Swiss corporate law provides companies with three distinct methods to increase their share capital: the ordinary capital increase, the capital range (Kapitalband), and the conditional capital increase. Each of these instruments offers specific advantages and is suited to different financing scenarios—whether for rapid funding, flexible capital raising, or long-term participation of employees and investors. The following sections provide a clear overview of the legal requirements, procedures, and practical use cases for each type of capital increase.
Swiss corporate law distinguishes between three types of capital increases:
- the ordinary capital increase
- the capital band
- the conditional capital increase
The Ordinary Capital Increase
Shareholders’ Resolution
An ordinary capital increase requires a resolution by the shareholders’ meeting. In this resolution, the shareholders approve the proposed capital increase and define the extent of the increase, the number of new shares, and their issue price.
Unlike other capital increase types (capital band, conditional capital), there is no maximum limit for the amount of the capital increase.
Board Resolution (Confirmation)
Once the capital contributions have been made by the investors or shareholders, the board of directors adopts a confirmation resolution, which must be notarized. In this resolution, the board formally acknowledges the receipt of funds and updates the company’s articles of association accordingly. The updated articles are then notarized.
Timeline
The shareholders’ resolution for an ordinary capital increase is legally valid for six months. Within this period:
- The board must pass the confirmation resolution.
- The capital increase must be registered with the Commercial Register.
- If not completed within the deadline, the resolution lapses and the entire process must be repeated.
In practice, the shareholders’ and board resolutions are often passed on the same day, especially in smaller companies with less complex financing rounds where investors are already identified and funds are available.
However, Pre-Seed rounds in startups often take longer than six months due to negotiations and contracting with multiple investors (e.g., Investment Agreements and Shareholders’ Agreements). Therefore, ordinary capital increases are usually not ideal for startup Pre-Seed funding.
Summary – Advantages and Limitations
The ordinary capital increase is ideal when:
- Investors are already known and available.
- There is no restriction on the amount to be raised.
- All forms of contributions are permitted (cash, in-kind, or set-off).
Less suitable for complex Pre-Seed financing rounds due to time constraints.
The Capital Band
Introduction of a Capital Band
The capital band must be introduced via a notarized shareholders’ resolution, which directly amends the articles of association. A new article titled “Capital Band” is added, authorizing the board of directors to increase (or decrease) the share capital within specified limits.
Key Legal Parameters
- Validity: The capital band is valid for five years from the date of the resolution.
- Limits: The capital may be increased or decreased by a maximum of 50% of the existing share capital. If an ordinary capital increase is carried out beforehand, the 50% limit can be calculated from the increased capital.
The statutory minimum capital (CHF 100,000 for stock corporations) must be maintained, even if the capital is reduced within the band.
Implementing a Capital Increase via the Capital Band
Once the capital band is registered with the Commercial Register:
- The board alone may adopt a resolution to carry out a capital increase (no further shareholders’ meeting is required).
- After collecting the funds, the board passes a confirmation resolution and updates the articles of association to reflect the increase.
- The revised documents are notarized and submitted for registration.
Important:
The capital band’s limits are fixed and can only be changed by a new shareholders’ resolution – unless the article itself specifies the number and nominal value of shares, in which case the board may make adjustments.
Who Is the Capital Band Suitable For?
- Companies with no identified investors yet, giving the board time and autonomy to raise capital.
- Companies requiring flexibility and speed, as no shareholders’ meeting is needed for each increase.
- Milestone financing rounds, where investors commit additional funds upon reaching defined business goals.
Disadvantages
- The 50% limit on the capital increase.
- Each capital increase within the band still requires a statutory amendment and notarial confirmation, adding administrative effort.
The Conditional Capital
Purpose and Function
Conditional capital is typically used for employee stock options and convertible loans. When an employee, investor, or lender exercises their option or conversion right, the capital increase happens automatically – no board resolution is needed.
- The capital contribution is paid directly into the company’s regular business account.
- No separate capital deposit account is needed.
- Funds are available immediately, even before the registration is complete.
Establishing Conditional Capital
Requires a notarized shareholders’ resolution, which directly amends the articles of association by adding a clause on conditional capital.
Characteristics
- No expiration – conditional capital can be used at any time.
- Limit: Maximum of 50% of existing share capital.
- A very flexible option for raising capital quickly and with minimal formalities.
Ongoing Board Responsibilities
The board must pass an annual notarized resolution to confirm how much of the conditional capital has been exercised. This step is subject to auditor review, meaning a formal audit report is required for registration – creating time and cost implications.
Option Pools
In many startup financing rounds, an option pool is created for current or future employees. To enable conversion of these options into shares, conditional capital must be included in the articles. Without this, shareholders could block conversions, making it impossible to grant meaningful options.
No Disclosure of Set-Off Contributions in Articles
Since 2023, the law requires that in capital increases by set-off contributions, the lender’s name, the converted loan amount, and newly issued shares must be disclosed in the articles. However, in its Practice Notice 1/24 of June 20, 2024, the Swiss Commercial Registry (EHRA) clarified: For capital increases from conditional capital, no additional disclosure of set-off contributions is required in the articles or the commercial register. This is because set-off is inherent in this type of capital increase. Additional disclosure is neither necessary nor appropriate, and this remains unchanged under the revised company law.
Conclusion
The choice of the appropriate form of capital increase depends heavily on the company’s specific needs and its current stage of development. The ordinary capital increase offers maximum flexibility in terms of capital amount and form of contribution. However, it requires swift execution, making it ideal for clearly defined financing rounds with known investors. The capital range provides greater leeway over an extended period and is particularly suited for growth-oriented companies looking to raise capital flexibly, for example in stages. Conditional capital, in contrast, is the preferred instrument for involving employees and investors through options or convertible loans. It is straightforward, automatically effective, and suitable for long-term planning.
A solid understanding of these instruments enables entrepreneurs to make strategic, legally sound, and efficient decisions regarding capital raising – whether for business growth, employee retention, or long-term corporate development.
Interested? Then …
… watch the video!
Want to understand which type of capital increase is right for your startup? Watch the video here:
Then click your way into our YouTube webinar: Part 2 - What forms of capital increase are there? - SeedFast webinar financing round
… read the next blog post!
Now that you know the different forms of capital increases, let’s dive deeper into the next key topic: the Term Sheet – what it is and what founders and investors need to know.
Read more: Following soon!
… plan your financing round with us!
Thinking about raising capital?
We support you in making your round smooth, investor-ready and compliant – without the legal headaches.
Start your inquiry at www.seedfast.ch.
… and if you have questions: reach out to us!
This format is brought to you by:
- Konsento – the platform for legally secure company documents
www.konsento.ch - Lex Futura – the law firm for innovative legal support for startups
www.lexfutura.ch
