SWITZERLAND Law and Practice Contributed by: Marco Toni, Gilles Pitschen and Leonard Baumann, Loyens & Loeff
an investment amount in seed rounds fell from CHF1.5 million to CHF1.2 million. With regard to early-stage transactions, the median investments amount to approximately CHF2.4 million. The documentation for early- stage financing for a start-up company in Swit- zerland is usually rather basic, comprising a sub- scription form (rather than a written subscription agreement) for newly issued shares resolved at a shareholders’ meeting and a basic shareholder’s agreement (including tag- and drag-along rights, if any). 2.4 Venture Capital Although the Swiss start-up scene has devel- oped impressively during the past ten years, Switzerland’s venture capital industry is still rela- tively young. Some of the sponsors are in their second or third fund generation, but a lot are still in their first round. However, Swiss start-ups are attracting large international investors, owing to attractive valuations and innovative ideas. In general, foreign venture capital firms foremost provide funds in mid- and late-stage financing rounds. The government may provide funds that grant loan guarantees for investments in start-ups operating in technologies that are in the public interest. By way of example, the technology fund promotes innovative technologies that reduce greenhouse gas emissions, support the use of renewable energy, and increase energy efficien- cy. Companies and start-ups developing such technologies can benefit from loan guarantees by encountering fewer hurdles to get the neces- sary financing in place. 2.5 Venture Capital Documentation The model documentation of the Swiss Pri- vate Equity and Corporate Finance Association
(SECA) has developed into a well-regarded set of documents that are available on its website. In general, there is substantial standardisation in terms of the documentation. Primarily, a term sheet lays out the financial terms of the invest- ment and forms the basis for implementing an equity investment. These terms may subse- quently be implemented into a legally binding investment and shareholders’ agreement – the purpose of which is to outline the rights, obliga- tions, and relationships among the shareholders. Minority shareholders such as start-up investors strive to implement special rights by which to protect their investment. 2.6 Change of Corporate Form or Migration In principle, start-ups continue to stay in the same corporate form and in the same jurisdic- tion. Specifically, if the start-up is incorporated as a corporation, there is no need to change the corporate form in a later stage of venture capital financing. A general need to change jurisdiction is not apparent; rather, this is subject to the start- up’s long-term strategy and goals. 3. Initial Public Offering (IPO) as a Liquidity Event 3.1 IPO v Sale Generally, a liquidity event in Switzerland is still run through a sale process, rather than through an IPO. Dual-track processes are sometimes pursued, but there is no general trend to have a dual-track process at the outset. In fact, there are only a few technology companies listed on the Swiss stock exchange (the “SIX Swiss Exchange”), despite the large increase of tech- nology companies in Switzerland.
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