SWITZERLAND Law and Practice Contributed by: Alexander Vogel, Marc Baumberger and Selina Bruderer, MLL Legal
tain group companies can be transferred to aid those within the group facing liquidity issues. This facilitates a co-ordinated approach to managing the financial resources of the group and supports companies with varying liquidity needs. A JV company has various financing options avail - able, with traditional bank borrowings being a popu - lar choice, but also considering capital market instru - ments, venture capital and project finance. In certain cases, provisions in the articles of association (for limited liability companies) or the shareholders’ agree - ment may require equity partners to offer additional funding or provide guaranteed bank loans. While these guarantees enhance capital access, they also increase personal financial exposure and diminish the protection provided by the corporate veil. In com - parison, corporate JVs typically enjoy more favour - able standing when seeking bank loans compared to contractual JVs. Regarding taxation, JV companies in Switzerland are subject to the same tax regulations as other local companies. Besides a share capital increase by cash contribution, shares may be issued in exchange for contributions in kind to the JV’s share capital. These contributions can be in the form of transferable assets that can be capi - talised on the balance sheet of the JV company, such as certain IP rights, assets or shares. Alternatively, the share capital may be paid by offsetting claims against the JV company. It is important to note that obliga - tions of third parties to provide services to the JV company are usually not considered as transferable assets. It is crucial to exercise caution and conduct a thorough review of contributions in kind, particularly those involving cross-border transactions, to under - stand and address the potential tax implications. Contractual JV The financing of a contractual JV is usually conducted directly from financial resources provided by the JV partners. External debt funding directly to the JV is often not available. 6.4 Deadlocks JV agreements typically encompass a range of dis - pute-resolution mechanisms, with mediation and arbitration being the primary methods, and with state
court proceedings being resorted to on exceptional occasions. In addition, to proactively address poten - tial deadlock scenarios, the agreement often outlines an internal escalation scheme or the involvement of a mediator as an initial step. If a deadlock scenario cannot be resolved, it is usu - ally helpful to predefine the route to proceed, which may include: • alternating decision-making rights for specific matters, such as appointing a chairperson with a casting vote; • appointing independent directors; • implementing reciprocal share call or put options; • using buy-sell structures like Russian roulette or Texas shoot-out clauses; and • implementing the right to request the dissolution of the JV company. The more intricate buy-sell devices may introduce an element of chance when taking relevant business decisions. The same may apply in cases where recip - rocal share call or put options at pre-agreed price for - mulas are introduced. A right to request dissolution can serve as the last resort where a JV becomes de facto unable to manoeuvre over a longer period of time. 6.5 Other Documentation Asset transfers, leases, loans or licences for IP can be made through additional agreements established by the partners. These specific arrangements are further detailed and outlined in the JV agreement (and usually form an annex thereto). They may include agreements on: • asset purchase or transfer, IP rights, contracts or business; • the supply of goods and services; • the licensing of IP; • employee secondment; and • marketing and distribution agreements. To ensure a comprehensive approach, the JV parties should carefully consider incorporating provisions in both the JV agreement and the ancillary agreements, outlining the impact that terminating an ancillary
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