Joint ventures as a form of combining the know-how and marketing power of two hitherto separated enterprises are an important form of doing business in Switzerland. Especially in the field of telecommunication a need to combine Swiss and foreign know-how, infrastructure and technology became apparent during the last few years.
There are no explicit rules on joint ventures in Swiss corporate and tax law. Thus, the legal structure of a joint venture may be chosen at the parties' discretion as a matter of principle.
Basically, there are two possibilities:
1. Partnership
a) Two persons or entities pursuing the same goals and contributing the requested means therefore form a so-called simple partnership ("Einfache Gesellschaft" - art. 530-551 of the Swiss Code of Obligations [hereinafter "CO"]) by operation of law. In more complex situations the partners normally execute a written agreement setting forth their mutual rights and duties.
b) The simple partnership is not a legal entity and, consequently, cannot acquire rights and duties under a company name and has no standing in legal proceedings of whatever nature. All such rights and duties are assumed by the partners themselves as joint and several rights and liabilities. This legal situation would be somewhat diffe-rent under the law of the general partnership ["Kollektivgesellschaft" {art. 552-593 CO}]; however, only natural persons and not legal entities may be partners thereof.
Thus, the basic disadvantage of a mere partnership structure is the unlimited liability of the partners. Consequently, the simple partnership is not intended to be used for a commercial enterprise, since the organization is very loose. It is, though, often used by building contractors when working together on larger projects (tunnels, motorways, etc.).
2. Combination of a Joint Stock Corporation and a Shareholders' Agreement
a) The disadvantages of the above described structure can be avoided by a combination of a simple partnership and a joint stock corporation ("Aktiengesellschaft [art. 620-761 CO]) ("corporation"). The idea of such a structure is that all business and commercial transactions are effected through the legal entity and that the corporation and the partners of the joint venture would remain in the background as (mere) shareholders of the corporation. In a separate document, the shareholders' agreement, the partners agree on their mutual rights and duties with respect to their shareholdings in the corporation (and form so again a simple partnership by operation of law).
b) The setting up of this structure requires the following steps:
(i) Execution of a shareholders' agreement prior to or concurrently with the incorporation of the corporation; this agreement is the core of the joint venture and must be drafted very carefully;
(ii) Establishing of a corporation by means of a public deed of incorporation and registration with the Company Registry.
3. Limited Liability Company as an Alternative
a) The concept of the Limited Liability Company ("Gesellschaft mit beschränkter Haftung" [art. 772-827 CO]) is similar in most European countries. Since it is admissible (contrary to corporation law) to include further rights and duties of the partners in the articles of incorporation, it is theoretically possible to include all provisions relevant for the joint venture into the articles of incorporation of the limited liability company. However, since the articles of incorporation must be submitted to the Company Registry, such document could be reviewed by everybody. Normally, this is contrary to the intention of the partners who would like to keep their arrangements confidential. Thus, a separate partners' or shareholders' agreement would still be necessary and the structure would almost be identical to the one described under item 2. above.
b) The limited liability company has advantages in terms of costs: it is not required by law to provide for auditors in the articles of incorporation and there is no board of directors provided for by law. Thus, only mana-ging directors ("Geschäftsführer") must be appointed who need not be partners. Moreover, there is only the requirement that one of the managing directors be domiciled in Switzerland.
c) However, contrary to corporation law many intricate issues are not yet solved, since the numbers of Swiss limited liabi-lity companies (and respective legal handling) only increased after the entry into force of the revised corporation law in 1992. In addition, the limited liability company is still regarded as a form of doing business for rather small businesses as it is reflected in the law limiting the maximum company capital (excluding reserves, etc.) to CHF 2,0 mio.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
