Legal Advice for Startups: What Matters When Incorporating a Company
Establishing a company involves a range of legal challenges that should be considered early on. On the one hand, this includes the key agreements between the founders as well as contracts with investors, employees and customers and, on the other, dealing with regulatory requirements.
Shareholder agreements
In addition to choosing the right legal form – typically a private limited company (GmbH) or a company limited by shares (AG) – and the actual establishment of the company, the drafting of a shareholder agreement is of key importance. As a general rule, this agreement is subject to the principle of contractual freedom and can be tailored individually. While the law lays down the basic rights and obligations of shareholders as well as the organization of the company, certain arrangements may be sensible based on the specific circumstances and shareholding structure.
To avoid conflicts later on, all parties involved should be clear from the outset about their rights with regard to participation in the company's success and about the extent to which they can determine the business strategy. Depending on business performance and changes in external conditions, a lack of binding rules can quickly lead to disputes.
General terms and conditions and master agreements with customers and suppliers
Swiss contract law offers plenty of flexibility when drafting general terms and conditions (T&Cs) and master agreements with customers or suppliers.
T&Cs set out standardized provisions for a large number of business relationships, such as payment terms, delivery terms, warranties and exclusions of liability. In addition, T&Cs promote transparency and trust between companies and their customers.
T&Cs should be reviewed on a regular basis to check that they are up to date and adapted to reflect any changes in the business model. In order to make sure that a company's own T&Cs apply in the event of a dispute, it is equally important to ensure and document the inclusion of the latest T&Cs for each individual contract.
Employment law
Contractual freedom also applies with regard to hiring employees, and existing employment contracts can, in principle, be terminated without any particular reason. When drafting employment contracts, however, a number of mandatory legal provisions must be factored in, which may not be deviated from to the detriment of employees (Article 361 and 362 of the Swiss Code of Obligations).
In addition, the Labor Act contains detailed provisions on working hours, rest periods, breaks, working-time recording and extensive rules to protect the health of employees.
Further, for companies with international staff or employees who work remotely, it is important to ensure that work permits are obtained in the correct manner and that the Swiss social security system is complied with, as well as checking the tax situation.
Regulatory requirements
Finally, depending on the sector and planned business activity, companies should familiarize themselves with the relevant regulatory requirements before setting up in business. For example, most activities in the financial or healthcare sector are highly regulated and, in some cases, only permitted once an official license has been obtained.
All companies that collect and process personal data on a large scale should also familiarize themselves in good time with the applicable data protection laws. While companies domiciled in Switzerland are primarily subject to the Swiss Data Protection Act (FADP). In the case of cross-border activities it needs to be examined to what extent the sometimes stricter requirements of the European General Data Protection Regulation (GDPR) should also be complied with.