Structure, IP, Trademark & Others

A Swiss holding company is a corporation whose primary purpose is to hold and manage long-term equity investments in other companies. Switzerland is a premier jurisdiction for holding structures due to a powerful tax incentive called the Participation Exemption (Beteiligungsabzug).

• How it Works: When a Swiss holding company receives dividends from its subsidiaries or realizes capital gains from selling a qualifying participation (at least 10% ownership), this income is effectively exempt from corporate income tax.

• Strategic Use: This makes a Swiss holding company an extremely efficient vehicle for consolidating international investments, managing group financing, and centralizing profits before reinvesting or distributing them.

Prior to 2020, Switzerland had special tax regimes for "domiciliary" and "mixed" companies that primarily conducted business abroad. These regimes were abolished as part of the Federal Act on Tax Reform (TRAF) to align with international standards. They have since been replaced by internationally accepted tools like the Patent Box and R&D super-deduction (covered in Part 1), which focus on incentivizing genuine innovation within Switzerland.

As a world leader in innovation, Switzerland offers robust legal protection and attractive tax incentives for intellectual property.

To encourage innovation, the Patent Box regime provides significant tax relief at the cantonal level. A portion of the profits derived from patents and similar rights is taxed at a much lower rate. This makes Switzerland a highly attractive location for companies to hold and exploit their IP assets.

Protecting your brand is essential. Trademarks in Switzerland are registered with the Swiss Federal Institute of Intellectual Property (IPI). The process involves:

1. Searching the registry to ensure your trademark is unique.

2. Filing an application with a list of goods and services it will cover.

3. Examination by the IPI.

   Once registered, a Swiss trademark is protected for 10 years and can be renewed indefinitely.

Switzerland, particularly the canton of Zug, has earned the nickname "Crypto Valley" for its pioneering and pragmatic approach to regulating digital assets and blockchain technology.

• Regulatory Clarity: The Swiss Financial Market Supervisory Authority (FINMA) was one of the first regulators in the world to issue clear guidelines on Initial Coin Offerings (ICOs) and token classification.

• Supportive Ecosystem: A deep ecosystem of crypto-focused banks, law firms, and service providers has emerged, creating a one-stop-shop for blockchain entrepreneurs.

• Favorable Legal Framework: Swiss corporate law is flexible enough to accommodate new decentralized business models.

Swiss law provides a clear framework for adapting your company's structure as it evolves.

• Mergers & Acquisitions (M&A): The Swiss Merger Act provides a streamlined process for companies to merge or de-merge, often with tax-neutral consequences if done correctly.

• Change of Legal Form: It is straightforward to convert a GmbH into an AG as a company grows. This is a common step for companies that want to raise capital from a wider pool of investors, as an AG structure is more suitable for this purpose.

Navigating financial difficulty requires a clear understanding of your legal obligations.

If a solvent company decides to cease operations, it undergoes an orderly liquidation. This involves a formal shareholder resolution, appointing a liquidator, notifying creditors, selling assets, settling debts, and finally distributing any remaining proceeds to shareholders before de-registering the company.

If a company's liabilities exceed its assets (a situation known as "Überschuldung"), the Board of Directors has a legal duty to notify the bankruptcy court. Failure to do so in a timely manner can result in personal liability for the directors.

One way to avoid bankruptcy notification is through a Letter of Subordination (Rangrücktritt). In this legally binding document, one or more creditors (often a shareholder) agree to subordinate their claims, meaning they will only be repaid after all other creditors have been satisfied. This effectively turns the subordinated debt into quasi-equity on the balance sheet, curing the over-indebtedness.

Switzerland has a highly efficient and creditor-friendly debt collection system. If a company fails to pay an invoice, a creditor can, without needing an initial court judgment, file a debt enforcement proceeding (Betreibung or Poursuite). This initiates a formal process that can quickly lead to the seizure of assets or a declaration of bankruptcy if the debt is not settled.

A "shelf company" is an existing but dormant company (usually an AG or GmbH) that is for sale. Acquiring one can be an alternative to a new incorporation.

• Benefits: It can be faster than a new incorporation and the company has a history, which can be perceived as more credible.

• Risks: The company may have hidden liabilities or a poor reputation. A thorough due diligence process is absolutely essential.

The acquisition is done via a Share Purchase Agreement (SPA), a private contract between the seller and the buyer. The transfer of ownership is completed, and the new owners then update the company's details (name, purpose, directors) with the Commercial Registry.

A key motivation for buying a shelf company can be to utilize its tax loss carryforwards to offset future profits. However, Swiss tax authorities scrutinize these transactions very closely and will disallow the use of tax losses if the acquisition is deemed to be purely for tax avoidance (e.g., if the company's original business is completely abandoned).

The law provides remedies for situations where a company is not being managed correctly.

A "lack of organisation" is a serious legal issue that arises if a company fails to have the legally required governing bodies, such as a Board of Directors, a Swiss resident director, or an auditor (if required). Any shareholder, creditor, or the Commercial Registrar can report this to the court.

If a lack of organisation is proven, the court will give the company a deadline to rectify the situation. If the company fails to comply, the court has the power to appoint the missing bodies itself or, in severe cases, to dissolve the company and initiate bankruptcy proceedings. This underscores the critical importance of maintaining proper corporate governance at all times.