Corporate Housekeeping

Keep your Corporate Files in Shape

Each year, specific corporate housekeeping tasks arise. As committed startup, venture capital, and corporate lawyers, we aim to assist you in streamlining this process. To achieve that, we’ve outlined the crucial corporate housekeeping tasks in the summary below:

 

• Annual General Meeting of Shareholders;
• Minutes of the Meeting of the Board of Directors;
• Lapse of Opting-Out of the Statutory Auditing;
• Commercial Register Changes;
• Keeping a Share Register and Register of Beneficial Owners;
• Storage of Corporate Documents / Records;
• Capital Loss and Over-Indebtedness pursuant to art. 725a and 725b CO;
• Updating Conditional Capital;
• Taxes.

 

Please access all relevant templates in both English and German here: link.

If you are looking for quick guidance on the most important topics, we cordially invite you to join our free corporate housekeeping webinar on 5 April 2024, 12:30p.m.-13:30p.m. Please register here: Corporate Housekeeping Webinar.

In this year’s newsletter edition, we share our insights regarding the updated corporate law. This revision, which encompasses changes to the Swiss Code of Obligations (the “CO”) and related laws (together referred to as the “Revised Corporate Law”), took effect on 1 January 2023. Notably, it introduced several practical modifications:

 

• Hybrid and fully virtual general meetings of shareholders;
• Resolutions of the general meeting of shareholders (the “General Meeting”) in written or electronic form;
• Resolutions of the board of directors (the “Board”) in electronic form;
• The capital band.

 

Important Notice: To take advantage of the enhanced flexibility provided by the Revised Corporate Law, it is essential to update the articles of association (the “Articles”) in advance through a General Meeting conducted before a notary. Specifically, if you intend to hold a fully virtual General Meeting, ensure that any changes to the Articles have already been officially registered with the competent commercial register.

Please be aware that, while you may choose not to utilize the new flexibility, the law sets a deadline of 31 December 2024 for adapting the Articles to comply with the Revised Corporate Law. Failure to implement changes by this date will render any existing provisions that conflict with the Revised Corporate Law ineffective. Therefore, it is advisable to align the Articles with the Revised Corporate Law no later than the next corporate transaction necessitating amendments (e.g., a capital increase resulting in changes to the company’s capital).

Note that the following explanations and instructions apply exclusively to non-listed companies incorporated in Switzerland and structured as a stock corporation (Aktiengesellschaft, société anonyme). Some of these provisions also extend to limited liability companies (Gesellschaft mit beschränkter Haftung, société à responsabilité limitée). If you require guidance regarding limited liability companies, we are more than willing to assist.

 

Annual General Meeting of Shareholders

Convocation

The annual General Meeting (the “AGM”) must occur each year within six months after the end of the business year, specifically no later than 30 June for companies with a calendar year as their business year. The AGM is typically convened by the Board, adhering to a convocation period of 20 calendar days as required by law and the Articles. This period can only be waived if all shareholders attend the AGM in person or through a proxy with a power of attorney (universal meeting), or if a written/electronic resolution is agreed upon by all shareholders.

The AGM is formally announced through an invitation following the format outlined in the Articles. The invitation specifies the date, time, type (in-person, hybrid, virtual, where permitted by the Articles), and venue of the AGM, along with the agenda items and motions proposed by the Board and shareholders (if any). Additionally, at least 20 calendar days before the AGM, the annual report (and, if an auditor is appointed, the audit report) must be made accessible to shareholders. If these documents are not available electronically (e.g., on the company’s website), shareholders have the right to request timely delivery.

Shareholders can participate in the AGM through a written proxy or, unless explicitly prohibited by the Articles, in another form as determined by the Board (e.g., electronically). It is advisable to review the requirements and include a proxy form with the invitation. Prior to sending out the invitation, the Board must pass a resolution that contains the convocation of the AGM and outlines the AGM’s agenda items and related motions. If not already done, the Board must also approve the financial accounts to be presented at the AGM (see the template for the Board resolution on approval of the invitation, type and venue of the AGM in the template collection under the link above).

According to the Revised Corporate Law, the Board has the authority to determine the venue for the AGM, unless the Articles specify otherwise. Notably, the Revised Corporate Law introduces flexibility in holding AGMs. It allows to hold the AGM at multiple venues at the same time and even abroad, subject to certain conditions. What will be most interesting for your company, however, is the newly codified option to hold the AGM by electronic means, meaning:

 

• Virtual AGM: Companies can now conduct fully virtual AGMs, without a physical venue. This can be achieved through platforms like MS Teams or Zoom, provided the Articles allow for it and the Board appoints an independent proxy (unless waived in the Articles).
• Hybrid AGM: The Revised Corporate Law also permits hybrid AGMs. In this format, some shareholders gather at a physical venue while others participate electronically.

 

These options offer greater adaptability and convenience for companies in organizing their AGMs. Under the Revised Corporate Law, the Board is obligated to oversee the utilization of electronic methods, such as by establishing regulations or providing instructions. This requirement applies unless the Articles already contain a relevant provision. Namely, the Board must ensure the following:

 

1. the identity of the participants is known;

2. the votes at the AGM are transmitted directly;

3. each participant can submit motions and take part in the discussion;

4. the shareholders can vote electronically; and

5. the voting result may not be falsified.

 

The templates that you can find by clicking on the link above include such possibility.

If the AGM has to adopt resolutions that are to be notarized, the setup of the AGM should be discussed with the lawyer or notary before the convocation.

If a company is subject to a full audit (ordentliche Revision, contrôle ordinaire), the auditor must also be invited to the AGM. However, the AGM has the authority to unanimously waive the auditor’s presence. For companies subject to a limited audit (eingeschränkte Revision, contrôle restreint) or those that have opted out, the presence of an auditor is not mandatory. This second scenario applies to the vast majority of companies.

An important change introduced by the Revised Corporate Law is the requirement to audit the company’s annual accounts (in the form of a limited audit if the thresholds for a full audit are not met) when the annual accounts indicate a capital loss (Kapitalverlust, perte de capital; art. 725a CO). A capital loss occurs when the assets minus liabilities no longer cover half of the sum of share capital, statutory capital reserves not repayable to shareholders, and statutory retained earnings. In the event of a capital loss and if no auditor has been appointed yet, the Board must promptly appoint an auditor on an ad hoc basis and ensure that an audit is conducted prior to the AGM. Therefore, it is crucial for the Board to closely monitor the balance sheet situation and liquidity, as new responsibilities have also been introduced in this regard (as detailed below).

 

Agenda / Proposals

Standard agenda items are:

 

• Approval of the annual accounts;
• Approval of the consolidated annual accounts and the management report, if these are legally required;
• Appropriation of the balance sheet profit or net loss;
• Granting discharge to the Board and the management;
• Re-election of existing members of the Board, if their statutory term of office is expiring, and/or election of new members of the Board. If no re-election of the existing members of the Board whose statutory term of office is expiring takes place, their term of office will automatically end six months after the end of the previous business year and the company may become incapable to act (organizational deficiency).

 

Optional agenda items as required or necessary:

 

• Re-election or election of the auditors (also here, the term of office has to be taken into account);
• Resolution on the determination of an interim dividend and approval of the interim accounts required therefore;
• Resolution on repayment of statutory capital reserves;
• Further topics, if applicable, such as amendments to the Articles.

 

Quorum

The law does not specify an attendance quorum for the AGM. Consequently, the AGM is considered quorate even if only one shareholder participates. However, it is essential to note that shareholders’ agreements (if applicable) and/or the Articles may establish an attendance quorum requirement. In such cases, this stipulated quorum must be adhered to. If necessary, we recommend obtaining powers of attorney to ensure the required quorum is met.

Regarding resolutions, the quorum is primarily determined by the provisions in the Articles and/or any existing shareholders’ agreement. Often, the provisions in shareholders’ agreements are more comprehensive than those in the Articles.

 

Minutes

Resolutions passed during the AGM must be meticulously documented in minutes. These minutes must be signed by both the chairperson and the minute keeper. Importantly, certain resolutions necessitate the involvement of a notary. Examples include changes to the company’s registered office (such as relocating to a different municipality), alterations in share capital, modifications to the company’s purpose, or any other amendments to the Articles. If you have any uncertainties regarding whether specific resolutions require notarization, it is advisable to seek legal advice. A lawyer can guide you through the process and ensure compliance with the necessary formalities.

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Minutes of the Meeting of the Board

According to legal requirements, minutes must be taken during Board meetings. This obligation applies even if the Board consists of only one person. Unfortunately, we’ve observed that minutes are often overlooked. To mitigate the liability exposure of Board members and meet the expectations of potential investors during legal due diligence, we strongly recommend diligently recording minutes for Board meetings. While slides can be used, they should always be accompanied by proper minutes. We’ve developed templates for logging both resolutions by written consent and regular meetings. For more detailed guidance on the process, consult the Articles and organizational regulations. Keep in mind that implementing certain provisions of the Revised Corporate Law may necessitate changes to these documents.

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Lapse of the Opting-Out of the Statutory Audit

Many startups initially operate without appointing an auditor, effectively opting out of the requirement for their company’s annual accounts to undergo a limited audit (the “Opt-Out”). However, this option is available only under specific conditions:

 

1. Unanimous shareholder consent: All shareholders must agree to the Opt-Out;

2. Employee Threshold: The company must have fewer than ten full-time equivalent positions (the “FTE”) on an annual average;

3. No Obligation for Ordinary Audit: There should be no obligation to conduct an ordinary audit.

 

It is crucial to verify whether these criteria were met during the business year 2023. When calculating the ten FTE threshold, legal doctrine generally considers the employment percentages from all employment contracts (both part-time and full-time).

If your company has ten or more FTEs and is not subject to an ordinary audit, it falls under the category of a limited audit (eingeschränkte Revision, contrôle restreint). In this case:

 

• Auditor Election: An auditor must be elected during a General Meeting;
• Limited Audit: The appointed auditor reviews the financial accounts to a limited extent;
• Extraordinary General Meeting: Before the AGM for the business year 2023, an extraordinary General Meeting must be held to elect the auditor;
• Registration: The auditor chosen by the General Meeting must be registered with the commercial register;
• Audit Report: If the required audit report is unavailable at the AGM, any resolutions approving the annual accounts and the allocation of balance sheet profit or net losses are considered null and void;
• Capital Loss: Be aware of the new requirements for a limited audit by a licensed auditor in case of a capital loss.

 

Lastly, note that certain large companies (meeting at least two of the following indicators: balance sheet total of 20 million, revenue of 40 million, or 250 FTEs on an annual average) are subject to an ordinary audit. If you need further advice on ordinary audits, feel free to consult with us.

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Commercial Register Changes

Certain changes must be notified to the competent commercial register for registration, including the following:

 

• Any change to the Articles (which also requires notarization);
• Resignations from and elections into the Board;
• Election, dismissal or change of the auditors;
• Change of domicile of the company;
• Granting and/or deletion of as well as changes to signatory powers;
• Change of personal data (name, place of origin/citizenship, place of residence);
• Changes with respect to share capital and company purpose;
• Change of company name.

 

Please note that failing to notify changes to the commercial register is punishable under criminal law.

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Keeping a Share Register and Register of Beneficial Owners

Every company with registered shares (Namenaktien, actions nominatives) is obligated to maintain both a share register and a register of beneficial owners.

Regarding the register of beneficial owners: When an individual (either alone or in concert with others) acquires shares and thereby reaches or surpasses the 25% threshold of the issued share capital, they must notify the company within one month. This notification should identify the natural person to whom the shares are beneficially attributable. If no such natural person exists, the company must be informed accordingly.

For natural persons who are shareholders, the beneficial owner is typically the shareholder themselves. However, in the case of legal entities as shareholders, the beneficial owner refers to any natural person who holds at least 50% ownership in the legal entity. Identifying the beneficial owner accurately can sometimes be challenging. If there are any doubts, seeking professional advice is recommended to avoid severe consequences, including the suspension of membership rights and loss of property rights until proper notification is provided.

Additionally, it is crucial to note that non-compliance with the legal requirements related to the share register and the register of beneficial owners may also result in criminal penalties.

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Storage of Corporate Documents / Records

Every company should maintain a comprehensive archive of corporate documents. These documents include minutes, contracts, share and beneficial owner registers, extracts from the commercial register, complete proof of share transfers (including share purchase contracts, if applicable), declarations of assignment, and corresponding Board resolutions approving share transfers. Additionally, companies should retain documents filed with public authorities, along with any relevant annexes. This encompasses loan agreements, employment contracts, IP and IT documents, and shareholders’ agreements. It is crucial that these records are available in digital format and easily accessible. For specific storage requirements, please refer to the ordinance issued by the Federal Council (LINK) . Keeping meticulous records is especially vital for future due diligence.

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Actions Required in the Case of Imminent Insolvency, Capital Loss and Over-Indebtedness Pursuant to art. 725 et seq. CO

The Board bears responsibility for the financial management of the company. This encompasses the obligation to take action during financial crises and to implement appropriate measures. To fulfil this duty, the Board must consistently monitor the company’s financial status.

The primary goal under the Revised Corporate Law is to establish a reliable “early warning system”. This system enables timely initiation of restructuring measures when a company faces financial challenges. Consequently, the law now outlines specific duties for the Board to fulfil:

 

• Measures in the event of imminent insolvency: If the company faces the risk of insolvency, the Board must promptly take actions to secure solvency with the necessary urgency (mit der gebotenen Eile). If needed, additional steps should be taken to restructure the company or propose relevant measures to the General Meeting, where the latter is competent.
• Duty to restructure in the event of a capital loss: If the most recent annual accounts indicate that assets minus liabilities no longer cover at least half of the combined total of (i) share capital, (ii) legal capital reserve not repayable to shareholders, and (iii) retained earnings, the Board is required to take prompt action to rectify the capital loss. Prior to the AGM, the company must have its latest annual financial accounts audited by a licensed auditor, even if the company has chosen to waive an audit, unless the Board applies for debt restructuring moratorium (Nachlassstundung).

• Duty to restructure in the event of over-indebtedness: When there is substantial reason to suspect over-indebtedness – meaning that the company’s liabilities exceed its assets – the Board must take specific actions. These actions include preparing an interim balance sheet based on both going concern and liquidation values, which must then be audited by a licensed auditor (even if case of Opt-Out). If both interim balance sheets reveal over-indebtedness, the Board is legally required to notify the court (referred to as an “over-indebtedness notification”). However, there is an exception: If company creditors subordinate their claims to those of all other creditors up to the extent of the over-indebtedness (including interest for the duration of the over-indebtedness) and there is a reasonable expectation that the over-indebtedness can be rectified within a reasonable period (specifically, no later than 90 days after the audited financial accounts become available), the notification obligation may not apply, provided that the creditors’ claims are not further jeopardized.

 

Given that failure to observe the duties under art. 725 et seq. CO can lead to personal liability of the members of the Board, specific legal advice should be sought.

While the accountant of the company can and will assist in monitoring the financial situation of the company, the Board is ultimately responsible and must carry out the above actions on its own initiative.

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Updating Share Capital and Conditional Capital

If the Articles allow for conditional capital, and shares have been issued from this conditional capital during the business year 2023 (for instance, as part of employee participation plans), a licensed auditor must confirm the valid issuance of these new shares. Subsequently, the Board is required to adjust the share capital in the Articles in the presence of a notary and file the relevant changes with the commercial register for official registration. Unlike before, the law no longer specifies a mandatory timeframe for completing these actions after the end of the respective business year. Nevertheless, we recommend that these adjustments be made no later than three months following the end of the business year.

Under the Revised Corporate Law, the Board has the authority to either amend or, if the provision related to conditional capital is no longer necessary, delete such a provision from the Articles.

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Taxes

Reserves from Capital Contributions

The reserves from capital contributions (the “CR”) (Kapitaleinlagereserven; réserves légales) must be presented as a distinct line item on the balance sheet. Any changes in these reserves should be reported to the Federal Tax Authorities (the “FTA”) using Form No. 170, even if not explicitly requested. This reporting obligation may arise in scenarios such as repayments or, more practically relevant for startups and SMEs, capital increases with a share premium (Agio). Repayments to shareholders must be reported within 30 days after the AGM approves the repayment. If no specific AGM resolution exists, the reporting deadline is still within 30 days after the actual repayment.

It is important to note that converting reserves from capital contributions into share capital is also considered a form of repayment and should be reported accordingly. In cases where there was only a capital increase (with no capital decrease) during the business year 2023, the reserves from capital contributions must be reported within 30 days after the AGM approves the annual financial accounts for that year. However, if a capital increase with a share premium falls within the capital band, where capital increases and decreases offset each other, reporting occurs only after the capital band period has expired.

You can find Form No. 170 for reporting purposes here. The form should be accompanied by the minutes of the General Meeting, duly signed annual financial accounts (highlighting the balance of reserves from capital contributions at the end of the business year as a separate position), and a duly signed account statement related to the reserves from capital contributions. These declarations are essential for enabling later tax-neutral distributions or other utilization of the capital reserves. Your accountant may have already brought this to your attention or will certainly do so and be able to help you with the declaration.

 

Withholding Tax / Dividends

In the following cases, the FTA must be provided with Form N°103 within 30 days after the AGM:

 

a. the balance sheet total of the annual financial accounts 2023 exceeds CHF 5 million;

b. the AGM concerning the business year 2023 approves a taxable dividend;

c. distributions to shareholders that are subject to withholding tax have been made in the business year 2023;

d. the company claims the participation exemption; or

e. the company claims benefits according to a double taxation agreement.

 

In such cases, once the annual financial accounts have received approval, Form No. 103 must be promptly submitted along with the duly signed financial accounts to the FTA, even without a specific request. If a taxable distribution has occurred, the FTA must be promptly informed about the withholding tax, and the corresponding 35% taxes should be paid within 30 days from the distribution’s due date. It is important to note that interest payments (such as those on convertible loans) may also be subject to withholding taxes under certain circumstances (for instance, when a certain number of creditors is reached). If you have any inquiries or require assistance with the filings, both we and your accountant are here to assist you.

 

Correct issuance of salary statements for employee participation plans

All companies that have allocated shares, options, phantom stocks, stock appreciation rights, or other forms of equity-based participations (employee participation) to their employees or board members must adhere to the provisions outlined in the “Ordinance on Attestation Requirements for Employee Participations” (Mitarbeiterbeteiligungsverordnung (MBV), Ordonnance sur les attestations de participations de collaborateur (OAP)). Annually, alongside the annual salary statements, the company is obligated to provide an attachment to the salary statement for all holders of employee participation (and, in some cantons, to the tax authorities). This attachment should declare the number of employee participation rights held by the individual at the end of the taxable year, along with specific details.

Furthermore, whenever an employee or board member realizes taxable income related to employee participation (such as the allocation or sale of employee shares, exercising options, or settling phantom shares), an additional certificate must be provided regarding the generated taxable income. The Swiss Tax Conference has published helpful templates for these declaration forms (LINK) .

Additionally, any taxable income resulting from employee participation must be disclosed in the salary statement (section 5) and is subject to source taxation if the employee’s regular salary is also subject to such taxation. Even if an employee acquires employee participation rights without triggering taxable income, this information must still be included in the salary statement (section 15).

In summary, each year, a certificate must be issued regarding the employee’s held rights, and an additional certificate is necessary for any income realized for tax purposes in connection with those rights during the past year (if applicable).

It should also be noted that copies of the attachment to be prepared for the salary statement relating to employee participation must also be attached to the social insurance statements.

The issuance of the certificates may seem to be somewhat complicated in individual cases or if they are done for the first time. For this reason, it might be worth seeking our or your accountant’s advice at an early stage before submitting the certificates.

 

Stamp duties

Deposits made to companies are generally subject to a 1% stamp duty and must always be reported to the FTA. However, if these deposits are provided during incorporation or capital increases in the form of nominal value or share premium, the company may benefit from a tax-exempted amount of CHF 1 million. Once this threshold is reached (which can be spread across multiple capital increases), stamp duties become due only on the amount exceeding the exemption.

Additionally, there is a possibility to apply the tax-exempted amount for financial recoveries (as outlined below). The tax calculation is typically based on the fair market value of the contribution, minus issuing costs and taxes. For cash-based capital contributions, this includes the nominal value plus the premium. Payment of the stamp duty to the FTA is required within 30 days after the end of the calendar quarter in which the capital increase was registered with the commercial register. During the same period, Form No. 3, along with copies of the relevant documentation (such as notary deeds) related to incorporation or capital increase, must be submitted to the FTA. In cases of capital increases within the capital band, stamp duties are only levied on the portion that exceeds decreases during the validity period of the capital band. If this scenario applies, the stamp duty payment deadline is extended to 30 days after the end of the calendar quarter in which the capital band expires.

When shareholders make informal contributions to a company’s reserves (from capital contributions of the company) (Zuschüsse), such as waiving claims or transferring cash or shares to the company without consideration, stamp duties may be triggered. However, in such cases, a tax-exempted amount applies only if the company can utilize the exemption for financial recoveries (as detailed below). Note that the ordinary tax-exempted amount of CHF 1 million does not apply to informal contributions. To comply with the requirements, the company must submit Form 4 to the FTA along with documentation regarding the contribution. The deadline for submitting the form and paying the taxes is 30 days after the contribution has been made.

In the context of financial recovery, there may be an opportunity to benefit from an additional tax-exempted amount (up to CHF 10 million). If necessary, it is also possible to seek relief related to the remaining stamp duty. However, the FTA stipulates that these contributions be set off against losses to qualify for the exemption. Notably, the FTA does not allow the creation of reserves from capital contributions when those contributions benefit from the additional tax exemption. Consequently, after any financing round, it is essential to assess whether the stamp duty reduction is feasible through the mentioned measures and, if so, how the company and its shareholders value this reduction in comparison to creating reserves from capital contributions.

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Value Added Tax

Individuals conducting business with a taxable turnover of at least CHF 100,000 are subject to Swiss Value Added Tax (the “VAT”). When starting new business activities or expanding by acquiring another business or opening a new branch, individuals become liable for VAT if it is anticipated that the CHF 100,000 threshold will be met within the next twelve months. If uncertainty exists regarding whether this threshold will be reached, a reassessment must occur within three months at the latest. If the reassessment indicates that the threshold will indeed be reached, the tax exemption ceases. In such cases, there is a choice to retroactively assume tax liability from the start or expansion of business activities or from the time of reassessment. Previously exempt individuals become liable to pay taxes after the business year in which the relevant turnover threshold is reached. If the business was not operational for a full year, turnover is extrapolated to a yearly basis. Individuals becoming liable for VAT must register with the FTA within 30 days of the commencement of tax liability, even without a specific request to do so. Additionally, voluntary VAT registration may be advisable, especially if recoverable input taxes exceed the payable turnover tax. It is possible to register online here (LINK). Your accountant may have already highlighted this or can assist you in making an informed decision.

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