Liability Risks in the Start-up Phase
Establishing a company limited by shares (AG) or limited liability company (GmbH) usually happens in multiple steps. Because of this, contracts for the future company are often signed before the company is officially created.
Legal situation and liability risks for founders
According to Swiss law, an AG or GmbH only becomes a legal entity once it is registered in the commercial register. Before this registration, the company does not legally exist and therefore cannot enter into contracts itself.
If founders sign contracts in their own name or in the name of the planned company before it exists, they become personally responsible for these obligations. If multiple founders act together, they share this responsibility. Examples include employment contracts with future employees or lease agreements for office spaces.
If the founding process is delayed or ultimately fails, these contracts do not automatically become void. They must either be cancelled by mutual agreement, or the founders might face claims for damages.
Reducing liability risks
Under Swiss law, individuals who have signed contracts in the name of a company in formation can be released from personal liability if the incorporated company officially assumes these contracts within three months after it is registered (Art. 645 para. 2 CO or Art. 779a para. 2 CO).
To protect themselves, founders should clearly state in contracts that they are signing "on behalf of the company in formation" not in their personal names. Only then can the newly formed company later assume these contracts without requiring extra approval or changes.
However, neither founders nor contractual partners have a legal right that the incorporated company must assume these contracts automatically. If disagreements among founders occur after the company is incorporated, the transfer of these contracts might fail.
To prevent such problems, it’s important to include a condition in contracts stating that they only take effect if the company is successfully incorporated and formally assumes the contract within the required three-month period. This is particularly essential for contracts that cannot be cancelled prematurely, such as long-term lease agreements.
In complex situations, founders should also consider creating written agreements among themselves. Such internal agreements may clearly define how liability is shared within the founding group, depending on the specific circumstances.