SWITZERLAND Law and Practice Contributed by: Marion Bähler, Ramona Wyss, Florian Gunz Niedermann, Fabienne Limacher and Urs Hofer, Walder Wyss Ltd
pro rata portion and gives neither a general pre-emptive right prevailing over existing shareholders nor the right for any overalloca - tion of non-exercised subscription rights. • Control or veto rights – VC investors often have control rights to influence key deci - sions at the shareholder level as well as at the board level. • Vesting and claw-back – In order to ensure the founders’ and other key personnel’s com - mitments vis-à-vis the company, VC investors often require that such persons are bound by (reverse) vesting provisions structured as call-options applicable in case of an early termination of the employment or service relationship. 3.6 Corporate Governance Investors often ask for the right to appoint one or more representatives to the company’s board of directors. Board representation allows the investors to influence key strategic decisions (often investor directors have veto rights in rela - tion to certain strategic decisions), and monitor the management as well as the activities of the company. The day-to-day management of the company is typically delegated to the executive board members/the management in accordance with the terms of organisational regulations. If an investor is not allowed (eg, for regulatory or tax reasons) or otherwise unable to appoint a board member, it is also possible to appoint a board observer having the same information and participation rights as a board member, but no voting rights. 3.7 Contractual Protection In a financing round, a VC investor would gener - ally ask for representations and warranties from the company and/or the founders covering, inter alia:
• ownership and qualification; • due authorisation; • financial statements and subsequent events; • insurance; • compliance; • intellectual property; • material agreements; • employment, social security and pension; • litigation; and • no broker’s fee. In most financing rounds, a fair disclosure con - cept is agreed, whereby the documents included in a virtual data room are generally deemed dis - closed vis-à-vis the investors. In some instanc - es, the representing parties may be asked to provide a disclosure letter. Swiss law imposes restrictions on the payment of damages result - ing from an investment by the company. Hence investors would typically be indemnified by vir - tue of a compensatory capital increase, which means the issuance of additional shares of the category initially subscribed at nominal value. There are numerous government-backed initia - tives providing non-dilutive funding or govern - ment-guaranteed loans to Swiss start-ups such as the Innosuisse programme and the Swiss Technology Fund, which may also provide an indirect incentive for equity investment. How - ever, there are no sizeable programmes directly subsidising equity investment in Swiss start-up companies. 4.2 Tax Treatment The tax treatment of an investment in start-up/ VC fund portfolio companies is generally the same as the tax treatment in any other company. 4. Government Inducements 4.1 Subsidy Programmes
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