualified subsidiary benefit from the participation exemption rule, which in most cases exempts such dividend income from taxation. Capital gains are treated in the same manner as dividend income.
Switzerland is an attractive location for foreign-controlled, non-industrial companies that derive most of their income from activities outside Switzerland. Many major multinational groups use Swiss “auxiliary” companies (typically companies that have very little or no Swiss-source income) to obtain tax relief for various activities.
An auxiliary company can be used for:
- Centralized distribution of profits;
- International trade operations;
- Group treasury management, including intra-group financing;
- Licensing and exploiting patents, trademarks, etc;
- European headquarter operations;
- Centralized group purchasing;
- Captive insurance
Switzerland has concluded numerous income tax treaties to avoid double taxation. These treaties usually provide for reduced withholding rates on dividends, interest and royalties.
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