Statutes of a Company: Understanding the Legal Framework for GmbH and AG

The backbone of a well-structured company is its statutes, or “articles of association”. These crucial founding documents establish the internal rules by which any company in Switzerland operates and guides its purpose. Drafting them for the first time or making a later alteration calls for the utmost care and expertise. In this blog, we provide a comprehensive explanation of what these statutes are and what information they should include. We also explore in detail what it takes to make changes to a company’s statutes after it has been incorporated.

What are the statutes of a company in Switzerland?

The statutes, often referred to as “articles of association”, are documents which constitute the legal foundation of a company in Switzerland. They are legally required for the formation of both a stock corporation (AG) and limited liability company (GmbH).

For both GmbH and AG, these documents outline the company’s purpose, structure, and rules governing its internal affairs. Essentially, statutes serve as the constitution of a company, guiding its operations and interactions with stakeholders.

Why are the articles of association so important?

The articles of association play a vital role in providing clarity and structure to a company’s operations. They define the purpose of the company, the rights and responsibilities of shareholders and directors, and the procedures for decision-making and governance.

They also specify important details such as the share capital, the type and number of shares, and the rules for their transfer. Having a written legal framework like this helps in preventing conflicts, ensuring transparency, and facilitating effective governance.

In other words, the articles of association act as a roadmap for companies embarking on a long and winding journey. Without it, they would be directionless from the start. Indeed, the route may have to be adapted along the way, but it is done carefully with the consent of those involved, while following the proper procedures and protocols.

What must be included in the company statutes?

The content of a company’s statutes in Switzerland is regulated by legal requirements. The articles of association should include at least the following information:

• Company name: The official name of the company as it will be registered.
• Registered office: The physical location in Switzerland where the actual management of the company is located.
• Purpose of the company: The purpose or objectives of the company, outlining the main activities it is authorized to undertake to achieve its objectives.
• Share capital: The authorized share capital of the company, including the number of shares, their nominal value, and types of shares. Information pertaining to any contributions in kind should also be included.
• Announcement: The form of the company’s notifications to its shareholders.

The following information is not mandatory but useful:

• Shareholder rights: The rights and obligations of shareholders, including voting rights, profit distribution, and share transfer restrictions if any.
• Decision-making rules: The procedures for decision-making within the company, specifying matters requiring shareholder approval and the majority thresholds where it isn’t already specified by corporate law. This should also include information pertaining to the general meeting.
• Board of directors: Details on the composition and responsibilities of the board of directors, including the appointment and removal process.
• Auditors: The appointment and duties of auditors if applicable.

These provisions of the articles of association need to be drafted with the utmost clarity and precision to avoid any legal complications, disputes, or conflicts, and to ensure the company operates smoothly within the bounds of Swiss corporate law.

It is highly recommended to enlist the services of a legal professional when drafting the company’s statutes. The statutes should also be notarized by a notary public.

Can a company’s statutes be changed?

Yes, the statutes of a company in Switzerland can be altered. This can usually only be done by an absolute majority at the general meeting.

Businesses are dynamic, and changes in the economic environment, corporate strategy, or even legal situation may necessitate alterations to the company’s statutes. The ability to change a company’s statutes provides flexibility for businesses to adapt to new circumstances and optimize their operations.

Why change the articles of association?

A company may decide to change its articles of association for various reasons. One common reason for changing the statutes is to adjust the company’s purpose to align with evolving business strategies and objectives.

Other motivations for a change may be modifying share capital for strategic or financial reasons, altering decision-making processes, or incorporating new governance structures. Changes could also be caused by legal requirements or mergers and acquisitions.

It is essential to carefully evaluate the reasons for the change and ensure that it still aligns with the long-term goals of the company. Changing a company’s statutes offers both advantages and disadvantages:

Advantages of changing the statutes

1. Adaptability: Changing statutes, and particularly changing the purpose of the company, allows it to adapt to changing market conditions and business environments, take advantage of new opportunities, and realign itself strategically.
2. Optimization: Changing the statutes can help to optimize a company’s structure, governance, and decision-making processes.  The owners of a company should constantly look for ways to enhance efficiency and may find that the original statutes need to be updated to best meet their current needs for optimization.
3. Compliance: In some cases, changes may be necessary to comply with new legal requirements or regulations.
4. Strategic Alignment: Adjusting the purpose and objectives of the company ensures continued alignment with its strategic goals.

Disadvantages of changing the statutes

1. Complexity: The process of changing statutes can be complex, requiring legal expertise and careful consideration.
2. Shareholder disagreement: Depending on the magnitude of the changes, obtaining shareholder approval may be challenging. Even if the majority votes for the changes, not all shareholders or employees might agree with the changes.
3. Time and costs: The process of re-writing the articles of association can be time-consuming and may be costly to ensure compliance and proper documentation.
4. Loss of identity and trust: If the company moves too far from its original purpose and objectives, it can result in a loss of brand identity. Frequent changes can also result in a loss of stakeholder trust and confidence.

What documents are required for changing a company’s statutes?

Altering a company’s articles of association is a complex legal process, for which various documents are required. The specific documentation needed depends on the nature and extent of the proposed changes. Typically, the following documents are always essential:

• Current statutes of the company.
• Clearly drafted amendments to the existing articles of association outlining the proposed changes.
• A resolution passed by the shareholders approving the proposed changes (including the minutes from the general meeting).
• Notarization of the changes by a notary public.
• Application form for the commercial register for changing the articles of association.
• Proof of payment for fees for registering the changes with the commercial register.
• Powers of attorney if the company is represented by a third party.
• Confirmation of approval from the management.

What are the steps to change the statutes?

Changing the articles of association of a GmbH or AG in Switzerland involves several important steps, each of which should be executed correctly to ensure the legality and effectiveness of the alterations. The general steps are as follows:

1. Board resolution: The board of directors or managing shareholders initiate the process by proposing the changes and passing a resolution for a change in the company’s statutes.
2. Shareholder approval: Shareholders must then approve the proposed changes. This can usually only happen through a vote at the general meeting. An absolute majority of voting shares is generally sufficient unless the current statutes themselves stipulate a higher quorum.
3. Notarization: Once the resolution has been approved by the general meeting, the change in the statutes must be notarized. A notary public must check the legality and validity of the decision and that all legal requirements were followed during the process before notarizing the changes.
4. Submission to the Commercial Register: The amended articles of association must be submitted to the commercial register for approval and registration. The commercial register examines the application and, if approved, makes the corresponding changes. The amendments only become legally effective when they have been entered into the commercial register.
5. Final communication and updates: Once the changes in the company’s statutes are successfully registered, customers, business partners, and other stakeholders that do not already know about the changes should be informed. Additionally, the company should check old documents and contracts and update them if needed to reflect the new articles of association and/or purpose of the company.

How long does it take to change the articles of association?

The timeline for changing the articles of association can vary significantly. While simple changes may be processed relatively quickly, more complex modifications may take several weeks or even months.

A major factor is how well prepared the company is for the changes and whether the initial phase has begun with internal discussions, guidance from experts, and other groundwork. Other factors influencing the timeline include the responsiveness of shareholders, the complexity of the changes, and the efficiency of the administrative process.

Once the initial preparations are complete, a general meeting must be called which must also comply with certain timelines and deadlines that are usually set out in the existing statutes. Once the resolution to change the statutes has been passed in the general meeting, the notarization follows. This usually only takes a few days, but if there are any legal issues or complications, the certification could be delayed.

Finally, the changes must be formally registered in the commercial register. The length of time depends on the workload of the responsible register office and can take anywhere from a few days to a few weeks.

Are there costs involved?

Yes, there are costs associated with changing a company’s articles of association. These costs include notary fees, legal fees for drafting and reviewing the amendments, and any administrative fees associated with submitting the changes to the commercial register.

The specific costs can vary depending on the time and complexity of the process, and the individual rates of the notary, legal experts, business consultants, etc. The company should also factor in internal administrative costs due to the time spent by their own employees on the process.

It is advisable for companies to consult with seasoned experts like Nexova to get an early idea of the expected costs and to budget for these expenses when considering amending their statutes.