Legal form
Question
When it is appropriate for a project to take on the form of a profit-oriented association rather than a GmbH (limited company) or an AG (public company)?
Answer
Under Swiss law (Article 60 ff. of the Swiss Civil Code [ZGB]), associations are not allowed to pursue an economic purpose. The purpose of the association is the pursuit of idealistic, non-economic purposes and may not provide its members with any economic advantages.
An economic purpose is deemed to exist if members are to be provided with an economic, financial advantage via the association's activities, for example through the payment of wages or the distribution of profits. The decisive factor here is not the articles of association and other association regulations, but rather the association's actual activities. However, it is absolutely allowed for an association to be economically active with respect to the funds it requires for the fulfilment of its idealistic purpose. It is allowed to employ people and conduct business in a commercial manner. In the latter case, it must be entered in the commercial register. Otherwise, an entry is voluntary.
Associations that already seek to pursue an illicit economic purpose at the foundation stage cannot be legally founded. Associations that go on to pursue an illicit purpose or engage in an illicit mixture of purposes at a later stage face the threat of liquidation or, in a liability case, the revocation of their legal form as an association.
Question
My partner and I work in the therapeutic field. We would like to shift the focus of our services to people with disabilities. We want to set up an association for this purpose. I have read that only two people are needed for an association. Can my partner and I set up an association and provide therapy within the scope of the association?
Answer
An association must not operate for the purpose of generating a profit (Art. 60 ZGB). If the association is intended to enable its members to earn a living or a part thereof, it is by definition profit-driven. Associations are given preferential treatment with regard to taxes and liability. Any circumvention is therefore punishable by law. In your situation, a different legal form should be chosen, or the association should be organised differently.
However, associations are generally permitted to employ people to fulfil their non-profit objectives. Pursuant to Article 68 of the Swiss Civil Code, its members must recuse themselves from any transactions concerning themselves, their spouses and cohabiting partners and close relatives. This means that you, in your function as a representative of the association, cannot appoint yourself or your partner, nor can you hire yourselves.
However, you could formulate an idealistic or charitable objective in the purpose of the association (e.g. reduction of costs for affected people). This would allow you to recruit people who value the focus on people with disabilities and who are willing to take on responsibility as board members in the association. The Board of Directors could hire or commission you as a superior body on behalf of the association. You yourself could be represented on the Board in an advisory capacity.
Question
We want to hold a festival. Somebody has advised us that we should form a community of interest rather than an association. What actually are the differences between an association, a club and a community of interest?
Answer
If a community of persons is duly established as an association (non-economic purpose, written articles of association, founding minutes, bodies), it is considered to be an association in a legal sense in accordance with Article 60 et sequitur of the Swiss Civil Code (ZGB). An association is not required to include the term "association" in its name. It is clear from the articles of association (usually in the first article) that it is an association. For example, associations refer to themselves as communities, societies, parties or organisations. Associations with various sections or sub-associations are usually refereed to as organisations.
"Community of interest", "club", and "organisation" are not legal terms. Communities of interest and clubs are, however, often organised as associations. It is also possible for them to take a different corporate form, for example that of an ordinary partnership. However, members of an ordinary partnership assume personal liability and groups that take this legal form are unable to open their own postal or bank account in their name.
