06.03 Closed number of companies

06 Company Law

When a company is founded, a decision has to be made in which form it will be managed in the future. The various characteristics of the company forms play an important role in this (see also chapter 06.02 Overview types of comapanies). The different forms of companies are explained in a summary below.

Important parameters of different company forms

Für die Wahl einer Gesellschaftsform sind insbesondere folgende Parameter relevant, die nachfolgend für die einzelnen Gesellschafts-Typen beschrieben werden:

    • Separate legal entity –> liability
    • Personality –> own actions, passive legitimation in the process
    • Personal liability of the shareholders
    • Formation modalities/costs of formation
    • Profit/non-profit purpose

Closed number system for types of companies

Swiss law recognises the closed number system for types of companies. This means that an entrepreneur must choose one of the following types to run his business. It is not possible to create his/her own type. On the other hand, the companies can be partially harmonised with each other with the appropriate design of the legal basis and organisation. If, for example, the shareholders of a limited liability company (LLC) tend to organise themselves more like shareholders of a corporation, i.e. they do not wish to be actively involved in the management of the company, they can choose a managing director or management board responsible for this.

Sole proprietorship (Ger. «Einzelunternehmen»)

Most companies started either as sole proprietorships or as simple partnerships (s. below). Although the sole proprietorship is mentioned in various places in the Swiss Code of Obligations, it is not explicitly regulated as an independent company form. The sole proprietorship is not a separate legal entity and has no legal personality of its own. The person of the entrepreneur and the company are legally the same. The sole proprietor is personally liable for the company towards third parties. Depending on the activity, this can be a major risk. The sole proprietorship must be registered in the Swiss Commercial Register from a turnover of CHF 100,000. If turnover is less than CHF 100,000, the sole proprietorship can be registered voluntarily. Entrepreneurs do the latter, especially if they want to demonstrate the existence of the company to the outside world or if they have to show an extract from the commercial register when making purchases, for example.

Simple Partnership (Ger. «einfache Gesellschaft», CO 530 ff.)

As mentioned above, most entrepreneurs probably start out in the form of a sole proprietorship or a simple partnership. The simple partnership is not actually part of the Swiss Code of Obligations, but still part of contract law. From a legal point of view, it is a partnership agreement. The simple partnership is therefore not a separate legal entity and has no legal personality. The partners of a simple partnership are also personally liable, which can be a great risk depending on the activity. The partners in a simple partnership strive for a common goal with common means. Important: in the simple partnership the partners do not act under a common business name. If they appear under a common company name, under Swiss law it is no longer a simple company but a general partnership (s. below). Examples of simple partnerships are, in particular, consortia of construction companies, engineers, architects and other companies in the construction sector who apply together for a construction project, such as the construction of a tunnel, and then carry it out together. Another example is the Shareholder Agreement (see below).

General partnership (Ger. «Kollektivgesellschaft», CO 552 ff.)

As soon as partners who, within the framework of a partnership agreement, try to achieve a common commercial purpose with joint means and for this purpose act under a common company name, they form a general partnership. A general partnership comes into existence without further ado, i.e. even without an entry in the commercial register. Such an entry is therefore not constitutive. According to CO 554, however, the general partnership must be entered in the commercial register after its formation. The entry is therefore declarative. As a rule, however, this is not checked by any authority. However, the general partnership is not a separate legal entity. But, it has its own personality. This means that it can, in particular, be sued as such and can sue as such against third parties. Partners in a general partnership are personally liable for the company and beyond, for the activities of the other partners within the company. Depending on the activity, the latter can represent a major risk.

Limited Partnership (Ger. «Kommanditgesellschaft», CO 594 ff.)

The limited partnership corresponds to the general partnership, but has two types of partners. The managing partners have personal and unlimited liability for the company and are therefore unlimited partners. In addition, there are partners who are usually not involved in the management of the company, but take a stake in companies with a predetermined amount, but who also wish to limit their liability to this amount and are therefore limited partners. For this purpose, these partners must be entered in the commercial register with the corresponding amount. Only after this entry has been made can these partners limit their liability for the company to the specified amount.

Corporation (Corp.; Ger. «Aktiengesellschaft» short «AG», CO 620 ff.)

The corporation is an independent legal entity with its own legal personality. The capital of the corporation is divided into shares. The shareholders are the owners of the company. However, the shareholders are generally only financially involved in the company and not in its management. The company’s liability to third parties is limited exclusively to the assets of the company. Together with the LLC (s. below), the corporation is one of the most important company forms in Switzerland. It is regularly chosen for larger companies. The corporation is the only form of company that is listed on the Swiss stock exchange. It is legally permissible to form a corporation with only one shareholder. The management of the corporation consists of the board of directors, which sets the guidelines for the management of the company, and a management.

Corporation with limited partners (Ger. «Kommanditaktiengesellschaft», CO 764 ff.)

This form of company plays hardly any role in Switzerland and is therefore not discussed further here.

Limited liability company (LLC; Ger. «Gesellschaft mit beschränkter Haftung» short «GmbH», CO 772 ff.)

The limited liability company is an independent legal entity with its own legal personality. The structure of the LLC is similar to the structure of the corporation. The difference lies on the one hand in the amount of capital and on the other hand in the fact that in the LLC the shareholders are usually also involved in the management of the company. There is no board of directors, as in the corporation. As with the corporation, also the LLC’s liability towards third parties is limited to the company’s assets. It is also possible for the LLC to have only a single shareholder. The LLC form is usually chosen for smaller companies.

Cooperative (Ger. «Genossenschaft», CO 828 ff.)

The cooperative is an independent legal entity with its own legal personality. The purpose of the cooperative is to promote or safeguard certain economic interests of its members in joint self-help. A cooperative must be founded by at least seven members. The number of members is open and can also vary. Each member has only one vote. In relation to third parties, the cooperative is exclusively liable with its assets. An example of this type of company is the housing cooperative, which is common in Switzerland.

Company types under the Collective Investment Schemes Act (CISA)

The Investment Company with variable capital (SICAV) and the Limited partnership for collective investment are covered by this law. These types of companies are very rare in Switzerland and were introduced mainly because they correspond to the respective companies in the European Union and because Switzerland is an important financial centre.

Association (Ger. «Verein», CC 60 ff.)

In Switzerland, the association is not regulated by the Code of Obligations, but by the Civil Code. An association is an independent legal entity with its own legal personality. The members of an association are not personally liable to third parties for the association. In order to found an association, one only has to draft appropriate statutes and have them approved by the association’s general meeting. In addition, the association needs a board of directors for its capacity to act. The association is basically a non-profit organisation. However, the association may run a commercial enterprise. Income from this business must then flow into the non-profit purpose of the association. An association that runs a commercial enterprise must be entered in the commercial register. An association is the simplest form by which members can block their personal liability to third parties.

Foundation (Ger. «Stiftung», CC 80 ff.)

It should be noted at the outset that a Swiss foundation does not take the form of an Anglo-American trust. For this reason, it is also not possible to convert an Anglo-American trust into a Swiss foundation. A foundation is an independent legal entity with its own legal personality. The foundation is even more independent than any other form of company or institution. In a foundation, a founder dedicates a specific asset to a specific purpose. As soon as the foundation is established, the founder basically no longer has any influence on the activities of the foundation. The foundation has no shareholders or members. In other words, the foundation is an actual, independent asset that one can imagine, like the floating house in the animated film «Up» (s. picture). The foundation is thus the most extreme form of a capital-related company or institution (s. Chapter 06.02 Overview types of companies). It is managed by a foundation board. In addition, a state supervisory body monitors whether the foundation is managed in accordance with the purpose of the foundation. The foundation can have a non-profit or a commercial purpose. In principle, the purpose of the foundation can no longer be changed (!). In this respect, the foundation is formally the most rigid form of company or institution. If you set up a foundation, you must therefore give it careful consideration.

06 Company Law