SWITZERLAND Law and Practice Contributed by: Alexander Vogel, Marc Baumberger and Selina Bruderer, MLL Legal
maintaining a board of directors, annual sharehold - ers’ meetings, book-keeping and (if necessary or desired) auditors. • Formalities to adjust JV structure: A JV company must at all times comply with Swiss corporate law’s specific minimum legal requirements regard - ing share capital, organisational structure and governing bodies. Changes to these aspects usu - ally require a formal procedure and may include the amendment of the articles of association and the registration of such changes with the Com - mercial Register. If the JV entity is eventually to be terminated (not just sold), it must undergo a formal liquidation process. • Taxation: The JV company will be treated as an independent taxable entity, which may have tax implications and may result in additional tax com - plexities (double taxation). It is subject to corporate income tax and capital tax applicable at its domi - cile, whereas tax rates vary between municipalities. Contractual JV A contractual JV relies on a contractual arrangement between the participating parties, accompanied by a series of ancillary agreements on an as-needed basis. It generally qualifies as a simple partnership ( einfache Gesellschaft / société simpl e) under Swiss law. Unlike a corporate JV, this is not a distinct legal entity; instead, the JV parties operate collectively as a group directly in the market. Note that JVs formed as general partnerships ( Kollek tivgesellschaft / Société en nom collectif ) are not com - mon in Switzerland. This is mainly because Swiss law prevents legal entities from becoming general part - ners. A contractual JV has the following advantages. • Simplicity and reduced administrative costs: Estab - lishing a contractual JV is generally less complex and involves fewer administrative procedures than establishing a separate legal entity. This simplic - ity can result in cost savings during the start-up phase. • Flexibility in structure: Contractual JVs offer greater flexibility in structuring the partnership. The terms and conditions can be tailored to the specific
needs of the parties involved, allowing for more customised arrangements. • Easy termination: Termination of a contractual JV is often less complicated and more straightforward than the formal liquidation process required for corporate JVs. • Confidentiality and control: Since no separate entity is created, each party may have more control over its proprietary information and intellectual property (IP), making it easier to maintain confiden - tiality. • Shared resources and expertise: The contractual JV allows the parties to pool their resources and expertise for a specific project or venture while maintaining their autonomy outside of the collabo - ration. • Limited long-term commitment: Contractual JVs are well suited for projects with limited timeframes or specific objectives, as they allow the parties to work together for a defined period without commit - ting to a long-term relationship. • Faster start-up: Because of its simpler nature, a contractual JV can be established more quickly, allowing the parties to begin their joint activities without significant delay. The disadvantages are as follows. • Lack of a separate legal entity: A contractual JV does not create a separate legal entity, but usually a simple partnership. This may negatively impact market perception and, in particular, complicate the raising of funds from outside sources, such as banks or investors, because there is no separate legal entity with a track record to present to poten - tial financiers. • Limited liability protection: Unlike a corporate JV, where liability is typically limited to the amount of share capital invested, a contractual JV may not provide the same level of liability protection. In principle, each party remains directly liable for JV debts and may even become jointly liable for debts incurred by the other party on behalf of the JV. • Potentially complex governance: Contractual JVs rely solely on the terms of the agreement between the parties. Without a formal corporate structure, decision-making processes and governance may
163 CHAMBERS.COM
Powered by FlippingBook