AG: Advantages & disadvantages of a public limited company in Switzerland

As an entrepreneur, if you only think about how much capital is available on the stock market, you might think that the decision to become a public limited company is an easy one. But it’s not that simple, because although the legal form offers founders particular advantages, there are also challenges.

As one of the oldest and most flexible corporate structures, the AG enables companies to raise capital, structure management efficiently and appeal to a broad investor base.

At the same time, it is subject to complex legal requirements and requires a clear governance structure.

This article examines in detail the advantages and disadvantages of an AG in Switzerland and provides you with a sound basis for decision-making.

Advantages of an AG in Switzerland

Limited liability

One of the biggest advantages of a public limited company is the limited personal liability. As a shareholder, you are generally only liable with your invested capital and not with your personal assets. This offers considerable protection against financial difficulties or legal disputes.

Please note: The management (Board of Directors and Executive Board) can be held liable with their private assets if it is proven that they have acted negligently or criminally.

Procurement of capital

The public limited company is particularly attractive when it comes to raising capital. By issuing shares, considerable financial resources can be mobilized in the form of share capital. This facilitates investments and expansions that are more difficult to realize with other company forms.

High reputation

A public limited company often enjoys a higher reputation and exudes professionalism. This can be particularly important if you want to work with established business partners or international companies. A professional image can open doors and expand business opportunities.

Social benefits

A key advantage of a public limited company is that employees who are also shareholders are considered employees and are therefore subject to mandatory social insurance. This arrangement offers a high level of social security, as social benefits in Switzerland are comprehensive and cover various areas such as old-age provision, accident insurance and health insurance.

Succession planning

Succession in a public limited company can be regulated relatively easily. Shares can be sold or transferred without jeopardizing the existence of the company. This facilitates the planning and implementation of succession arrangements, which can be particularly advantageous for family businesses.

Tax advantages

A public limited company in Switzerland offers the possibility of reducing tax progression by splitting profits. Capital gains from the sale of company shares are generally tax-free. Shareholders with a stake of at least 10% benefit from the partial taxation of dividends, whereby only part of the dividends are taxed. This regulation reduces double taxation and makes the AG particularly attractive for investors and entrepreneurs.

Anonymity

The ownership structure of a public limited company (AG) in Switzerland does not have to be made public, as the shareholders are not entered in the commercial register. This protects the privacy of shareholders and makes it easier to sell the company, as the ownership structure remains discreet.

Unlimited lifespan

A public limited company exists independently of its owners. This means that the company can continue to exist even if the original founders or shareholders leave or die.

Disadvantages of the AG in Switzerland

High capital requirements compared to a limited liability company

The formation of an AG involves considerable costs compared to a limited liability company. Notary and legal fees, commercial register entries and minimum capital requirements (at least CHF 100,000, of which CHF 50,000 must be paid up) can represent a financial hurdle.

Administrative expenses

A public limited company requires a higher level of administration compared to other legal forms. Accounting, annual financial statements, general meetings, auditing and reporting are time-consuming and cost-intensive. This requires either internal know-how or the commissioning of external service providers.

Publication requirements

Public limited companies are subject to certain disclosure requirements in Switzerland. For example, listed companies must disclose their annual financial statements. This can lead to sensitive company data being publicly accessible, which can be a disadvantage for some companies.

Double taxation

Another disadvantage of the legal form is double taxation. Profits of an AG are first taxed at company level. Distributions to shareholders (dividends) are then taxed again at a personal level. This can increase the tax burden and should be taken into account when planning.

For whom is it worth founding an AG in Switzerland?

Companies with high capital requirements

The AG legal form is ideal for companies with high capital requirements or major growth plans. By issuing shares, they can raise share capital quickly and efficiently, enabling investment and expansion.

Family business with succession planning

Family businesses and SMEs that want a clear and structured succession plan benefit from the flexibility of an AG. Shares can be transferred easily and company management can be continued on an ongoing basis.

Companies with an international focus

The AG offers a suitable structure for companies that operate internationally or wish to expand internationally. The professional image and the possibility of attracting international investors make the AG particularly attractive.

In this article you will learn all about the advantages and disadvantages of a GmbH.

When does it make sense to form an AG in Switzerland?

The formation of an AG is worthwhile if the following conditions are met:

1. High investment volume: when substantial financial resources are required for investment and growth.
2. Risk minimization: when the protection of private assets through limited liability is of great importance.
3. Succession planning: if a regulated and simple succession plan is desired.
4. Internationalization: if international business activities are planned.
5. Complex structures: if the company has complex business structures and numerous shareholdings.

Advantages of an AG over a GmbH

There are some differences between a public limited company and a private limited company. Certain advantages of the AG can make it a better choice. Here are key aspects to consider when deciding between the two legal forms.

Raising capital: An AG can easily raise capital by issuing shares, which is particularly attractive for start-ups looking for investors. This flexibility in raising capital makes it easier to attract large sums of money from venture capital firms and other investors.

Anonymity of shareholders: With an AG, shareholders generally remain anonymous, as only the company’s shareholder register is known and cannot be viewed publicly. In contrast, the shareholders of a GmbH are entered in the commercial register and can be viewed by the public. This anonymity offers AG shareholders additional privacy protection and facilitates trading in shares, as changes of ownership do not have to be made public. However, authorized signatories, such as members of the Board of Directors and persons with power of attorney, must be entered in the commercial register. In the case of listed public limited companies, some of the information on significant shareholdings will also be made public.

Structure and management: The public limited company has a clearly structured management hierarchy with a board of directors that manages the company. This can be particularly advantageous for larger companies that require formalized and structured management.

Reputation and credibility: A public limited company often enjoys a higher reputation and credibility in business than a private limited company. This can be advantageous with business partners, customers and investors. However, this reason should not be the deciding factor in your decision as it is very subjective.

Possibility of employee participation: By issuing share options, employees can more easily participate in the company, which is beneficial for motivation and loyalty to the company.