LLC Statuten: Content, Purpose and Typical Mistakes

What are LLC Articles of Association?

LLC Articles of Association are the fundamental rules of a limited liability company. They are established upon incorporation and form part of the public deed.

The LLC does not simply come into existence through a private agreement. The founders declare in a public deed that they are establishing an LLC, lay down the Articles of Association therein, and appoint the corporate bodies (Art. 777 Abs. 1 OR). When registering for entry, the public deed and the Articles of Association, among other documents, must be submitted to the Commercial Registry Office (Art. 71 Abs. 1 HRegV).

It is also important to note that LLC Articles of Association cannot be changed informally at will. Any amendment to the Articles of Association must be publicly certified and entered in the commercial register (Art. 780 OR). Thus, anyone who plans poorly during incorporation risks unnecessary costs and delays later on.

What minimum content must LLC Articles of Association have?

The Articles of Association of an LLC must regulate at least four topics. If one of these points is missing, the Articles of Association are incomplete.

The statutory minimum content includes:

These mandatory details result directly from Art. 776 OR. The minimum content is mandatory. The Articles of Association must therefore contain at least the company name and registered office, purpose, share capital with shares, and the form of communication.

The share capital of an LLC is at least CHF 20,000 (Art. 773 Abs. 1 OR). It is specified in the Articles of Association, and basically only the company assets are liable for the liabilities of the LLC (Art. 772 Abs. 1 OR). Upon incorporation, a contribution corresponding to the issue price must be fully paid up for each share (Art. 777c Abs. 1 OR).

How should the purpose of the LLC be formulated?

The purpose should be clear enough for third parties to understand what the LLC does, but not so narrow that every minor adjustment to the business model requires an amendment to the Articles of Association.

Commercial register law requires legal entities to describe their purpose in such a way that their field of activity is clearly visible to third parties (Art. 118 Abs. 1 HRegV). In the case of an LLC, the Commercial Registry Office takes over the description of purpose unchanged from the Articles of Association or the foundation deed (Art. 118 Abs. 2 HRegV).

Too general formulations are therefore tricky. A purpose such as "transactions of all kinds" is not sufficiently specific. Formulations that are too narrow are also impractical. If an LLC offers web design today and wants to provide online marketing, training, or software development tomorrow, the purpose should leave enough room for this.

A good purpose describes the core business in an understandable way and, if necessary, complements it with a factually suitable ancillary purpose. It should not list every conceivable transaction, but neither should it be so empty that no one knows what the company actually does.

Why are LLC Articles of Association more than just a mandatory document?

LLC Articles of Association can regulate far more than the minimum content. This is precisely where the practical value lies.

The law allows the Articles of Association, for example, to provide for additional capital contribution obligations and ancillary performance obligations (Art. 772 Abs. 2 OR). An additional capital contribution obligation means that shareholders must provide additional money under certain conditions. It is only possible if it is provided for in the Articles of Association, and the amount must be specified per share. This amount may not exceed twice the nominal value of the share (Art. 795 Abs. 1 OR, Art. 795 Abs. 2 OR). The Articles of Association must clearly show whether and to what extent individual shares are subject to an additional capital contribution obligation.

Ancillary performance obligations can also be regulated in the Articles of Association. They are only permissible if they serve the purpose of the company, the maintenance of its independence, or the preservation of the composition of the shareholder circle (Art. 796 Abs. 2 OR). Object and scope must be determined in the Articles of Association (Art. 796 Abs. 3 OR).

Other typical design points are:

• Rights of first refusal or purchase rights for shares

• Non-compete clauses for shareholders

• Special voting rights or voting restrictions

• Veto rights for certain resolutions

• Consent requirements of the shareholders' meeting for important transactions

• Rules on the withdrawal or exclusion of a shareholder

Such provisions must be formulated deliberately. They can be crucial later on when a shareholder wants to sell, a conflict arises, or a succession needs to be regulated.

What rules apply to shares and their transfer?

The assignment of shares generally requires the consent of the shareholders' meeting. The meeting can refuse consent without giving reasons (Art. 786 Abs. 1 OR).

This fits the personal nature of the LLC. Unlike in a typical public company, who the shareholder is is often important in an LLC. However, the Articles of Association can adapt this basic legal rule. They can, for example, waive the consent requirement, specify reasons for refusal, provide for an acquisition at real value, or exclude assignment (Art. 786 Abs. 2 OR).

Particularly for family businesses, startups, or joint ventures, a conscious regulation is worthwhile. Without clear Articles of Association, it can become difficult if a shareholder wants to sell their shares or if unwanted third parties are to enter the company.

What should the Articles of Association regulate regarding management?

Unless the Articles of Association state otherwise, all shareholders manage the business jointly (Art. 809 Abs. 1 OR). This may be unproblematic in a single-member LLC. With several shareholders, however, it can quickly lead to ambiguities.

The Articles of Association can regulate management differently (Art. 809 Abs. 1 OR). They can also provide that certain decisions must be submitted to the shareholders' meeting for approval (Art. 811 Abs. 1 OR). In addition, every managing director is generally authorized to represent the company, although the Articles of Association can regulate representation differently. However, at least one managing director must be authorized to represent the company (Art. 814 Abs. 1 OR, Art. 814 Abs. 2 OR).

Therefore, clear answers to the following questions are of practical importance:

• Who leads the LLC in everyday life?

• Who is allowed to sign contracts?

• Which transactions require the consent of the shareholders' meeting?

• What applies in the event of a tie vote?

• Who ensures commercial register registrations and shareholders' meetings are held?

Without a clear organization, small operational issues can turn into major conflicts.

What typical mistakes happen with LLC Articles of Association?

The most common mistake is treating LLC Articles of Association as a pure formality. This often leads to standard rules that do not fit the specific company.

1. The purpose is too unclear or too narrow

A purpose must make the field of activity clearly recognizable (Art. 118 Abs. 1 HRegV). Too general purpose clauses are inadmissible, too narrow clauses make later adjustments tedious. The best solution usually lies in a precise but sufficiently flexible formulation.

2. The company name is not checked properly

The company name can basically be chosen freely, but must contain the legal form (Art. 950 Abs. 1 OR). In addition, it must clearly differ from all company names of commercial partnerships and cooperatives already registered in Switzerland (Art. 951 OR). Entries in the commercial register must be true and must not deceive (Art. 929 Abs. 1 OR).

3. Transfer rules are left to chance

Anyone who wants to transfer shares later should deliberately design the consent requirements. The law provides a basic rule, but allows options in the Articles of Association (Art. 786 Abs. 2 OR). This design possibility is often too little utilized.

4. Additional capital contributions are included thoughtlessly

Additional capital contribution obligations can make sense, but they create additional financial risks. They must be provided for in the Articles of Association and limited in amount (Art. 795 Abs. 1 OR, Art. 795 Abs. 2 OR). Anyone who assumes them should understand when and in what amount payments can be demanded.

5. Exit and conflict cases remain unregulated

A shareholder can sue in court for permission to withdraw for good cause (Art. 822 Abs. 1 OR). The Articles of Association can additionally grant a right of withdrawal and specify conditions for it (Art. 822 Abs. 2 OR). Particularly with several shareholders, it is often useful not to clarify such scenarios only in the event of a dispute.

Conclusion on LLC Articles of Association

LLC Articles of Association are not a paper for the drawer. They determine the legal framework of your company and can be crucial later on when shareholders change, capital is needed, or important decisions are pending.

The minimum content is prescribed by law. However, good LLC Articles of Association go further. They translate the concrete business model, the roles of the shareholders, and possible conflict scenarios into clear rules. If you need support with the topic of incorporation, Jurata is always happy to help you.

Frequently asked questions about LLC Articles of Association

Must LLC Articles of Association be publicly certified?

Yes. Upon incorporation, the Articles of Association are set forth in the public deed (Art. 777 Abs. 1 OR). Subsequent amendments to the Articles of Association must also be publicly certified and entered in the commercial register (Art. 780 OR).

Must the shareholders be listed in the Articles of Association?

No. The Articles of Association must contain the amount of share capital as well as the number and nominal value of the shares (Art. 776 Ziff. 3 OR). However, the shareholders are entered in the commercial register with the number and nominal value of their shares (Art. 791 OR).

Can you change LLC Articles of Association later?

Yes. The amendment of the Articles of Association belongs to the non-transferable powers of the shareholders' meeting (Art. 804 Abs. 2 Ziff. 1 OR). The resolution to amend must be publicly certified and entered in the commercial register (Art. 780 OR).

Are model Articles of Association sufficient for an LLC?

Model Articles of Association can be a starting point for simple cases. However, they are no substitute for a conscious examination of the points that are important for your LLC. Especially with several shareholders, investors, family businesses, or planned successions, the purpose, transfer of shares, management, withdrawal, and additional obligations should be carefully regulated.