It all started quite harmlessly. Unsuspectingly, I was advising a consortium of several German and Swiss entrepreneurs who wanted to jointly found a start-up in Switzerland in the form of an AG (stock corporation). So far, so good. Founding an AG in Switzerland is relatively simple: as long as there is sufficient capital (at least 100,000 CHF according to Art. 621 OR), a founder, at least one member of the Board of Directors, a person authorized to represent the company in Switzerland, the articles of association according to Art. 626 OR, and, of course, the business idea, everything moves quite quickly.
That was the case for us as well. At the time of incorporation, the share capital of 50,000 CHF was easily paid in; no more is required for the incorporation itself, especially since the notary, commercial register, and others charge fees anyway. The articles of association were drafted, office space was found, and two board members were appointed—a German economist and an engineer as the managing Swiss board member. The only catch was that after we had prepared the incorporation of the AG so well together, the two of them came up with the idea that having a lawyer on the Board of Directors could be quite helpful.
So, not just two, but three future board members drove to the incorporation appointment with the responsible notary. Since I did not own any shares in the AG and had not contributed any equity, I didn’t have to do anything except sign at the designated spot at the notary’s office and show my ID. Many administrative procedures here in Germany are more complex than founding an AG in Switzerland.
However, it turned out that founding a start-up is significantly easier than managing it from abroad afterward. While our Swiss colleague, the managing board member, was responsible for daily operations and—unlike the other two of us—had sole signing authority, all legal issues and problems landed on my desk. After all, why have a lawyer on the Board of Directors?
Anyone who carefully read my post on comparative law might remember that the Swiss Code of Obligations (OR) is attributed to the Germanic legal family and is therefore very similar to German regulations in many respects—except that, in my view, the OR is significantly more confusing than its German equivalents in the law of obligations, commercial law, and corporate law. Nevertheless, this was extremely helpful, as from then on I was “allowed” to deal with Swiss labor law almost daily, which is largely regulated in Art. 319 to 362 OR as well as some special norms. It turned out that our managing director had hired a not-so-honest person who preferred leisure time to working, yet diligently recorded and billed hours.
It felt like a new infraction occurred every other day, yet our managing director failed to react to the previous ones in any even remotely adequate way. Since the other two board members and I were not on-site, I could only regularly provide what I considered very good, legally sound suggestions on how he could get a handle on the growing labor law problem. But instead of facing consequences for his misconduct, our managing director preferred to provide a company car and other perks on top—his motto was always (at least with this employee): the carrot instead of the stick. Meanwhile, another freelancer had to wait months for the wages owed to him, which created further problems, including those related to social security law; unfortunately, our managing director was not interested in this at all, despite multiple warnings from me and from our freelancer.
After it became increasingly clear that this had no future and that our limited capital, which was supposed to be invested in the further development of our technology, was being spent on a dishonest employee who was living the high life on it, I had to pull the ripcord. Because, although I had no capital stake in the AG and did not hold a single share, I would have been liable with my personal assets as a board member if the AG had become insolvent during my term and I had been at fault.
At least leaving a Board of Directors is similarly simple—actually even easier than the incorporation itself—because I didn’t even have to travel to Switzerland in person to be removed from the Swiss commercial register; I could handle everything conveniently from home. In fact, one year after my departure, the shareholders’ meeting had to file for the liquidation of the AG.
My conclusion from the story is nevertheless positive: founding, managing, and, if necessary, exiting a company in Switzerland is easily possible even for German citizens, even if you do not have your regular residence in Switzerland. The linchpin is the one legally required acting person in Switzerland, who should be selected with particular care and examined very closely for their leadership and other qualities. Especially when you are not on-site, you need people you can rely on 150% and who, if necessary, listen to the advice of trained professionals. In my view, that is the only important requirement for successful business development in Switzerland—the surrounding legal issues are manageable.
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