SWITZERLAND Law and Practice Contributed by: Marion Bähler, Ramona Wyss, Florian Gunz Niedermann, Fabienne Limacher and Urs Hofer, Walder Wyss Ltd
2.3 Fund Regulation Please see 2.1 Fund Structure . 2.4 Particularities
• intellectual property; and • compliance and regulation. 3.2 Process
As mentioned in 2.1 Fund Structure , venture capital funds managed and/or marketed in or from Switzerland are typically not set up in Switzerland but in a foreign fund jurisdiction. It remains to be seen if the newly introduced fund type L-QIF will also be used to set up venture capital funds in Switzerland. Accordingly, no observations can be made in respect of spe - cific VC fund structures emerging in response to certain market trends in Switzerland. How - ever, the L-QIF regime in particular, would be well designed to support fund structures geared towards longer investment cycles, including long-duration closed-end funds, as well as sec - ondaries and continuation vehicles for the pur - pose of providing a liquidity solution for existing investors. 3. Investments in Venture Capital Portfolio Companies 3.1 Due Diligence Before investing in a company, VC investors would often conduct a legal, financial, commer - cial and tax due diligence, whereby the scope of such due diligence varies depending on the stage of the company, the size of the investment, and the industry and market in which the rele - vant company operates. In a legal due diligence, key areas that are generally covered include the following: • title; • employment; • social security and pensions; • tax; • material agreements;
The timeline of a new equity financing round in a company depends on several factors, such as the complexity of the transaction, the due diligence process and the dynamics between the parties. On average it takes about two to four months from the signing of the term sheet until the registration of the capital increase in the commercial register. By contrast, the timeline for convertible loan rounds tends to be signifi - cantly shorter. Generally, the company and the lead investor are each represented by separate counsel but there are also (rare) instances where joint counsel is engaged to streamline the pro - cess and save costs. As a financing round in a Swiss entity requires the involvement of the existing shareholders – such as for the approval of the relevant capital increase, the waiver of statutory and contractual pre-emptive rights, and renegotiation of the shareholders’ agree - ment including the rights of the existing inves - tors – it is advisable to involve them sufficiently early in the process. 3.3 Investment Structure Whereas a Swiss start-up would typically be incorporated with common shares only, pre - ferred shares are commonly used in later financ - ings, in particular from a seed or Series A stage onwards. Preferred shares are entitled to a liqui - dation preference in the event of a liquidation or sale of the company, ensuring that they receive a certain amount before any distributions are made to common shareholders. In most instanc - es, a one-time non-participating liquidation pref - erence is granted. Other rights that are typically linked to preferred shares are as follows: • conversion rights;
547 CHAMBERS.COM
Powered by FlippingBook