Can initial deposits be repaid to the stockholders?
No, it is not allowed to repay initial deposits to shareholders because the value of the company in the size of the stock deposit may not be voluntarily diminished.
This is codified in different places in the law. Article 680 paragraph II of the Swiss Code of Obligations states that the initial deposits may not be repaid to the investors: “The private equity that is invested in a public limited company travels down a one way street… once it reaches the company, withdrawal of these invested funds is generally forbidden…” (Federal Court of Aarau in SJZ 1985 43). By doctrine and jurisprudence, the repayment obligations of a public limited company are void. Indirect repayment is also not allowed with the consequence of requiring reinvestment of the repayment. (see Federal Court Decision 109 II 129)
A consequence of this ban is the restriction outlined in Article 675 Paragraph II of the Swiss Code of Obligations where dividends may only be paid out from profits and reserves built up for the specific purpose of repayment. Moreover, Article 675 Paragraph I states that no interest may be paid for the equity investment. The lawmaker’s intent here was also to prevent the equity repayment.
Article 678 f. of the Swiss Code of Obligations states that shareholders and members of the board must repay unjustifiably rendered services.
Important: Shareholders in the company are contractual partners and can therefore make certain demands of the company. Such demands must be accounted for as foreign capital and must therefore also be fulfilled. However, of the position of the shareholder can be deemed to be abusive if, for example, the shareholders knowingly and willingly provided the company with insufficient equity. In such a case it could be that the equity investment could be treated as the company’s own equity making it subject to the obligation to the other creditors.
