An Aktiengesellschaft (AG) [corporation / public limited company] (OR Art. 620-763) is always created through the amalgamation of several natural persons or legal entities. These contribute a certain amount of capital, which is broken down into the individual partial sums (shares).

Together with the sole proprietorship (of which there are about 150,000), the AG is the most frequently found legal form in Switzerland (about 175,000), since it also offers quite a few advantages for small enterprises in matters of liability, capital regulations, etc.

In the worst case, the shareholders lose only their share capital in the event of bankruptcy. The corporate assets are exclusively liable for the AG’s accounts payable. If several parties are involved in the business enterprise, a shareholder commitment contract ensures clarity. In order to be able to implement the formation of an AG, at least one shareholder is required, in which case this can be natural persons or legal entities, or also other trading companies. The formation expenses are higher than with partnerships, and the formation procedure is also more expensive.

If it is not already occupied by another company, the company name can be freely selected. Thus the Meier Locksmith’s Shop could become the “Metalltraum AG” or the “Meier AG”.


Disadvantageous double taxation

The tax authorities always differentiate between “private” and “business” with regard to an AG. Like any other legal entity, the AG is also taxed separately. The following disadvantage ensues for shareholders: if the company makes a profit, they owe earnings taxes to the fiscal authorities. And in addition to this profit it pays a dividend to its shareholders; once again this dividend has to be taxed as personal income of the individual shareholders. This is described as double taxation.

The fiscal authorities also strike twice with regard to share capital: whereas the shares are taxable as the shareholder’s personal assets, the company owes additional taxes on investment income for the share capital.

The Swiss Corporate Tax Reform II – adopted by parliament as well as confirmed through popular vote and prospectively entering into force in 2009 – shall reduce the disadvantages of this double economic burden.

The suggested solution reads as follows: the future partial taxation of dividend – 60 % on personal assets and 50 % on business assets for shareholders with at least a 10 % stake – results in an alignment of fiscal burden. In the future, firms which seek entrepreneurially involved shareholders shall no longer be treated fiscally different than those who only finance themselves via credits.


Regulation with regard to share capital

The minimum share capital amounts to CHF 100,000. Nevertheless, only 20 % of the provided share capital – but at least CHF 50,000 – must be fully paid in. However, the rest absolutely has to be subsequently paid in — at the very latest during the liquidation or in the event of a bankruptcy. The capital can also be provided with contributions in kind (e.g. real estate, machinery, etc.) and thus does not necessarily have to be paid in cash. The cash portion of the share capital is deposited in a share capital deposit account during the formation. It remains blocked there until publication of the formation in the Swiss Official Trade Journal. Afterwards it will be transferred by the bank to an account of the newly formed company. The business management can dispose of this amount from this point in time. As many shareholders as you like can participate in the company’s share capital. The shares can run in the shareholder’s name and/or names; but the respective nominal value has to amount to at least 1 Rappen (Swiss centime).

•	Bearer shares: the shareholders remain anonymous with this type of share; the respective bearer of the shares is considered a shareholder. Bearer shares change owner through delivery of the paper to a third person.
•	Registered shares: this form of share is always in the actual name of the shareholder. Moreover, this person absolutely has to be recorded by name in the company’s share register. Registered shares change the owner through the fact that the transferor signs the paper (so-called “endorsement”) and through the entry in the company’s share register.

So that the AG has a limited control over the ownership structure: of course, the company and its bodies know the individual shareholders with registered shares, yet this is not always the case with the bearer share. Exactly because of these circumstances many small enterprises decide in favour of registered shares, and then place these in the private environment, e.g. in one’s own family. The founders can also secure their influence on the AG by means of so-called voting shares. These shares – which have a low nominal value, but nevertheless have a full voting right – are issued in the name of the founder(s). Thereby it is achieved that a shareholder with 1,000 shares at CHF 10 dominates the shareholders’ meeting vis-à-vis 100 shareholders with 100 Swiss franc shares, although both camps have paid in the same amount of money (CHF 10,000).


Executive board: supervisory and organisational body

At least one and/or several shareholders constitute the corporate executive board (VR) of the AG. Should legal entities be involved in the company, they can send representation to the executive board. Individuals authorised to representation of the AG must have their residence in Switzerland. These individuals can be members of the executive board or also members of the management (Art. 708 OR).

The executive board is the highest supervisory and organisational body of the AG. Pursuant to the Swiss Law of Obligations (OR), the executive board implements the transactions itself, or the business management will be handed over to a third party (which is the rule).
The names of the executive board members must be published in the commercial register. They are personally liable for damages which have been caused through intentional or negligent breach of duty on their part.

One topic which has increasingly gained importance in the last years, and is also gaining increasing importance for SMEs, is corporate governance — i.e. the manner in which a firm is managed, or should be.


Auditing agency and management report

Every AG is obligated to have an auditing agency. This is to be determined during the formation. It always has to submit a written report to the general meeting of shareholders; this has to occur annually. The auditing procedure presupposes an ordinary audit for larger AGs (and GmbHs) which have exceeded two or three limits (balance sheet total: CHF 10 million; turnover: CHF 20 million; 50 and more full-time positions) in two successive years. All other business enterprises go through a limited audit.

Every AG has to prepare a compulsory management report. This has to include: annual report and annual account. The annual account includes the profit and loss account, the balance sheet and an annexe with additional information, which have to meet the legal minimum requirements.


Highest body: general meeting of shareholders

The highest body of an AG is the annual general meeting of shareholders (GV). The GV specifies the respective statutes, selects the executive board and the auditing agency, approves or rejects the annual report, and decides on the appropriation of corporate profit. In the event of an adverse balance, the VR has to immediately arrange a general meeting of shareholders and apply for restructuring measures. In the event of debt overload the executive board – or also the auditing agency – absolutely has to inform the judge.