Inflation, interest rates and/or the war in Ukraine have not yet had a direct impact on the type of joint ventures (JVs) seen in Switzerland, other than general market impacts. The Swiss JV market proved robust in 2023 despite these uncertainties and challenges.

However, interest rates will have an impact on the financing of JVs, particularly if they do not further decrease. Therefore, JV parties may use their own funds and/or turn to less liquidity-driven set-ups.

Construction, industrial projects, research and financing are the key industries for JVs in Switzerland. Industries such as retail and, in recent years, fintech also frequently engage in JVs. Generally, JV structures in Switzerland are opted for in situations where the parties rely on each other’s specific (market) knowledge, skills and/or assets to pursue a mid- to long-term business collaboration.

Swiss law does not provide for a specific legal definition or set of laws governing JVs, but the concept is legally well recognised, and the general rules for contracts and companies set forth in the Swiss Code of Obligations (CO) apply. This liberal framework allows partners to structure their undertaking according to their needs.

JVs are generally established in two main forms: corporate JVs or contractual JVs.

Corporate JV

In a corporate JV, the parties operate through a separate legal entity, which is typically structured as a Swiss corporation (Aktiengesellschaft) or, less common, as a Swiss limited liability company (Gesellschaft mit beschränkter Haftung). Note that this article mainly focuses on corporate JVs set up in the form of a corporation.

A corporate JV has the following advantages.

• Separate legal entity: a corporate JV becomes a separate legal entity under Swiss law. This status enhances the JV's stability and facilitates smoother interactions with third parties. External parties often prefer dealing with a familiar legal structure, which is particularly advantageous for cross-border JVs or when seeking direct financing from banks and lenders.
• Limited liability: each JV party’s liability is limited to the amount of capital it has subscribed to the JV company. Swiss courts rarely pierce the corporate veil; liability protection is robust. However, third parties may require JV parties to guarantee the JV company’s obligations, particularly in early-stage undertakings. Furthermore, the insolvency of a JV company may still affect the reputation of the JV parties.
• Enhanced flexibility for change of JV parties/exit: in a JV company, the transfer of shares to a new owner is a rather simple process, despite there being specific Swiss formalities to obey. The JV company’s corporate governance may be set up to allow for a smooth and fast change of JV parties (including adding additional partners), and also with a view to a full or partial exit.

The disadvantages are as follows.

• Higher administrative costs: establishing costs (drafting of agreements, notarisation and registration) are usually comparable with those of a contractual JV, but operating a corporate JV often involves higher (recurring) administrative costs. This is mainly because of ongoing corporate-related costs, such as those associated with maintaining a board of directors, annual shareholders’ meetings, book-keeping and (if necessary or desired) auditors.
• Formalities to adjust JV structure: a JV company must at all times comply with Swiss corporate law’s specific minimum legal requirements regarding share capital, organisational structure and governing bodies. Changes to these aspects usually require a formal procedure and may include the amendment of the articles of association and the registration of such changes with the Commercial Register. If the JV entity is eventually to be terminated (not just sold), it must undergo a formal liquidation process.
• Taxation: the JV company will be treated as an independent taxable entity, which may have tax implications and may result in additional tax complexities (double taxation). It is subject to corporate income tax and capital tax applicable at its domicile, whereas tax rates vary between municipalities.

Contractual JV

A contractual JV relies on a contractual arrangement between the participating parties, accompanied by a series of ancillary agreements on an as-needed basis. It generally qualifies as a simple partnership (einfache Gesellschaft) under Swiss law. Unlike a corporate JV, this is not a distinct legal entity; instead, the JV parties operate collectively as a group directly in the market.

Note that JVs formed as general partnerships (Kollektivgesellschaft) are not common in Switzerland. This is mainly because Swiss law prevents legal entities from becoming general partners.

A contractual JV has the following advantages.

• Simplicity and reduced administrative costs: establishing a contractual JV is generally less complex and involves fewer administrative procedures than establishing a separate legal entity. This simplicity can result in cost savings during the start-up phase.
• Flexibility in structure: contractual JVs offer greater flexibility in structuring the partnership. The terms and conditions can be tailored to the specific needs of the parties involved, allowing for more customised arrangements.
• Easy termination: termination of a contractual JV is often less complicated and more straightforward than the formal liquidation process required for corporate JVs.
• Confidentiality and control: since no separate entity is created, each party may have more control over its proprietary information and intellectual property, making it easier to maintain confidentiality.
• Shared resources and expertise: the contractual JV allows the parties to pool their resources and expertise for a specific project or venture while maintaining their autonomy outside of the collaboration.
• Limited long-term commitment: contractual JVs are well suited for projects with limited timeframes or specific objectives, as they allow the parties to work together for a defined period without committing to a long-term relationship.
• Faster start-up: because of its simpler nature, a contractual JV can be established more quickly, allowing the parties to begin their joint activities without significant delay.

The disadvantages are as follows.

• Lack of a separate legal entity: a contractual JV does not create a separate legal entity, but usually a simple partnership. This may negatively impact market perception and, in particular, complicate the raising of funds from outside sources, such as banks or investors, because there is no separate legal entity with a track record to present to potential financiers.
• Limited liability protection: unlike a corporate JV, where liability is typically limited to the amount of share capital invested, a contractual JV may not provide the same level of liability protection. In principle, each party remains directly liable for JV debts and may even become jointly liable for debts incurred by the other party on behalf of the JV.
• Potentially complex governance: contractual JVs rely solely on the terms of the agreement between the parties. Without a formal corporate structure, decision-making processes and governance may be less clear, with a higher risk of disputes or inefficiencies.
• Reduced long-term stability: contractual JVs are typically appropriate for short-term or project-specific collaborations. If the parties intend to enter into a long-term partnership, a corporate JV may provide more stability and permanence.
• Potential exit challenges: even though terminating a contractual JV may in principle be more straightforward, ending the collaboration and resolving any remaining obligations between the parties may be cumbersome (in particular because the items that a partner has contributed to the simple partnership do not automatically revert to the respective partner in an exit; see 8.1 Key IP Issues). The exit scenario should therefore be carefully considered and reflected in the JV's contractual framework.
• Limited transferability of interests: the transfer of ownership interests or shares is often more complicated than in a corporate JV, where the transfer of shares is often more streamlined.

The choice of JV structure depends primarily on the specific requirements of the parties involved. For projects of limited duration and scope, a contractual JV is often preferred due to its ease of establishment and adaptability. On the other hand, for long-term collaborations, in situations where the JV needs to interact directly with external parties or where limited liability is an important consideration, the more formal structure of a corporate JV is typically preferred.

When deciding on the appropriate form of a JV in Switzerland, it is essential to thoroughly evaluate the following aspects:

• formation and termination – careful consideration should be given to the procedures for establishing and terminating the JV;
• liability of the JV partners – the extent of liability of the JV partner(s) should be clearly understood and assessed;
• corporate governance structure – the division of power amongst the JV partners is a key element;
• confidentiality – the issue of confidentiality of the JV partners' information and operations requires careful attention;
• tax implications – the tax aspects of the JV, including its structure and operations, must be considered, particularly for cross-border JVs; and
• flexibility – the degree of flexibility offered by the chosen form of JV should be evaluated to ensure that it is consistent with the project’s objectives and potential future developments.

Primary Regulators

Competition Commission

Based on the nature of the JV and its potential impact on competition, the Swiss Competition Commission may have a role in reviewing and approving the JV from an antitrust perspective.

Swiss Financial Market Supervisory Authority (FINMA)

If the JV engages in financial activities such as banking, insurance or securities trading, it may fall under the regulatory oversight of FINMA. FINMA supervises and regulates financial markets and institutions in Switzerland.

Commercial Register Office

The Commercial Register is maintained by the respective cantonal authorities. A corporate JV must be registered with the competent Commercial Register; otherwise, it may qualify as a contractual JV. The Commercial Register office ensures transparency and (to some extent) compliance with legal requirements. Most of the information to be shared with the Commercial Register for registration purposes will be publicly available.

Main Statutory Provisions

Code of Obligations

Various provisions of the CO are relevant when establishing JVs. Key provisions include:

• simple partnership (Articles 530–551);
• corporation (Articles 620–763); and
• limited liability company (Articles 772–827).

Cartel Act

Key provisions include:

• unlawful agreements affecting competition (Article 5);
• unlawful practices by dominant undertakings and undertakings with relative market power (Article 7); and
• notification thresholds regarding merger control (Article 9).

Financial market regulations

To the extent applicable, key aspects of the financial market are governed by the Swiss Financial Market Infrastructure Act (FinMIA) and the Swiss Financial Market Infrastructure Ordinance (FinMIO).

There are no specific rules addressing anti-money laundering (AML) in a JV context. Nevertheless, the obligations in the Swiss Anti-Money Laundering Act (AML Act) apply to a JV if it qualifies as a financial intermediary or dealer who hold assets on behalf of others, or who assists in the investment or transfer of assets.

Individuals, including legal entities, who hold assets belonging to others or provide assistance in the management or transfer of such assets fall under the category of financial intermediaries, as defined by the AML Act. This includes activities such as credit transactions and electronic transfers. Compliance includes fulfilling due diligence requirements, such as identifying beneficial owners, and belonging to a self-regulatory organisation or being directly supervised by FINMA. The scope of financial intermediaries extends beyond banks and securities dealers to include those providing payment services or managing payment instruments.

Sanction Laws

Switzerland has a sanction regime in place based on the Federal Act on the Implementation of Sanctions (known as the Embargo Act). The State Secretariat for Economic Affairs maintains a publicly available list of sanctioned individuals and entities.

Lex Koller

Lex Koller (officially known as the Federal Act on the Acquisition of Real Estate by Persons Abroad) is a Swiss law that regulates the acquisition of real estate properties by foreign individuals and legal entities (companies) in Switzerland. It was enacted to control and limit the extent to which non-resident foreigners can purchase Swiss real estate. The law’s primary aim is to prevent speculative buying and to ensure that Swiss citizens have fair access to their country’s property market.

The law imposes restrictions on the acquisition of certain real estate by foreigners. In general, non-resident individuals and legal entities are subject to limitations/approval requirements when purchasing properties such as residential real estate and vacation homes. Different cantons (Swiss administrative regions) may have varying rules and regulations related to the implementation of Lex Koller. Therefore, if a JV contains real estate assets, a specific review on potential Lex Koller implications should be conducted early in the process. If the real estate is necessary for the JV’s business conduct, a governmental ruling may be obtained to waive the applicability of this legislation.

Foreign Direct Investment (FDI)

Foreign direct investment (FDI) makes a significant contribution to Switzerland’s economy; therefore, Switzerland has been very open towards FDI and has not yet introduced a general structured framework for the systematic assessment of FDI. Currently, FDI control only applies to certain industries and sectors, particularly banking/securities and real estate, where prior government approval is required. A number of additional business activities require a licence from the authorities, including in the following fields: aviation, telecommunications, nuclear energy and radio/television. However, in recent years, Switzerland’s open policy has been questioned, and there are political initiatives to implement a more restrictive policy in the future. Governmental procedures to implement the Swiss Federal Act on the Control of Foreign Investments (ICA) started back in 2018, with consultation on the first draft of the new law ending in September 2022. The consultation bill was rejected by most participants, and the Federal Council decided to undertake substantial revisions to this first draft, which shall be less cumbersome to businesses than the first proposal. The amended proposal was published in December of 2023 and focuses on the investments that are most critical to national security by investors that are directly or indirectly controlled by foreign states.

Such law is not expected to enter into force before 2025/2026. However, once implemented, the Swiss ICA regulations (in its proposed form) are expected to become part of the typical due diligence process when implementing a Swiss JV. This will become relevant for sectors like defence equipment, electricity transmission and production, water supply, health, telecoms and transport infrastructure.

Again, from a competition law perspective, one has to distinguish between the main types of JVs, each of which is subject to different competition rules.

Corporate JV

These JVs operate as autonomous economic entities in the long term, performing all necessary functions independently. If the JV is a newly created entity, it often involves a transfer of business activities from at least one of the controlling companies to be subject to merger control. Notification to the Swiss competition authorities is required prior to implementation if both of the following thresholds are met (see Article 9 of the Swiss Federal Act on Cartels):

• the combined worldwide turnover of the undertakings concerned is at least CHF2 billion or the turnover in Switzerland is at least CHF500 million; and
• at least two of the undertakings concerned each have a reported turnover in Switzerland of at least CHF100 million.

Contractual JV

These JVs do not meet the criteria of full-function JVs and are assessed under the rules applicable to horizontal agreements. Transactions involving co-operative JVs may be notified prior to their implementation, pursuant to Article 49a of the Federal Act on Cartels.

The parties involved in a JV that is listed on a stock exchange must adhere to the relevant listing rules. In Switzerland, for instance, the SIX Swiss Stock Exchange mandates issuers to disclose relevant price-sensitive information (ad hoc publicity), along with other reporting requirements (in particular, financial reporting and regular reporting obligations). Depending on the circumstances, entering into a JV can trigger an ad hoc notification.

Furthermore, specific regulations may govern directors’ remuneration. These include prohibitions on certain types of remuneration (eg, “golden parachutes”) and the requirement for shareholders to vote on remuneration (say-on-pay).

See 3.6 Control/Ownership Disclosure Requirements for information on disclosure obligations under Swiss law.

Non-listed Companies

A Swiss corporation (Aktiengesellschaft) shall keep an up-to-date share register with information on its shareholders (direct beneficial owners) who have requested registration (note that such registration is not mandatory, but it is necessary for shareholders to effect voting rights at shareholder meetings). This share register is not publicly available.

This is also true for Swiss limited liability entities (Gesellschaft mit beschränkter Haftung). As a key difference, the quotaholders (direct beneficial owners) must also be registered with the Commercial Register, thereby becoming public.

Furthermore, any person who, alone or by agreement with third parties, acquires shares in a Swiss company (corporation and limited liability entity) whose participation rights are not listed on a stock exchange – and thus reaches or exceeds the threshold of 25% of the share capital or right to vote – must within one month give notice to the company of the first name, surname and address of the natural person for whom it is ultimately acting (the ultimate beneficial owner, UBO). Based on such information, the board is obliged to keep a register of UBOs of the company. The register is not made public.

In May 2024, as part of the proposed new AML, the federal government proposed a new federal transparency register, in which companies need to enter the information on their UBO. The register will not be publicly available. The bill is now being presented to parliament and is not expected to enter into force until 2026 at the earliest.

Listed Companies

If the JV company or a Swiss JV party is listed on a stock exchange, its shareholders must disclose a relevant participation as soon as such exceeds the 3% threshold (with further thresholds at 5%, 10%, 15%, 20%, 25%, 33.3%, 50% and 66.6%). This disclosure notification shall include the UBO and, if different, the direct shareholder. The information on significant shareholders is publicly available (for SIX Swiss Exchange listed entities, see www.ser-ag.com).

The reformed Swiss company law came into force on 1 January 2023. The main changes are greater flexibility in share capital and capital distributions, strengthening of shareholders’ rights to improve corporate governance, and the digitalisation of shareholders’ meetings. From a corporate JV perspective, the following changes allow for greater structuring flexibility and facilitate the handling thereof:

• the allowance of interim dividend payments;
• share capital in certain foreign currency is permissible (USD, GBP, EUR and JPY) – note that accounting and financial reporting must then be done in the same currency as the share capital;
• the implementation of the capital band concept, which allows greater flexibility for capital increases and decreases within a predefined range during a maximum period of five years; and
• shareholders’ meetings may now be held:
1. in one or more different meeting venues;
2. by electronic means without a physical meeting venue (virtual shareholder meeting);
3. in a physical and virtual venue (hybrid shareholder meeting);
4. in a meeting venue abroad; and
5. in written circular form (on paper or electronic).

Negotiating JV agreements can be a rather time-consuming and complex process, depending on the complexity of the envisaged structure. As a result, parties often outline key commercial terms in a term sheet or letter of intent. Those may include general directives on the parties’ envisaged structuring of a JV, including corporate governance principles.

While these terms are often non-binding with respect to the specifics of the JV, others are binding to govern the negotiation and diligence process. Examples of such binding rules include exclusivity, confidentiality obligations, cost sharing, the choice of applicable law and jurisdiction, or a commitment to resolve disputes through arbitration.

If no listed entities are involved, there is in principle no legal obligation to disclose a JV. Nevertheless, parties often decide to provide such market information on a voluntary basis, mainly for marketing purposes (eg, by way of a press release previously aligned amongst parties).

If either of the JV parties or the JV itself is listed, the relevant listing rules apply. Under Swiss law, it is often permissible for a listed entity to inform the market upon signing/closing – ie, after the term sheet/letter of intent stage. This would need to be assessed on a case-by-case basis.

Obtaining necessary authority approval (eg, related to merger control) is usually necessary prior to establishing the JV.

The JV Agreement, as the name suggests, is the fundamental document that “creates” and governs the JV and the rights and obligations of the parties to it. As such, it contains the agreement between the JV partners on the incorporation/creation, objective, organisation and termination of the JV.

Corporate JV

Swiss corporate JVs are typically established as corporations (Aktiengesellschaft). The minimum share capital for such a company is CHF100,000, of which at least CHF50,000 must be fully paid up. Share capital may be contributed in cash, in kind or by setting-off claims. Contributions other than by cash require additional disclosure and the involvement of an auditor.

A Swiss limited liability company (Gesellschaft mit beschränkter Haftung) can be formed with an initial capital of CHF20,000. Unlike a corporation, the members of such LLC are of public record. The articles of association may provide for additional financial and material contributions. The law also imposes other duties on the members of an LLC, such as the duty of loyalty and the prohibition of competition.

A corporation is usually preferable if confidentiality is the primary concern, and also because corporations earn better market acceptance among third parties due to their higher minimum capital requirements. On the other hand, an LLC may be deemed a better fit if the JV wishes to impose additional funding obligations other than the initial contribution. The incorporation procedure for both types is largely similar.

To incorporate a corporate JV, the founders hold an incorporation meeting in front of a notary public. Several corporate resolutions are made, such as the implementation of the articles of association and the election of the board of directors and, if necessary or desired, the auditors.

To complete the incorporation process, the company must be registered with the Commercial Register competent at the company’s seat. The application must be accompanied by supporting documents from the incorporation meeting.

In the course of the incorporation, all further corporate documentation – as agreed upon by the parties – would be effected, such as the shareholders’ agreement, the company’s business rules and potential further deal-specific agreements.

Contractual JV

A contractual JV is established upon entering into a JV contract. According to Swiss law, the parties in a contractual JV have the freedom to define their shared objectives and determine each partner’s contribution, including rights and obligations. Of course, any objectives that are impossible, unlawful or immoral are not permissible by law.

Corporate JV

At the core of a corporate JV is the mutual agreement between the partners/parties to create an autonomous corporate entity. This independent vehicle will be jointly owned by them, serving as the means through which they will collectively achieve their shared objective. Similar to a shareholder agreement, the corporate JV agreement typically outlines the essential aspects of the forthcoming corporate entity. These include the type, nature and internal structure of the company, voting rights, restrictions on share transfers and the specific contributions to be made by each individual JV partner. The corporate JV might also include provisions for ancillary (business) agreements to be established between the corporate vehicle and the partners.

Furthermore, the parties usually enter into a shareholders’ agreement (which might be the JV agreement itself) that covers essential aspects of their collaboration, including:

• the JV company’s legal form, domicile, capital structure and articles of association (including purpose);
• the representation of partners at the JV’s board of directors (including the chairperson);
• the composition of management;
• the signatory powers of board members and management;
• corporate governance matters, such as the conduct of board and shareholders’ meetings, internal organisation, decision-making processes, dispute-resolution mechanisms and provisions to protect minority interests;
• special regulations to address deadlock situations;
• details about (potential) future funding of the JV (or exclusion thereof);
• determination of the ownership of JV assets and the utilisation of JV parties’ assets, particularly intellectual property rights;
• an outline of the JV parties’ liabilities to third parties;
• rules on the transferability of shares, including restrictions like pre-emptive rights, rights of first refusal, drag-along and tag-along rights, as well as purchase rights;
• guidelines on profit and loss distribution;
• specification of non-compete obligations, fiduciary duties and confidentiality obligations;
• the JV’s duration, termination, exit strategies or winding-up procedures;
• change of control regulations (extraordinary termination right and/or purchase right); and
• governing law and jurisdiction (ordinary courts or arbitration).

To the extent permissible under Swiss law, JV parties occasionally replicate specific provisions of the shareholders’ agreement in the JV’s articles of association. This approach offers several advantages, as it holds corporate weight and legally binds the JV company (note that shareholders’ agreements are of a contractual nature only). Moreover, third parties are presumed to be aware of the articles’ contents since they are publicly accessible. However, this in turn may be the decisive factor with respect to why JV parties often prefer to keep the content of the articles of association on a standard level.

Furthermore, business rules that govern the board regulations and the delegation of day-to-day management responsibilities within the JV company are implemented, passing them from the board of directors to the management team in a tailor-made framework as deemed fit. In the absence of such business rules, the board of directors assumes full responsibility and liability for the management of the JV company.

Contractual JV

The foundation of contractual JVs lies in the agreement of the partners to combine their efforts towards a common goal. This agreement, commonly referred to as a “JV agreement”, “basic agreement” or “contrat de base”, covers certain aspects, including:

• the purpose of the JV;
• each party’s contribution to the JV, whether financial, in kind or otherwise;
• the internal structure and organisation of the JV, including the representation rights and powers of each party;
• the allocation of losses and profits between the parties;
• dispute regulations;
• termination; and
• choice of law.

Generally, the main objective when setting up the decision-making aspects of a JV entity is to duly reflect and balance the partners’ interests, level of participation and even the know-how they bring to the JV. This is usually done by way of specific regulations at the level of both the shareholders’ meeting and the board of directors. The potential for a deadlock situation and routes to avoid/handle such events shall be considered.

Shareholders’ Meeting

Since JV companies typically have a small number of shareholders, their meetings are commonly referred to as universal meetings – ie, all shareholders are present/represented. The unique feature of universal meetings is that shareholders can deliberate and make decisions on any agenda item without needing to fulfil the formal convening requirements that are typical of larger corporate meetings, such as an invitation period of 20 days.

Generally, the shareholder’s meeting passes resolutions with the majority of voting rights represented at the meeting, unless a higher quorum is provided for in the articles of association. By law, certain important matters require a majority vote with two-thirds of the voting rights and the majority of the nominal value of shares. Those important matters include:

• an amendment of the corporation’s purpose;
• the consolidation of shares, unless the consent of all the shareholders concerned is required;
• a capital increase subscribed from own capital, by contribution in kind or by setting-off claims, and the granting of special privileges;
• the creation of conditional contingent share capital, reserve capital or a capital band (authorised capital);
• the conversion of participation certificates into shares;
• any restriction on the transferability of shares;
• limitations on or cancellation of subscription rights;
• the introduction of preferential voting shares;
• a change of currency of share capital;
• the introduction of a casting vote for the chairperson at the shareholders’ meeting;
• provision of the articles of association on holding the general meeting abroad;
• the delisting of the equity securities of the corporation;
• merger, demerger, transformation or dissolution;
• the relocation of the registered seat;
• the introduction of an arbitration clause in the articles of association; and
• dispensing with the designation of an independent voting representative for conducting a virtual general meeting in the case of companies whose shares are not listed on a stock exchange.

In the interest of safeguarding the JV parties, the JV agreement may also incorporate provisions that ensure shareholders’ meetings are appropriately constituted only when all shareholders (ie, JV parties) are present. In addition, specific decisions deemed to be of critical importance (eg, dividend, liquidation, merger or changes to the capital structure) might require an elevated quorum, as stipulated in the agreement. The introduction of preferred voting shares is another option, but this is less common in Switzerland; generally, each share has one vote.

Board of Directors

Besides the shareholders’ meeting, the governance at the board level is of importance. To strike the envisaged balance between the JV parties, the number of board representatives (each having one vote), the designation of the chairperson (potentially accompanied by a casting vote) and the quorum requirements for board resolutions are key factors. Often, certain important matters require an enhanced quorum or even unanimous resolutions.

Furthermore, JV companies encounter distinct governance challenges compared to public companies. While public companies may prioritise the prevention of self-dealing, the primary objective of a JV is to strike a balance between the goals of the JV itself and the individual objectives of its partners. This equilibrium may pose difficulties, especially when the JV's founders have representatives on the board of directors who advocate for the founders’ interests. To address this, the implementation of independent committees and codes of conduct could help align and equalise the interests involved. Moreover, specialised committees can prove beneficial, particularly for JVs operating in the technology or manufacturing sectors, enabling them to focus on technical matters and efficiently resolve disputes pertaining to such issues.

Corporate JV

Once the corporate JV meets the minimum capital requirements and has sufficient assets to cover its share capital and statutory reserves, the JV parties have the flexibility to finance the venture with debt. Decisions to strike the right balance between equity and debt financing, as well as the determination of interest rates, are often influenced by tax considerations.

In scenarios where a thriving JV company evolves into a corporate group, it gains the ability to internally self-finance through strategic cash management. Such cash management involves the efficient utilisation and optimisation of funds owned by the group. Within the corporate group, specific companies may enjoy significant profitability and possess cash surpluses, while others may encounter liquidity challenges. Through cash pooling mechanisms, surplus funds from certain 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 available, with traditional bank borrowings being a popular choice, but also considering capital market instruments, venture capital and project finance. In certain cases, provisions in the articles of association (for limited liability companies) or the shareholders' agreement 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 comparison, corporate JVs typically enjoy more favourable 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 capitalised on the balance sheet of the JV company, such as certain intellectual property rights, assets or shares. Alternatively, the share capital may be paid by offsetting claims against the JV company. It is important to note that obligations 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 understand 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.

JV agreements typically encompass a range of dispute-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 potential 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 usually 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 reciprocal share call or put options at pre-agreed price formulas 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.

Asset transfers, leases, loans or licences for intellectual property 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, intellectual property rights, contracts or business;
• the supply of goods and services;
• the licensing of intellectual property;
• 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 agreement would have on the JV agreement and vice versa.

The JV agreement commonly includes specific provisions regarding the selection of the chairperson and vice-chairperson of the board of directors. It may also outline the minimum number of board members required for a quorum and whether the chairperson has a casting vote in case of a tie. These details (or parts thereof) are sometimes also found in the articles of association and are usually mirrored in the business rules.

Only individuals can serve as members of the board of directors – ie, legal entities may only be represented through a natural person. Typically, each JV party appoints its own representatives to serve on the board of directors, and the parties may foresee certain additional independent members being elected.

It is worth noting that Swiss law requires at least one person with sole signature power, or two persons with collective signature power, to be Swiss resident/s. Such signature power may be limited based on internal regulations, but a third party acting in good faith can nevertheless rely on the signature powers contained in the corporation’s Commercial Registry excerpt.

Other than certain duties and powers that are expressly reserved for the board of directors by law, all powers and duties may be delegated to individual management members or to one or more executive board members. This delegation allows the establishment of a structure similar to a two-tier system.

The board of directors’ non-transferable key duties include:

• overseeing management and providing management directives;
• establishing the organisation;
• organising the accounting system, financial controls and financial planning;
• appointing, dismissing and supervising those in charge of management and representation;
• preparing financial statements and shareholders’ meetings; and
• applying for a debt-restructuring moratorium and notifying the court if the corporation becomes over-indebted.

Members of the board of directors have a duty to act with due care and in good faith, prioritising the JV company’s interests (duty of care and loyalty). In situations where the interests of the JV party and those of the JV company are in conflict, the board members are obliged to act in the best interest of the JV company to avoid personal liability. Any unlawful conduct or breach of fiduciary duty by directors can result in personal liability for damages caused to the JV company.

The board of directors may install subcommittees (remuneration committee, risk management committee, nomination committee, etc) for the purposes of preparing and/or executing its decisions or to supervise specific undertakings. This may enhance the efficiency of the board but can also result in information asymmetry amongst its members.

In cases of actual or potential conflicts of interest, directors are required to immediately disclose the relevant conflict to the board, which must then take appropriate measures to protect the JV company’s interests. Such measures may include the relevant member refraining from deliberation and resolution, or even a shareholders’ meeting to vote on the matter.

Generally, transactions involving members of the board of directors and the JV company must be documented in writing (unless the transaction value of the JV company does not exceed CHF1,000) and conducted at arm's length.

Board members appointed by a JV party are generally allowed to vote in the interests of that party, unless a conflict arises between the interests of the JV party and the JV company, in which case board members must prioritise the JV company’s interests to avoid personal liability and fulfil their fiduciary duty.

Corporate JV

The JV company often becomes the legal owner of the IP when ownership is transferred. Consequently, the JV party must enter into a separate licence agreement with the JV company if it wishes to continue to use the IP. The transfer may be conducted by an in-kind contribution, but this approach can present challenges, particularly if the JV becomes insolvent or one of the contributing parties decides to leave. An inaccurate initial valuation could result in liability for creditors, shareholders or the departing party. Therefore, parties may opt to license IP out to the JV company.

Note that termination of the shareholders’ agreement does not automatically affect the JV’s ownership of its IP rights. Also, if a JV is liquidated, its assets will be liquidated, including IP. Against this, JV parties commonly foresee specific rights of use and further develop IP or purchase rights to apply in such scenarios.

Contractual JV

When a contractual JV is formed, all assets contributed are owned jointly by the parties. To manage IP rights, they are typically transferred to the JV through a licence agreement, while ownership remains with the respective parties. Ownership of the IP is usually not transferred to the JV because it would become jointly owned by the JV parties. Joint ownership is likely to lead to enhanced ownership complexity, such as a mutual consent requirement to any use or assignment of the jointly owned IP. In situations where a JV party sublicenses IP owned by a third party, it is important to review the terms of the primary licence to ensure that the JV’s use of the IP is permitted.

In the case of a contractual JV, licensing is usually preferable, whilst licensing and assignment are used for corporate JVs. If the IP is also under further use/development by a JV partner, said partner may prefer to retain direct ownership because of the potential impact of a JV termination or dissolution (see 8.1 Key IP Issues). Nevertheless, the ultimate decision for either path often depends on the actual usage of IP by a JV. If the JV’s main purpose is to further develop IP, a transfer can be preferable with a view to an exit scenario, as the potential sale of a JV not owning its main asset (its IP) can be limited.

Under Swiss law, public companies, banks and insurance companies with 500 or more employees and at least CHF20 million in total assets, or more than CHF40 million in turnover (ie, large companies, large undertakings), are obliged to report publicly on non-financial and sustainability issues. Such reporting shall give account of environmental issues, particularly CO2 targets, social issues, employee issues, respect for human rights and the fight against corruption. It shall contain such information as is necessary for an understanding of the development and performance of the business, the position of the company and the impact of its activities on these matters. This includes:

• a description of the business model;
• a description of the approaches followed in relation to the matters referred to in the foregoing, including the due diligence applied;
• a description of the measures taken to implement these concepts and an evaluation of their effectiveness;

• a description of the significant risks associated with the matters referred to in the foregoing and the company’s management of those risks arising from the undertaking’s own business activities, and, where relevant and proportionate, those arising from its business relationships, its products or its services; and

• the key performance indicators of the company’s activities in relation to the matters referred to in the foregoing.

The Federal Council has enacted the Federal Ordinance on Mandatory Climate Disclosures for Large Companies, which came into effect on 1 January 2024. This new ordinance sets standards for climate-related reporting standards applicable in Switzerland by binding implementation of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

For Swiss JVs, this is not likely to have a direct impact since the relevant (high) thresholds are only triggered in exceptional cases; Swiss ESG reporting law applies to certain large companies only. However, an indirect impact is certainly possible where a JV participant holds a substantial interest in the JV. If so, the JV may become part of its shareholders’ group reporting and/or will be requested to provide/collect relevant data for its report.

A Swiss JV could also be subject to EU regulation. The regulations under the EU Corporate Sustainability Reporting Directive (CSRD) come into force in different phases between 2024 and 2028. Key differences to Swiss law are the inclusion of non-listed large entities and a lower threshold regarding employees (250 instead of 500); more EU entities are therefore within scope compared to the current situation. This can include a Swiss JV that has an EU subsidiary reaching relevant thresholds.

For the first time, in 2029 – for the business year 2028 – non-EU entities will also be within the scope of the EU CSRD if they have a relevant EU turnover of at least EUR150 million and a relevant EU subsidiary – or a branch with sales revenue – of at least EUR40 million. Since Switzerland is not an EU member, a Swiss corporate JV reaching such threshold will fall within the scope of the EU CSRD. It seems worth noting that the reporting obligation resulting therefrom will also extend to their non-EU subsidiaries.

Corporate JV

The duration of a JV agreement may be limited to a definite period. A fixed period of up to 20 years is often viewed as permissible; longer terms may be restricted by law due to their “excess binding nature”. In practice, partners often refrain from specifying a fixed duration for their JV agreement, instead establishing procedures and conditions for ordinary and extraordinary termination (for good cause – eg, change of control, breach of material obligations, seizure of assets or bankruptcy of either JV party).

However, Swiss corporations are established for an unlimited period of time. As a result, termination of the JV agreement does not affect the JV vehicle itself. Nevertheless, the articles of association can stipulate that the JV vehicle will be dissolved upon termination of the JV agreement. Furthermore, the shareholders have the option to agree on the dissolution of the company at a general meeting.

Contractual JV

Under Swiss law, if a contractual JV is formed for an indefinite period or for the lifetime of one of the partners, any partner may terminate the partnership by giving six months’ notice. Therefore, the parties usually agree on a fixed term with automatic renewal if the JV agreement is not terminated before the end of the fixed term. Specific termination events/rights, as well as termination for good cause, remain reserved.

A direct transfer of assets between JV parties remains, in principle, unaffected by the JV unless the respective asset is of relevance for the JV itself. This could be the case for IP that is licensed out to the JV by one participant and shall be transferred to another participant. It is then relevant to ensure that the new owner will continue licensing out such IP to the JV, presumably under the same terms as the former owner did.

The assessment changes if assets are initially transferred to the JV and then to a JV participant. Not only are the parties to the transfer different (JV participant and the JV itself versus JV participants amongst themselves), but also the remuneration for such assets belongs to the JV. Accordingly, all JV participants financially participate indirectly in the transfer. Potential conflicts of interest must be addressed properly and, if foreseeable, it may be helpful to align on the valuation of the assets as well as on other potential impacts of the transfer of assets (eg, future usage thereof by the JV company) in the JV agreement.

The main effect of assets originating from the JV itself being transferred to a JV party is that the other JV participants will not further participate in (recurring) earnings resulting from such assets by way of dividend payments. Again, the valuation aspect seems key, and the potential tax impact the transfer may have on the JV company shall also be considered. Overall, the JV structure/organisation often assures that transfers of relevant assets require the approval of all JV participants (or at least those with a substantial interest).