Corporate Law & Governance in Switzerland: Frequently Asked Questions

Switzerland remains one of the most commercially attractive jurisdictions in Europe for structuring international business. Its corporate law framework, anchored in the Swiss Code of Obligations (Obligationenrecht, OR), provides a stable, predictable environment - but it also imposes specific obligations on directors, shareholders and managers that differ meaningfully from Anglo-Saxon or continental European norms. International entrepreneurs who assume Swiss law mirrors their home jurisdiction frequently encounter costly surprises. This article answers the most frequently asked questions on Swiss corporate law and governance, covering company structures, board duties, shareholder rights, capital requirements, and dispute resolution pathways. It is designed as a practical reference for business owners, CFOs and legal counsel operating in or through Switzerland.

Swiss law recognises several corporate forms, but two dominate commercial practice: the Aktiengesellschaft (AG, joint-stock company) and the Gesellschaft mit beschränkter Haftung (GmbH, limited liability company). A third form, the Kommanditgesellschaft für kollektive Kapitalanlagen (limited partnership for collective investment), is reserved for regulated fund structures and rarely used for ordinary trading or holding purposes.

The AG is the preferred vehicle for larger operations, capital-market access, and structures where shareholder anonymity matters. Its shares can be issued as bearer shares or registered shares, though Swiss law now requires registration of all beneficial owners in the share register following reforms under the Anti-Money Laundering Act (Geldwäschereigesetz, GwG). The minimum share capital for an AG is CHF 100,000, of which at least CHF 50,000 must be paid up at incorporation.

The GmbH suits smaller or closely held businesses. Its minimum capital is CHF 20,000, fully paid up at formation. GmbH quotas are not freely transferable without the consent of shareholders representing at least three-quarters of the share capital, unless the articles of association provide otherwise. This restriction is a common source of friction in joint ventures and M&A transactions involving Swiss targets.

A non-obvious risk for international investors is the Swiss branch office. A branch (Zweigniederlassung) of a foreign company is not a separate legal entity. It shares the parent';s liability, must be registered in the Swiss Commercial Register (Handelsregister), and requires a resident representative authorised to act for the company. Many foreign entrepreneurs underestimate the compliance burden this creates, particularly for VAT registration and employment law obligations.

In practice, it is important to consider that the choice between AG and GmbH affects not only capital requirements but also governance flexibility, the ease of transferring ownership interests, and the availability of certain tax rulings from cantonal authorities. A GmbH';s articles of association can be amended only with a qualified majority, making governance changes slower and more contentious in a deadlocked shareholder structure.

To receive a checklist on selecting the right Swiss company structure for your business, send a request to info@vlolawfirm.com

The board of directors (Verwaltungsrat, VR) of a Swiss AG carries non-delegable duties defined in Article 716a of the Code of Obligations. These duties cannot be transferred to management or third parties, regardless of what the articles of association say. They include: overall management and strategic direction of the company, establishment of the organisational structure, financial planning and control, appointment and supervision of senior management, and the duty to notify the court in cases of over-indebtedness.

The duty to act in cases of capital loss and over-indebtedness is one of the most consequential and least understood obligations for foreign directors. Under Article 725 OR, if the board determines that the company';s assets no longer cover half of its share capital and legal reserves, it must immediately convene a general meeting and propose remedial measures. If the company is over-indebted - meaning liabilities exceed assets at both going-concern and liquidation values - the board must notify the competent court without delay, unless creditors subordinate their claims to cover the shortfall. Failure to act promptly exposes individual board members to personal liability for damages suffered by creditors.

Swiss law imposes a duty of care (Sorgfaltspflicht) and a duty of loyalty (Treuepflicht) on every director. The duty of care requires directors to act with the diligence of a reasonably prudent businessperson in the same circumstances. The duty of loyalty prohibits directors from pursuing personal interests at the company';s expense or exploiting corporate opportunities for private gain. These duties apply equally to de facto directors - persons who exercise directorial functions without formal appointment - a concept Swiss courts have applied broadly.

A common mistake among international clients is appointing nominee directors without establishing a functioning oversight structure. Swiss law does not prohibit nominee arrangements, but the nominee director remains personally liable for all board-level decisions. If the nominee acts on instructions from the beneficial owner without independent judgment, both the nominee and the instructing party may face liability. Swiss courts have consistently held that formal delegation does not extinguish the VR';s supervisory responsibility.

Board resolutions are valid when adopted by a majority of directors present, provided a quorum exists. The articles of association may require higher majorities for specific decisions. Minutes of board meetings must be kept and signed. Electronic meetings and circular resolutions are permissible under the revised OR (in force since January 2023), provided all directors consent to the format.

The revised Code of Obligations, which entered into force in January 2023, introduced significant changes to Swiss corporate law. These include new rules on capital bands (Kapitalband), allowing the board to increase or reduce share capital within a defined range without a shareholder vote, new provisions on interim dividends, and updated rules on gender representation on boards of large listed companies. International clients operating pre-2023 structures should audit their articles of association for compliance with the new framework.

Swiss shareholders exercise their rights primarily through the general meeting (Generalversammlung, GV). The ordinary GV must be held within six months of the end of each financial year. Extraordinary GVs can be convened by the board or, under Article 699 OR, by shareholders holding at least ten percent of the share capital. The convocation notice must be sent at least twenty days before the meeting date, specifying the agenda items.

Shareholders holding shares with a combined nominal value of at least CHF 1 million may request that specific items be placed on the agenda. This threshold, introduced under the 2023 reform, replaced the previous one-percent rule and is more accessible for smaller companies with high nominal share values. For listed companies, the threshold is one percent of voting rights or share capital.

The general meeting has exclusive competence over certain fundamental decisions under Article 698 OR. These include: adoption of the annual report and financial statements, declaration of dividends, election and removal of directors and auditors, amendment of the articles of association, approval of the management report, and decisions on the dissolution of the company. The board cannot substitute its own resolution for a GV decision on these matters.

Minority shareholders in Switzerland have meaningful protective rights. A shareholder holding at least ten percent of the share capital can demand a special audit (Sonderprüfung) under Article 697a OR if the GV refuses to order one. The special audit examines specific transactions or management conduct. If the court grants the application, an independent auditor is appointed at the company';s expense. This mechanism is frequently used in shareholder disputes to obtain information that the majority is unwilling to disclose voluntarily.

In practice, it is important to consider that Swiss law does not provide for derivative actions in the Anglo-Saxon sense. A shareholder who believes the company has suffered loss through director misconduct must either vote to authorise the company to bring a claim, or - if the majority blocks this - pursue an action under Article 756 OR on behalf of the company. The procedural requirements for such actions are strict, and courts scrutinise standing carefully.

Voting rights in a Swiss AG are linked to the nominal value of shares unless the articles of association create voting shares (Stimmrechtsaktien) with enhanced voting rights. Voting shares may carry up to ten times the voting power of ordinary shares but must have the same nominal value. This structure is common in family-controlled companies seeking to maintain control while raising external capital.

A non-obvious risk in Swiss GV practice is the strict rule on agenda items. The GV cannot validly resolve on matters not included in the convocation notice, except for the convening of an extraordinary GV or the appointment of a special auditor. Resolutions adopted on unannounced items are voidable under Article 706 OR. International clients accustomed to more flexible AGM procedures sometimes attempt to introduce last-minute agenda items, creating grounds for subsequent challenge.

To receive a checklist on shareholder rights and general meeting procedures in Switzerland, send a request to info@vlolawfirm.com

The January 2023 revision of the Code of Obligations represents the most comprehensive reform of Swiss corporate law in decades. It affects virtually every aspect of company governance, from capital structure to director liability to gender quotas. Understanding the new framework is essential for any international business with a Swiss entity.

Capital flexibility is the most commercially significant change. The new capital band mechanism (Kapitalband) under Article 653s OR allows the articles of association to authorise the board to increase or reduce share capital within a defined range - up to 150 percent of registered capital for increases, and down to 50 percent for reductions - over a period of up to five years. This eliminates the need for a shareholder vote each time capital is adjusted, reducing transaction costs in growth or restructuring scenarios.

Interim dividends are now expressly permitted under Article 675a OR, provided an interim financial statement prepared by a licensed auditor confirms sufficient freely distributable reserves. Previously, Swiss companies could only distribute dividends once per year following the ordinary GV. The new rule benefits holding structures and companies with irregular cash flow cycles.

The revised law strengthens transparency requirements for large companies. Under Article 964a OR, companies exceeding two of three thresholds - balance sheet total of CHF 20 million, revenue of CHF 40 million, or 250 full-time employees - must publish a non-financial report covering environmental, social, and governance matters. Companies exceeding CHF 100 million in revenue or balance sheet total and employing more than 500 people face additional due diligence obligations on supply chain risks.

Gender representation rules under Article 734f OR apply to listed companies and large unlisted companies. Listed companies must achieve at least 30 percent representation of each gender on the board and 20 percent in senior management within defined transition periods. Non-compliance does not invalidate appointments but triggers a mandatory explanation in the remuneration report. This comply-or-explain approach is less prescriptive than some EU frameworks but creates reputational exposure for companies that ignore it.

A common mistake is assuming that the 2023 reforms are self-executing. Many provisions require amendments to the articles of association to take effect. A company that has not updated its articles since 2022 may be operating under provisions that are now inconsistent with the new statutory defaults. Swiss law provides that where the articles are silent, the statutory defaults apply - but where the articles contain provisions that conflict with mandatory new rules, those provisions are void. This creates legal uncertainty that only a formal articles review can resolve.

The revised law also introduces new rules on the dissolution and liquidation of companies, including simplified procedures for companies with no assets and no creditors. Under Article 746a OR, a company can be dissolved by a simplified court procedure if it has no assets and its debts are covered. This is relevant for international groups seeking to wind down dormant Swiss subsidiaries without incurring full liquidation costs.

Swiss corporate disputes are resolved through a combination of cantonal courts, the Swiss Federal Supreme Court (Bundesgericht), and - where parties have agreed - arbitration. The choice of forum has significant practical consequences for cost, speed, and enforceability of outcomes.

Swiss civil procedure is governed by the Swiss Civil Procedure Code (Zivilprozessordnung, ZPO), which entered into force in 2011 and was revised in 2021. Corporate disputes typically fall within the jurisdiction of the cantonal commercial courts (Handelsgerichte) in cantons that have established them - Zurich, Bern, Aargau, St. Gallen, and Basel-Stadt. These courts have specialised expertise in commercial matters and hear cases as a single instance, with direct appeal to the Federal Supreme Court. This two-tier structure accelerates resolution compared to cantons without a commercial court.

Jurisdiction in corporate disputes follows the registered seat of the company. A claim against a Swiss AG incorporated in Zurich must generally be brought before the Zurich courts, regardless of where the parties are located. This rule applies to shareholder actions, director liability claims, and disputes over the validity of GV resolutions. Parties cannot contractually derogate from this rule for disputes falling within the exclusive jurisdiction provisions of the ZPO.

Director liability claims under Article 754 OR are among the most litigated corporate matters in Switzerland. A director who culpably breaches their duties and causes loss to the company, shareholders, or creditors is personally liable for damages. The claimant must prove: the breach of duty, the loss, causation, and fault. Swiss courts apply an objective standard of fault - the question is whether a reasonably diligent director in the same position would have acted differently. The limitation period for such claims is three years from the date the claimant knew of the loss and the responsible party, and in any event ten years from the act giving rise to liability.

Disputes over the validity of GV resolutions are subject to a strict two-month limitation period under Article 706a OR. A shareholder or director who wishes to challenge a resolution must file an action within two months of learning of the resolution. After this period, the resolution becomes unchallengeable, even if it was adopted in breach of mandatory law. This deadline is frequently missed by international clients who are not present at the GV and learn of the resolution only through correspondence.

Swiss arbitration is well-established for corporate disputes, particularly in joint ventures and M&A transactions. The Swiss Rules of International Arbitration (Swiss Rules), administered by the Swiss Arbitration Centre, provide a modern procedural framework. The Swiss Private International Law Act (IPRG) governs arbitral proceedings seated in Switzerland involving at least one non-Swiss party. Swiss arbitral awards are enforceable under the New York Convention in over 170 countries.

A practical scenario: a minority shareholder in a Swiss GmbH discovers that the majority has approved a related-party transaction at above-market terms, causing loss to the company. The minority shareholder';s options include: requesting a special audit under Article 697a OR, challenging the resolution authorising the transaction within two months, bringing a derivative action under Article 756 OR, or - if the articles contain an arbitration clause - initiating arbitral proceedings. Each path has different cost implications and timelines. The special audit is the lowest-cost entry point and often produces evidence that supports subsequent litigation.

A second scenario: a foreign parent company appoints a local nominee director to its Swiss AG subsidiary. The subsidiary subsequently enters financial difficulty. The nominee director, having signed financial statements without adequate review, faces personal liability claims from creditors under Article 754 OR. The parent company, as the instructing party, may also face claims if it can be shown to have exercised de facto directorial functions. The cost of defending such claims typically starts from the low tens of thousands of CHF in legal fees alone, before any damages award.

A third scenario: two equal shareholders in a Swiss AG reach a deadlock on a strategic decision. Neither can convene a GV with a quorum sufficient to pass resolutions. Swiss law does not provide a statutory buy-out mechanism equivalent to the English unfair prejudice remedy. The parties must either negotiate a shareholder agreement exit mechanism, seek court-ordered dissolution under Article 736 OR, or - if the articles permit - submit the dispute to arbitration. Courts are reluctant to order dissolution unless the deadlock is irresolvable and causes material harm to the company.

We can help build a strategy for resolving corporate disputes in Switzerland. Contact us at info@vlolawfirm.com

Swiss companies face a layered compliance framework that combines corporate law obligations under the OR, financial reporting standards, and anti-money laundering requirements under the GwG. For international groups, the interaction between these layers creates compliance risks that are easy to underestimate.

Financial reporting obligations depend on company size. Small companies - those not exceeding two of three thresholds: balance sheet CHF 10 million, revenue CHF 20 million, 50 employees - may prepare simplified financial statements under Article 958a OR. Medium and large companies must prepare full financial statements in accordance with Swiss GAAP FER or IFRS. Listed companies must use IFRS or a recognised equivalent. The financial statements must be submitted to the ordinary GV within six months of the financial year end and filed with the Commercial Register if the company is subject to ordinary audit.

Audit requirements under Article 727 OR distinguish between ordinary audit (ordentliche Revision) and limited audit (eingeschränkte Revision). Ordinary audit applies to large companies and all listed companies. Limited audit applies to smaller companies. Companies with fewer than ten full-time employees may opt out of audit entirely (Opting-out) if all shareholders consent. The auditor must be licensed by the Federal Audit Oversight Authority (Eidgenössische Revisionsaufsichtsbehörde, RAB) for ordinary audits.

The beneficial ownership register is a critical compliance requirement that many international clients overlook. Under Article 697j OR, every Swiss AG and GmbH must maintain an internal register of beneficial owners - persons who ultimately own or control more than 25 percent of the share capital or voting rights. The register must be updated within one month of any change. Failure to maintain the register is a criminal offence under Article 327 of the Swiss Criminal Code (Strafgesetzbuch, StGB) and can result in fines for the company and its officers.

The GwG imposes due diligence obligations on financial intermediaries, including banks, asset managers, and certain corporate service providers. A Swiss company that provides financial intermediation services - for example, a holding company that manages third-party assets or provides payment services - may itself qualify as a financial intermediary and must affiliate with a self-regulatory organisation (Selbstregulierungsorganisation, SRO) or obtain a FINMA licence. Many international entrepreneurs who establish Swiss holding structures for investment activities are unaware that their activities may trigger GwG obligations.

In practice, it is important to consider that cantonal tax authorities conduct periodic reviews of Swiss companies'; substance requirements. A company that claims Swiss tax residency but has no real economic activity in Switzerland - no employees, no board meetings held locally, no genuine decision-making - risks being reclassified as a foreign entity for tax purposes, with retroactive consequences. Swiss courts and tax authorities apply a substance-over-form analysis that looks at where actual management decisions are made, not merely where the registered office is located.

A non-obvious risk for international groups is the interaction between Swiss corporate law and foreign mandatory provisions. A Swiss subsidiary of a US or EU parent may be subject to extraterritorial compliance obligations - for example, GDPR data protection requirements or US FCPA anti-corruption rules - that impose obligations on the Swiss entity';s directors independently of Swiss law. Swiss directors who are unaware of these obligations cannot rely on Swiss law as a shield against foreign regulatory action.

To receive a checklist on corporate compliance obligations for Swiss companies, send a request to info@vlolawfirm.com

What is the practical risk of not updating a Swiss company';s articles of association after the 2023 reform?

The January 2023 revision of the Code of Obligations introduced mandatory provisions that override conflicting articles of association. Where the articles are silent, statutory defaults apply automatically. Where the articles contain provisions that conflict with mandatory new rules - for example, outdated capital reduction procedures or obsolete quorum requirements - those provisions are void, creating legal uncertainty about the validity of resolutions adopted under them. The practical risk is that a GV resolution adopted under a void articles provision may be challenged within two months, potentially unwinding transactions or appointments. A formal articles review and update is the only way to eliminate this risk. The cost of such a review is modest compared to the cost of defending a challenge.

How long does it take and what does it cost to resolve a shareholder dispute in Swiss courts?

A shareholder dispute before a cantonal commercial court in Switzerland typically takes between 18 and 36 months from filing to first-instance judgment, depending on the complexity of the case and the court';s caseload. Appeals to the Federal Supreme Court add a further 12 to 24 months. Legal fees for a contested corporate dispute start from the low tens of thousands of CHF for straightforward matters and can reach several hundred thousand CHF for complex multi-party litigation. Court fees are calculated as a percentage of the amount in dispute and are generally borne by the losing party. Arbitration under the Swiss Rules can be faster for well-drafted arbitration clauses but involves comparable or higher legal costs, offset by greater procedural flexibility and confidentiality.

When should a Swiss company choose arbitration over court litigation for a corporate dispute?

Arbitration is preferable when confidentiality is a priority - court proceedings in Switzerland are generally public - or when the dispute involves parties from multiple jurisdictions and enforcement of the award outside Switzerland is anticipated. The New York Convention makes Swiss arbitral awards enforceable in most commercially significant countries. Arbitration also allows parties to select arbitrators with specific expertise in corporate law or a particular industry. Court litigation is preferable when speed and cost are paramount for lower-value disputes, when interim measures are needed urgently (Swiss courts can grant provisional measures within days), or when the dispute involves third parties who cannot be compelled to join arbitral proceedings. The presence or absence of an arbitration clause in the articles of association or shareholder agreement is the threshold question - without a valid clause, arbitration requires the consent of all parties at the time of the dispute.

Swiss corporate law offers a robust and flexible framework for international business, but its requirements are specific and non-trivial. The 2023 reform has modernised the system significantly, introducing capital bands, interim dividends, and enhanced transparency obligations. Directors face personal liability for breaches of non-delegable duties. Shareholders have meaningful rights but must exercise them within strict procedural deadlines. Compliance obligations - from beneficial ownership registers to audit requirements to potential GwG obligations - require active management rather than passive reliance on registered agents.

International entrepreneurs who treat Switzerland as a low-maintenance jurisdiction invariably encounter problems that could have been avoided with proper legal structuring from the outset. The cost of correcting governance deficiencies after the fact - through litigation, regulatory proceedings, or restructuring - consistently exceeds the cost of getting the structure right initially.

Our law firm VLO Law Firms has experience supporting clients in Switzerland on corporate law and governance matters. We can assist with company formation and structuring, articles of association review and update, board governance advice, shareholder dispute resolution, and compliance with the revised Code of Obligations. To receive a consultation, contact: info@vlolawfirm.com