By Startups.ch, November 13, 2015

Establishing a branch in Switzerland – a legal overview

Switzerland is a popular location for businesses. Establishing a branch in Switzerland is attractive to both domestic and foreign businesses. This article provides a legal overview.

A business location in Switzerland offers several different advantages: a liberal economic system, political stability, low levels of taxation, flexible labour laws and high availability of qualified employees are just a few of these advantages.

The term “branch” (“Zweigniederlassung”)

The branch is a commercial operation which, from a legal perspective, is a dependent part of a principal place of business. The branch permanently performs – on its own premises – the same type of activities as the principal place of business and, in doing so, has a certain amount of economic and commercial independence.

Example: Bank X has its headquarters in Zürich. It operates from further locations in Basel, Bern and Lausanne.

A branch office is not a subsidiary

In German-speaking Switzerland, the term “Filiale” is often used in the place of “Zweigniederlassung” to mean branch. In French legal terminology, however, “Filiale“ means subsidiary which, in contrast to a branch, is also legally independent. In order to avoid misunderstandings, the Swiss commercial register does not permit the term“Filiale“ to be used in respect of branches.

Legally, the branch remains part of the whole business and – although it is registered in the commercial register – has no legal personality of its own. The lack of its own legal personality is also the main difference between a branch and a subsidiary.

A branch can be set up in Switzerland by a business seated in Switzerland, as well as by a business seated abroad.

Swiss branch of a domestic company/partnership

Swiss branches of firms which have their headquarters in Switzerland should be registered where they are located (Article 935 of theSwiss Code of Obligations). Branches can be set up by an AG (company limited by shares), a GmbH (limited liability company), cooperative societies and general and limited partnerships.

The advantages of a branch are a professional presence at another location, a certain amount of economic independence and low set-up costs, as no minimum capital is required.

Swiss branch of a foreign company/partnership

Foreign businesses can establish branches in Switzerland which are also subject to Swiss law. In these circumstances, Swiss law is, above all, applied to external legal relationships (e.g. which persons are able to conclude valid transactions for the branch?). Internal relationships, such as the regulation of responsibility, are usually governed by the foreign law.

To establish a branch, an authorised person resident in Switzerland must be appointed and registered in the commercial register. Swiss citizenship is not necessary. In addition, the branch of a foreign company/partnership is subject to independent insolvency proceedings for obligations it has entered into on its own account.

The advantages here, too, are low set-up costs, because no minimum capital is required. Additional costs may be incurred, however, by the headquarters’ documents being translated into an official language of the relevant canton’s commercial register.