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Limited companies in Switzerland: which is the best option?

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Launching an entrepreneurial activity, promoter must question himself which is the best company form that suits his needs. Amongst limited companies, one of the most common is reducing financial risk to the sole company's asset: by doing so, the personal assets are not affected if the company is not successful.

To answer this need, as early as 1600, limited companies were set up, limiting shareholders' liability to the shares or subscribed ones. In Switzerland there are two types of limited companies: joint-stock company (SA) and limited liability company (SAGL), which are opposed to individual companies, such as sole trader or general partnership, for which liability is defined as personal. 

How choosing between the two forms of limited companies?

With limited entrepreneurial risk, which is the common characteristic between the two, the choice between joint-stock company and a limited liability company should look at the different advantages and disadvantages of these two legal instruments.

The main differences are related to:

  • Initial capital amount
  • Required number of persons for constitution
  • Shareholders registration to Register of Commerce
  • Image and solidity deriving from greater or less share capital 

Joint-stock company

With its own legal personality and patrimonial autonomy, the joint-stock company has the advantage of anonymity towards the public with respect to shareholders or investors.

- The initial capital, divided by stocks and not by shares, amounts to at least CHF 10,000, of which at least CHF 50,000 has been paid in.

- When the company is set up, it must include SA after the name

- Shareholders liability is limited to subscribed capital 

In order to open a joint-stock company, at least one initial shareholder is required. The company can therefore provide for the presence of several shareholders at the time of incorporation, who participate through stocks issue. Law requires that at least one shareholder and the board of directors must attend the issue of stocks, but they can coincide in the same person. In order to be able to operate in Swiss territory, the law requires that at least one component of the board with signing authority is domiciled in the Confederation, and that the company must be registered in the Commercial Register.

SA company is indicated for economic and financial activities, relying above all the division of capital by stocks, which allows more flexibility in terms of new shareholders entry or stock emissions. Last but not least, the increased share capital enables the company to boast greater creditworthiness than a liability company. In Switzerland, it is the most popular form of a company even for those setting up a small business.

The limited liability company

The procedures for setting up a liability company (SAGL) are similar to those of SA, with the difference that shareholder/s must pay the full initial capital of CHF 20,000 that will then be expressed in shares rather than stocks. The presence of at least one shareholder and one director, who may coincide in the same person, is essential for constitution. It is allowed to other shareholders to join the capital, in accordance to the rules established in company statute or - if applicable - in the shareholders' agreement. As in SA, an administrator with signing authority must be domiciled within Confederation. 

The most important difference within SA is that SAGL establishment requires the publication of shareholders names and the amount of subscribed shares.

SAGL, on the other hand, has a greater control by the founding member, who is not exposed to the risk of losing a significant share of company's asset, since new shareholders entry is subordinated to company statute law, which also concern composition of share capital. New members entry can only happen by the resolution of capital increase, through shareholders meeting.

SAGL is not precluded to external means of financing, such as access to credits and loans, once the necessary guarantees have been presented. Dividends and losses are distributed in proportion to the hares held by the individual shareholders, always bearing in mind that, in the event of losses, the shareholders are liable with the share capital.

For this reason, SAGL is ideal for small and medium-sized businesses, including family business, international groups that want to open branches in Switzerland, or simply by individual entrepreneurs who do not want to risk their personal asset in the new entrepreneurial activity.

For an in-depth consulting on setting up or acquiring a corporation, Fidinam has the professionals and experience to offer tailored advice on which is the best legal form to set up a company in Switzerland. 

 

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