Limited partnerships: the essentials
Legal basis
The limited partnership is governed by Articles 594-619 of the CO (Swiss Code of Obligations).
How a limited partnership works in Switzerland
The limited partnership is a partnership between two or more people, usually carrying on business under a company name. At least one of the partners must be a natural person with unlimited liability. At least one of the partners, who may be a natural person, a partnership or a legal entity, has liability limited to the fixed amount as entered in the commercial register.
Common Use
Limited partnerships are relatively rare in Switzerland. They are generally used by small companies, often when the owner of a family business is selling up and his heirs wish to continue the business. A general partnership may also be used when the owner is looking for private investors.
Creation of a Swiss limited partnership
Joint agreement
The creation of a limited partnership requires an agreement to pursue a goal with joint efforts or means under a partnership name. A written agreement between the partners is not mandatory, but strongly recommended.
Entry in the Commercial Register
In addition, the limited partnership must be entered in the Commercial Register (art. 594 para. 3 CO), and essential information on the partnership such as the name, place of residence and nationality of all partners, the name and registered office of the company and, in particular, the maximum amount of liability of the limited partners. The name of the limited partnership can therefore be chosen freely.
Organization of a limited partnership
The company management is ensured by the general partners, who have an active role and are indefinitely liable of the company's debts, thereby committing their personal assets. Limited partners, on the other hand, contribute capital but are not involved in management, and their liability is limited to their contribution.
Allocation of profits and losses
The profits and losses are generally shared equally between the partners. The law does not lay down any specific rules for limited partners, and if the partnership agreement does not deal with this issue, the judge may decide on the distribution of profits and losses. The limited partner's share of losses in the event of dissolution of the partnership is limited to the amount of the limited partner's initial capital contribution.
Decision-making
Unless otherwise stipulated, decisions must be taken unanimously, and the same rules as for the simple partnership and general partnership rules apply. All partners generally have the right to participate in the company management.
Limited partners have no management rights or duties (art. 600 para. 1 CO), but certain information rights and very limited voting rights. The same prohibition of competition that the general partnership applies to the partners of the limited partnership (art. 598 para. 1 and art. 561 CO) and also extends to the limited partners.
Liability
The assets of the limited partnership must cover the partnership's liabilities. The creditors company's assets in the event of non-payment. In the event of failure of the company's enforcement proceedings or in the event of dissolution, only the parties with unlimited liability are entitled to claim against the company's assets. are jointly and severally liable and all their assets for the debts of the company (art. 604 CO). The limited partner's liability is strictly limited to the amount of his or her capital contribution.
Key facts about the Swiss limited partnership
- Articles 594-619 of the Swiss Code of Obligations govern limited partnerships.
- It can be created on the basis of an agreement
- At least one partner must be a natural person with unlimited liability
- Limited partnerships are rare in Switzerland (1,236 companies in Switzerland¹).
- The company must be registered with the Registre du Commerce.
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Frequently Asked Questions
What are the advantages of a limited partnership?
The formation of a limited partnership does not require any founding capital. The limited partner's corporate assets are liable for the obligations of the limited partnership. Operational management is separate from financial investors.
What are the disadvantages of a limited partnership?
Liability for debts is shared between the managing partners, who are jointly and severally liable for the company's debts. General partners are subject to bankruptcy proceedings. Moreover, the limited partnership has no legal personality.
How many owners or partners are required to create a limited partnership?
A limited partnership requires at least two partners: one or more general partners and one or more limited partners.
What's the difference between a limited partnership and a general partnership (SnC)?
In a SnCAll partners have unlimited joint and several liability for the company's debts.
However, in a limited partnership, the limited partners have limited liability and are not involved in the management of the business, while the general partners, who are responsible for the management of the business, have unlimited liability..
Should I choose this legal form?
It all depends on your objectives. In general, the Limited Company (SA) or the Limited liability company (Sàrl) will be recommended when it comes to having investors, as these structures and investors' obligations are better defined in the CO.
To make the right choice, compare the legal forms of company to make the right decision.
¹Legal form: Limited partnership. SECO KMU-Portal [online]. [no date] [accessed November 17, 2023]. Available from : https://www.kmu.admin.ch/kmu/fr/home/savoir-pratique/creation-pme/differentes-formes-juridiques/societe-en-commandite.html#1426655298
