Subsidiaries are, in contrast to branch offices, separate legal entities established and governed by Swiss law. Since the subsidiary is considered a 100% local Swiss company and is thus, completely independent from its parent company, the parent company must adhere to the same rules and issue the same documents needed to set up a regular company in Switzerland. All or a majority of the shares are typically held by the foreign parent company. The parent company is not directly liable for the subsidiary’s debts and undertakings.
There are no restrictions on foreign ownership of the shares of a company in Switzerland, but at least one member of the Board of Directors must reside in Switzerland (or a Director with single signatory power or two board members with joint signatory power). There is no need to have Swiss citizenship.
The two main forms of corporations in Switzerland are the so called “Aktiengesellschaft” (“AG”, a Company Limited by Shares; Ltd.) and “Gesellschaft mit beschränkter Haftung” (“GmbH”, a Limited Liability Company; LLC). Both forms are incorporated with a separate legal personality and an ownership primarily based on capital contributions. Both companies have sole liability for their own debts.
The business vehicles: GmbH vs. AG
GmbH – the Limited Liability Company
The formation of a GmbH requires a minimum nominal capital of CHF 20’000. All company members (holders of the capital contributions; equivalent to shareholders) must be published in the commercial registry as well as all directors and people with signatory powers. The capital contributions cannot be transferred without the permission of the members’ general meeting. The nominal value of the capital contribution (the equivalent to shares) must be at least CHF 100.00.
AG – the Company Limited by Shares
The formation of an AG requires a minimum share capital of CHF 100’000. Only board members, directors, and people with signatory power must be published in the commercial registry. Shareholders thus stay anonymous to the outside. Unless the Articles of Association provide otherwise, shares may be transferred without prior approval.
It is possible to only pay-in a capital contribution of CHF 50’000. However, this will be published in the commercial registry as well as in the articles of the company.
In addition, the AG can “go public” by listing its shares on a stock exchange.
AG or GmbH – what should you choose?
The decision on whether you want to set up your subsidiary as a GmbH or an AG should be based on several factors. One of the main differences is the capital needed to set up the company (GmbH: CHF 20’000, AG: 100’000). In both cases, the capital contribution can be made in cash, in kind, or by set-off. Another difference that makes founders more often opt for an AG is the anonymity of the shareholders: the commercial registry entry must contain all company members, directors and people with signatory power in case of a GmbH, while an AG entry does not contain any information about the shareholders. Additionally, capital increases and the transfer of shares is easier in case of an AG and thus, leads to higher flexibility.
The AG therefore offers a broader flexibility in general, but specifically with regard to the shareholding structure as well as anonymity. While the use of a GmbH is not limited to small businesses, in practice most medium sized and larger companies will rather choose an AG for the above reasons. A GmbH makes a lot of sense for companies that have a small number of shareholders and do not aim at transferring or splitting shares. These are mostly companies with a more personalized or even family structure. Changing the structure of the company is specifically more complicated in case of a GmbH because (i) the transfer of capital contributions needs to be approved by the general meeting and (ii) the splitting of capital contributions is less flexible due to a minimum value of CHF 100.00 per capital contribution. Particularly in situations where the shareholding structure is a bit more complex and involves more people (or it is planned to involve more people due to upcoming investment rounds), the disadvantages of the GmbH outweigh its advantages.
Other issues to keep in mind
Apart from the legal process of establishing the company, there are other issues to be thought about when establishing a subsidiary in Switzerland. Such are, for example, insurances, residence permits, applying for any licenses (in case such are required), and registration with the federal tax administration. Most business activities do not need a license, however, many activities in the financial services sector are regulated and thus subject to license requirements. Other sectors where new businesses may require a license or concession include education, employment agencies, energy, gambling, health care, public transport etc.
Establishing your subsidiary – step-by-step
These are the steps needed to be followed in order to set up your subsidiary (in a general situation):
Budget the costs of the establishment.
Choose the legal form of your company: GmbH or AG.
Choose and check the trade name under which your company will be registered in the commercial register. The company name can be freely chosen but it must be sufficiently distinguishable from other company names formerly registered. The company name must contain the legal form of the company (AG or GmbH).
Search for board members, auditors (if applicable) and a domicile (local address).
Open a capital contribution account with a Swiss bank and pay-up the capital contribution. This might take some time. For the notarization of the necessary documentation, a document of the respective bank is needed that confirms that the capital contribution has been fully paid-up.
Contact your Swiss notary (e.g. Lex Futura), furnish all the necessary information, and set up a date to notarize and sign all the documents.
Submit the registration to the commercial register.
Release of the capital contribution at the bank (show extract from the commercial register).
Register for VAT with the Federal Tax Administration.
Make sure to have any licenses needed to run your business, if required.
Enroll employees in the Social Insurance System and conclude necessary insurance contracts.
Overview: Documentation needed for Registration with Commercial Register
Articles of Association (notarized)
Signatures of people to be registered in the commercial register with signatory power (notarized, and apostilled, if notarization takes place outside of Switzerland)
Public Deed on the establishment of the Company (notarized)
Lex Friedrich Statement (declaration that no real estate is being acquired or intended to be acquired by a non-resident)
Protocol of the Board of Directors (issuance of signatory powers and decision o domicile)
Commercial Registry Registration Form
Domicile Acceptance Declaration (if the company does not have its own offices)
If there is a contribution in-kind, acquisition of assets, intended acquisition of assets
Declaration of the acceptance of election from the Board Members
The documents need to be handed in in German, but your notary (e.g. Lex Futura) can issue them bilingually.
Overall, with good preparation and legal assistance, seeting up a subsidiary is relatively easy (in a standard situation).