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Formation liability for AG and GmbH / Founder’s and involved person’s liability

Founders, members of the administrative board and all people who participate in a corporation’s formation process are subject to the formation liability in accordance with art. 753 of the Swiss Code of Obligations. This applies to the formation of a GmbH too.

Formation liability means that all participants to the formation are liable to the newly founded company, to the shareholders and to the company’s creditors for any damage arising from their behaviour in breach of duty in the course of the formation. Of particular concern is the constellation where somebody is misled about the financial strenght of the newly founded company. This is particularly likely to happen in the case of so-called qualified formations (e.g. with contribution in kind). The formation liability applies also to capital increases.

Examples of situations where a formation liability could apply:

  • A cash formation is simulated, whereas material assets are brought in in the new company instead of cash.
  • Contributions in kind are overvalued, i.e. the capital of the new company is underfinanced, because the value of the introduced material assets does not correspond to the outstanding shares’ value.
  • The capital of the new company is only feignedly paid in, e.g. with a short term loan which is paid back immediately after the formation.

As aforementioned, not only the founder but also further participants are liable (e.g. fiduciaries and notaries). In accordance to the Swiss Supreme Court every person, which participates to the foundation in a creative way, enhances the founder’s activity and with his help encourages the company’s formation may be held liable if acting intentionally or negligently.

The formation liability only applies for the formation period, including the preparatory acts until the registration in the commercial registry.

Preferably you establish or convert your company with STARTUPS.CH. STARTUPS.CH will provide you with professional guidance before and after the foundation.

Here you will be able to apply for a counselling interview and to request free documentation.

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