The articles of association: the clauses you can't do without

The articles of association are the constitution of your company: they define what it can do, how it decides and who has which rights. Good articles prevent conflicts; superficial ones generate them. In Switzerland the articles of association of an AG or a GmbH must contain a core of mandatory clauses set out in the Code of Obligations, but it is in the optional clauses that the real governance is played out. Let’s look at what cannot be missing, taking into account the revision of company law for the AG in force since 1 January 2023.

The mandatory clauses

Without these particulars the articles of association cannot be entered in the commercial register. For an AG the minimum content includes:

• the company name (business name) and the registered office of the company;
• the corporate purpose, described clearly and not generically;
• the amount of the share capital and of the contributions paid in;
• the number, nominal value and class of shares (registered or bearer, where still permitted);
• the form of the company notices to shareholders and the manner of convening the general meeting;
• the bodies for administration and for audit.

For the GmbH the logic is analogous, with the particularity of the quotas: the articles indicate the capital, the nominal value of the quotas and the members, who are entered by name in the commercial register.

The optional clauses that make the difference

This is where the balance between the members is built. They are the clauses that are rarely noticed until they are needed — and by then it is too late to introduce them:

• Approval and pre-emption clauses: they limit the free transfer of shares or quotas, deciding who may enter the ownership base and on what terms. Fundamental in closely held and family-based companies.
• Privileged voting rights or voting shares: they allow capital and control to be separated within the limits of the law.
• Qualified majorities: they raise the quorum for sensitive decisions (change of purpose, capital increase, dissolution), protecting minorities.
• Conditional capital and capital band: instruments introduced or reorganised by the reform to manage flexible increases, stock options and the entry of investors.
• Clauses on dividends and reserves: they define the distribution policy beyond the legal minimums.

Corporate purpose: neither too narrow nor too vague

The purpose deserves particular attention. If it is too narrow, every new activity requires an amendment of the articles by notarial deed. If it is too broad and generic, the commercial register may request clarifications and clarity towards banks and counterparties is lost. The right formulation describes the main activity precisely and opens up to ancillary and instrumental ones, without turning into an endless list.

How the articles of association are amended

The articles of association are not an immutable document, but changing them has a procedural cost. Amendment requires:

1. a resolution of the meeting (the general meeting in the AG, the members’ meeting in the GmbH) with the quorum provided by law or by the articles themselves;
2. a public deed before a notary certifying the amendment;
3. entry in the commercial register, which makes the amendment effective towards third parties.

For this reason it is worth designing the articles with the coming years in mind: providing for conditional capital or transfer clauses from the outset avoids costly amendments when an investor or a new member arrives.

Recurring mistakes

• Adopting a standard set of articles downloaded or recycled, without adapting it to the real structure of the members.
• Confusing the articles of association with the shareholders’ agreement: the former is public and enforceable against third parties, the latter is private and binds only the signatories. Both are needed, coordinated.
• Forgetting transfer clauses in a family-based company, with the risk that a quota ends up in unwanted hands.
• Defining a purpose that does not cover the activity actually carried out.

In summary

The minimum content makes the articles valid; the optional clauses make them useful. The difference between a company that decides in an orderly way and one that grinds to a halt at the first disagreement almost always lies in a few lines of the articles written well at the outset.

Do you want articles of association built on your real ownership base, not a standard template? The corporate division of SIH ONE designs the articles together with the governance and the agreements between members.