Since 1 January 2013, Swiss companies limited by shares were able to prepare their financial reports either in Swiss francs or in the foreign currency relevant for their business operations according to Swiss accounting law. However, it was mandatory that the share capital continued to be denominated in Swiss francs.
The revised Swiss corporate law (as of 1 January 2023) provides the possibility to also keep the share capital in the foreign currency that is essential for the business operations of a company according to art. 621 para. 2 of the new Swiss Code of Obligations (nCO). With this, the Swiss legislator closes an inconsistency with the already revised Swiss accounting law.
The new rule applies to both already established companies and companies in the process of being incorporated.
For a share capital in foreign currency the following is required pursuant to art. 621 para. 2 nCO:
- the share capital in the foreign currency must correspond to an equivalent value of at least 100,000 Swiss francs at the time of incorporation or at the time the board of directors has ascertained that the legal requirements according to art. 621 para. 2 nCO are met (in case of an already existing company);
- the accounting and financial reporting must be done in the same currency; and
- the foreign currency must be one which the Swiss Federal Council has defined as suitable for this purpose.
The reference to business operations and the link to accounting and financial reporting law ensure that the choice of the functional currency is materially justified.
The permissible currencies for the share capital are determined by the Swiss Federal Council. According to the preliminary draft for the revision, these shall be, in addition to the Swiss franc, the British pound (GBP), the euro (EUR), the US dollar (USD) and the yen (JPY).
Determination at incorporation
The share capital can be defined in a foreign currency immediately upon incorporation. In such case, the requirements of art. 621 para. 2 nCO must be recorded in the deed of formation. In addition, the exchange rate applicable on the day of the incorporation must be stated in the deed of formation accordingly (Art. 629 para. 3 nOR). The choice of and responsibility for the conversion rate rests with the founders. The commercial registry would only have to intervene if an obviously incorrect conversion rate were applied.
Currency change for already established companies
If existing companies wish to change the currency of their share capital at the beginning of a financial year, the shareholders’ meeting must approve such a motion. It is within the competence of the shareholders' meeting to resolve to change the currency in which the share capital is denominated; likewise, it may resolve to change back from a foreign currency to Swiss francs.
In contrast to general amendments to the articles of association, the Swiss legislator appears to assume that there is a special need for protection, which is why the shareholders' meeting must pass the resolution by a qualified majority. The board of directors is responsible for the implementation, whereby the board of directors must amend the articles of association and in doing so establish that the requirements of art. 621 para. 2 nCO are met. The resolutions of the general meeting of the shareholders and of the board of directors must be publicly certified by a Swiss notary.
As mentioned, the applicable currency is determined by the shareholders' meeting and a change of currency is possible as per the beginning of each financial year.
Advantages of the new rule
The introduction of share capital in a foreign currency will be particularly interesting for companies
- whose accounts are already kept in a functional foreign currency; or
- subsidiaries of multi-national groups located in Switzerland who intend to distribute future dividends based on the relevant foreign currency.
The new rule eliminates the inconsistency between Swiss corporate law and Swiss accounting law that existed under the current scheme, which led to translation problems and additional formal work for such companies.