Converting a GmbH into an AG (and vice versa)

Many Swiss companies start out as a GmbH (limited liability company) to keep the initial capital low and then, as they grow, consider moving up to an AG (stock corporation). Others take the opposite route. The good news is that there is no need to dissolve the old company and set up a new one: the Merger Act (MerA) provides for a direct conversion of the legal form, preserving the company’s identity, contractual relationships and registration number. Let’s look at how it works and what really changes.

Why move from a GmbH to an AG

The typical reasons relate to perception and structure:

image and credibility: the AG is still seen as the form used by more structured businesses, which helps with banks, clients and investors;
shareholder anonymity: in a GmbH the members are listed in the commercial register, whereas in an AG the shareholders are not;
bringing in investors: the share-based structure makes financing rounds, stock options and transfers of stakes easier.

The reverse move, from AG to GmbH, makes sense when you want to simplify the governance of a small, family-based company, with fewer formalities around the general meeting.

Comparing the capital

The main leap is the capital. A GmbH requires a minimum share capital of CHF 20,000, fully paid in. An AG requires a minimum share capital of CHF 100,000, of which at least CHF 50,000 (or 20%, if higher) must be paid up. Converting a GmbH into an AG therefore almost always means raising the capital to at least CHF 100,000, often combining the conversion with a capital increase.

The conversion procedure

Conversion under the MerA follows a precise sequence:

Conversion balance sheet: you start from an up-to-date statement of financial position, as a rule not too far ahead of the decision.
Conversion plan: the managing body draws up a written plan setting out the new form, the articles of association and the consequences for members and shareholders.
Conversion report: explains and justifies the operation, in particular its effects on the members.
Review by a licensed auditor: the plan and the report must be reviewed; small businesses may waive this with the consent of all members (opting-out).
Resolution of the general meeting with the qualified majority required by law.
Public deed before the notary, adopting the new articles of association.
Entry in the commercial register, which makes the conversion effective.

What stays the same and what changes

The strength of the conversion is legal continuity: the company remains the same legal entity. Contracts, employment relationships, bank accounts, VAT, receivables and debts all remain valid. There is no transfer of assets and no liquidation.

What changes is the company’s “outfit”: quotas become shares (or vice versa), the corporate bodies and general-meeting rules change, and the company name changes, since it must carry the new suffix (AG or GmbH).

Tax aspects not to overlook

If carried out correctly, the conversion is as a rule tax-neutral: it is not a liquidation, so it does not trigger the realisation of hidden reserves or the 35% withholding tax on reserves. Watch out, however, for the capital: raising it to CHF 100,000 to become an AG may generate issue stamp duty above the statutory exemption threshold, and this needs to be planned. Conversely, a mistake in the sequence of steps can trigger unwanted tax consequences.

Mistakes to avoid

Confusing the conversion with a brand-new incorporation: you would lose continuity and history.
Underestimating the capital requirement for the AG and arriving at the notary without the funds.
Forgetting to update logos, letterhead, contracts and VAT with the new company name.
Waiving the auditor’s review without the formal consent of all members.

In summary

Converting a GmbH into an AG (or the reverse) is an orderly operation with full continuity, not a fresh start. The heart of the project is the capital, the sequence of steps and tax neutrality.

Are you considering changing your company’s legal form? SIH ONE’s corporate division designs and executes the conversion from the initial analysis through to registration.