Swiss corporate law is precise, well-established, and in many respects generous to founders. It sets out the rights of shareholders, the obligations of directors, and the procedures that govern major decisions. What it does not do is anticipate the particular arrangements that two or more co-founders have reached between themselves. The statute provides a framework; it does not provide a partnership.

A shareholders’ agreement fills that gap. For international co-founders incorporating in Switzerland, whether through a company limited by shares (SA) or a limited liability company (Sàrl), the agreement is the document that converts an understanding into an enforceable arrangement. It governs what happens when one founder wants to leave, when a third party makes an offer to buy, when the parties disagree about strategy, and when the relationship between co-founders deteriorates beyond repair. Incorporating without one is possible. It is simply a risk that most experienced founders and their advisers prefer not to take.

What Swiss Corporate Law Provides By Default

The Swiss Code of Obligations governs both the SA and the Sàrl. For decisions requiring shareholder approval, it sets out voting thresholds. For the transfer of shares or quotas, it provides default rules; but those defaults may not reflect what the founders intended. In an SA, shares are in principle freely transferable unless the articles of association restrict transfers. Unless the articles of association provide otherwise, the transfer of quotas in a Swiss Sàrl requires the approval of the shareholders’ meeting. Such approval is generally adopted by at least two-thirds of the votes represented and the absolute majority of the voting share capital.

These statutory provisions protect the company and its shareholders in a general sense. They do not address the specific commercial understandings that co-founders typically reach: who has the right to appoint board members, what happens if one founder is bought out, whether a new investor’s entry requires the consent of all existing shareholders, or what obligations apply if a founder wishes to compete after departure. For all of these, a shareholders’ agreement is the appropriate instrument.

Governance and Decision-Making

One of the most important functions of a shareholders’ agreement is to define how the company will be governed in practice, not merely on paper. The statutory framework allocates certain decisions to the general meeting of shareholders and others to the board of directors. It does not, however, determine which decisions require unanimity among the founders, which can be taken by a simple majority, or which matters the founders wish to reserve to themselves regardless of their formal shareholding.

A well-drafted agreement will set out a list of reserved matters: decisions that require approval from all shareholders, or from shareholders representing a specified threshold, regardless of statutory requirements. Typical reserved matters include raising additional capital, incurring significant debt, disposing of material assets, entering into related-party transactions, and approving the annual budget. The list should reflect the specific circumstances of the venture and the relative positions of the co-founders; a one-size-fits-all approach rarely serves anyone well.

Board composition is a related question. If two founders each hold fifty per cent of the equity, the agreement should address how the board is constituted and what happens when the two directors cannot agree. Leaving this to the default rules of Swiss corporate law, which do not resolve true deadlock at board level, is a common and avoidable oversight.

Transfer Restrictions and Pre-Emption Rights

Co-founders typically do not want to find themselves in business with an unknown third party because one founder has sold their shares without warning. A shareholders’ agreement addresses this through transfer restrictions and pre-emption rights.

A right of first refusal gives existing shareholders the right to purchase shares at the same price and on the same terms as any proposed third-party sale, before the shares can be transferred to that third party. A right of first offer requires the selling shareholder to offer the shares to existing shareholders before approaching the market. These mechanisms ensure that the founding group has the opportunity to maintain its composition before an outsider can enter the share register.

Drag-Along and Tag-Along Rights

When a buyer acquires a Swiss company, they typically want to acquire one hundred per cent of the share capital. Drag-along provisions address this by requiring minority shareholders to sell their shares on the same terms as the majority, when the majority decides to accept an offer. Without a drag-along, a minority shareholder can effectively block a transaction that the majority has approved, giving a disproportionate degree of leverage to a small position.

Tag-along rights work in the opposite direction. They protect minority shareholders by giving them the right to participate in a sale on the same terms as the majority. If one co-founder negotiates a sale of their majority stake to a third party, the minority can require that their shares be included in the transaction at the same price. Without this protection, the majority founder could exit at a premium while the minority remains locked into a company now controlled by a party they did not choose.

Both provisions are straightforward to draft and are standard in well-structured agreements. Their absence is a gap that becomes visible, usually at significant cost, only when a sale is being negotiated.

Deadlock and Exit Provisions

Fifty-fifty structures are common among co-founders and inherently vulnerable to deadlock. When neither party can out-vote the other and the relationship has deteriorated, the company can become paralysed. Swiss corporate law does not provide an automatic mechanism for resolving this; it is not a jurisdiction that readily permits judicial dissolution on the grounds of shareholder deadlock alone, and litigation is costly and slow.

A shareholders’ agreement can address deadlock through several mechanisms. An escalation clause requires the parties to refer unresolved disputes to senior management or a neutral third party before any other action is taken. A buy-sell provision, sometimes called a shotgun clause, allows one party to offer to buy the other’s shares at a stated price; the other party must then either accept the offer or buy the first party’s shares at the same price. This creates a strong incentive to propose a fair valuation.

Exit provisions more broadly should address valuation methodology. How will shares be valued if one co-founder leaves? Will an independent expert be appointed, or will the parties apply a formula? Is there a discount for minority shareholdings, or does the agreement provide for fair value regardless of stake size? These questions are much easier to agree on at the outset than after the relationship has broken down.

Confidentiality, Non-Compete, and Non-Solicitation

Co-founders typically have access to the most sensitive commercial information in the company: strategy, financials, customer relationships, and technical know-how. A shareholders’ agreement should include confidentiality provisions that survive the termination of the relationship, with clear definitions of what constitutes confidential information and how it may be used.

Non-compete clauses under Swiss law are enforceable within limits. They must be reasonable in scope, duration, and geographic reach; an open-ended prohibition on all competitive activity will not hold. For international founders, the geographic dimension requires particular thought: a non-compete that is appropriate for a Swiss domestic business may be disproportionate for a venture with global ambitions. Swiss courts will reduce an unreasonably broad clause rather than strike it entirely, but a clause calibrated to the actual competitive risk of the business is more reliable in practice than one drafted on a generous template.

Non-solicitation provisions, which restrict former founders from approaching employees or clients after departure, are similarly subject to reasonableness requirements. They are, however, generally easier to enforce than broad non-competes and should be included as a matter of course.

Governing Law and Dispute Resolution

A shareholders’ agreement relating to a Swiss company will almost always be governed by Swiss law. The parties may choose a different governing law, but this requires careful thought; the agreement must be compatible with Swiss corporate law, which cannot be excluded by contractual choice, and inconsistencies between the agreement and the applicable corporate law create practical difficulties.

Dispute resolution provisions deserve the same attention as the substantive terms of the agreement. For international co-founders who may be based in different countries, Swiss arbitration is frequently the preferred mechanism; it provides a neutral, confidential, and enforceable process. The Swiss Rules of International Arbitration, administered by Swiss Arbitration Centre, offer a well-regarded institutional framework. Litigation before Swiss courts is the alternative; it is competent and predictable, but public and potentially slower for complex disputes.

The Moment to Draft the Agreement Is the Beginning

The value of a shareholders’ agreement is not apparent when the co-founders are aligned and the venture is performing. It becomes apparent when something changes; a founder wants to leave, a third-party offer arrives, a disagreement cannot be resolved, or a relationship breaks down under commercial pressure. At that point, the presence or absence of a well-drafted agreement determines whether the situation can be resolved efficiently or whether it escalates into protracted and expensive conflict.

The agreement is also far easier to negotiate at the outset, when goodwill is high and the parties are motivated by the prospect of building something together, than later when the dynamic has changed. International co-founders bringing together different legal and cultural backgrounds should treat the process of drafting the agreement as a useful exercise in itself; it surfaces assumptions that differ, clarifies expectations, and creates a shared understanding of how the partnership is intended to work. That exercise has value regardless of whether the provisions are ever tested.

Frequently Asked Questions

Is a shareholders’ agreement required under Swiss law?

No. Swiss law does not require co-founders to enter into a shareholders’ agreement. The SA and Sàrl are governed by the Swiss Code of Obligations and by their articles of association. A shareholders’ agreement is a private contractual arrangement that supplements the statutory and constitutional framework with terms the parties have agreed between themselves. Its absence is not a legal deficiency; it is a gap in the protection that the parties have chosen to provide themselves.

Can a shareholders’ agreement override the articles of association?

A shareholders’ agreement cannot override mandatory provisions of Swiss corporate law, and it operates separately from the articles of association. Where there is a conflict between the agreement and the articles, the corporate law position will generally prevail as against the company and third parties; the agreement creates obligations between the parties to it, but does not bind the company in the same way. For key protective provisions, it is therefore advisable to reflect them in both the agreement and the articles, where the articles permit.

What happens if one co-founder transfers shares in breach of a pre-emption clause?

A transfer in breach of a contractual pre-emption right does not automatically render the transfer invalid as a matter of Swiss law; the corporate law position and the contractual position must be distinguished. The transferring founder will be in breach of the agreement and may be liable for damages. However, the practical effect on the validity of the transfer depends on whether the articles of association also restrict transfers and on the specific terms of the agreement. Ensuring that both the agreement and the articles address transfer restrictions consistently is therefore important.

Should a shareholders’ agreement be kept confidential?

Yes, in most cases. Unlike the articles of association, which are publicly accessible through the Swiss commercial register, a shareholders’ agreement is a private document between the parties. Its terms are not disclosed publicly unless the parties choose to make them so, or unless disclosure is required in the context of litigation or a regulatory process. This confidentiality is one of the reasons parties use shareholders’ agreements to address sensitive commercial arrangements rather than embedding them in the articles.

At what stage should co-founders put a shareholders’ agreement in place?

The agreement should ideally be negotiated and signed at the time of incorporation, or shortly afterwards. Waiting until the venture is established and the parties’ interests have diverged makes negotiation significantly more difficult. If the company is already in operation and no agreement is in place, it is still worth addressing; the absence of any agreement is more exposed than an imperfect one. An existing structure can be reviewed and an agreement put in place at any point, though the process will require goodwill on both sides.

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Readers should not act on the basis of this content without first seeking professional advice specific to their circumstances. For guidance tailored to your situation, please contact David Kohler. Learn more about his practice here.