Capital increase

Capital decrease


The last package of numerous revisions to Swiss company law will enter into force on 1 January 2023. Articles 653s to 653v of the revised Swiss Code of Obligations (revCO) introduce the capital band, a new concept in the provisions that govern companies limited by shares which aims at making equity financing more flexible for corporations.(1) The shareholders' meeting will be able to use the capital band to authorise the board of directors to increase and/or decrease the share capital in a more flexible way than presently possible. In order to highlight the novelties that this new instrument sets out, this article outlines the legally defined procedures regarding capital increase and decrease in companies that are limited by shares under current law. A subsequent article will contrast these with key aspects of the capital band (for further details please see "Capital band: how could new instrument make equity financing more flexible for corporations?").

Capital increase

There are three methods to increase the capital of companies limited by shares under current Swiss law: ordinary, authorised and contingent capital increase.

In case of an ordinary capital increase (article 650 of the CO), the shareholders' meeting decides on an increase of the share capital, which then must be executed by the board of directors within three months. By virtue of an authorised capital increase,(2) such a meeting does not itself decide on a capital increase; rather, it authorises the board of directors to do so within the following two years, if needed. The general meeting votes on a resolution to amend the articles of association where it lays down the maximum nominal amount by which the board of directors may increase the share capital (article 651(2) of the CO). Such authorised capital may not exceed one half of the existing share capital (article 651(2) of the CO). Finally, by means of the contingent capital increase, the shareholders' meeting stipulates in the articles of association that creditors of new bonds and similar debt instruments issued by the company or its group companies and employees will be granted rights to subscribe to new shares (article 653(1) of the CO). The share capital automatically increases whenever and to the extent that such conversion or option rights are exercised, and the contribution obligations are discharged by set-off or payment (article 653(2) of the CO).

In cases of the ordinary and authorised capital increase, the shareholders are entitled to the proportion of the newly issued shares that corresponds to their existing participation (article 652b(1) of the CO). The law allows this right to be cancelled, but only under strict conditions. It requires, among other things, a resolution of the shareholders' meeting with at least two-thirds of the voting rights represented and with an absolute majority of the nominal value of shares (article 704(1)(6) of the CO) or, in case of the authorised capital increase, of the absolute majority of the members of the board or directors, and may only be cancelled for good cause (article 652b(2) of the CO). Further, the cancellation of the subscription right particularly must not result in any improper advantage or disadvantage to the parties involved (article 652b(2) of the CO). The new capital can either be paid up in money or in kind. As contributions in kind run the risk of being over-evaluated (which results in a factual decrease of the share capital), they must respect various requirements intended to minimise this risk (article 652c in connection with article 633 of the CO).

In the event of a contingent capital increase, the bonds or similar debt instruments to be issued must first be offered to the shareholders to subscribe in proportion to their existing participation (article 653c(1) of the CO). This priority subscription right may also be restricted or cancelled, but only for good cause, and this must not result in any improper advantage or disadvantage to the parties involved (article 653c(1) and (2) of the CO).

Capital decrease

Existing law stipulates three possibilities to decrease the share capital:

  • a constitutive decrease in capital share (articles 732 to 734 of the CO);
  • a declarative decrease (article 735 of the CO); or
  • a capital cut (article 732(1) of the of the CO).

This terminology is not used in the provisions themselves but is established in practice.

A constitutive decrease in capital means that the shareholders are paid back their contribution in exchange either for returning the number of shares to be cancelled or for the reduction of the par value of all shares. The declarative decrease in capital share is a restructuring method that is applied in situations where losses cause a negative net worth and the company intends to reduce the share capital by an amount not exceeding such losses. In contrast to the first method, the shareholders are not compensated for the decrease in capital. Finally, a capital cut will reduce the share capital and simultaneously increase it to at least the previous amount.

The first two methods lead to a decrease in the company's liability reserves. In order to ensure that the company's creditors are not at risk, the law imposes a strict procedure to be followed by the company. In particular, a special audit report is required that declares that the claims of the company's creditors are fully covered (article 732(2) of the CO). Only then can the shareholders' meeting vote on the resolution to amend the articles of association. If the resolution passes, the board of directors must give public notice of the resolution and announce to the creditors that they may register their claims to be satisfied or secured within two months (article 733 of the CO). This step is only mandatory for the constitutive decrease, as paying back the contribution to the shareholders impacts the company's liquidity and thus bears additional risks for the company's creditors.(3) Once such registered claims have been satisfied or secured and it has been verified by public deed that the provisions are fulfilled, the reduction of the share capital may be carried out (article 734 of the CO).

For further information on this topic please contact Markus Dörig or Georges Clemmer at Badertscher Rechtsanwälte AG by telephone (+41 1 266 20 66) or by fax (+41 1 266 60 70) or by email ([email protected] or [email protected]). The Badertscher Rechtsanwälte AG website can be accessed at


(1) Dispatch of the Federal Council regarding the Amendment to the Code of Obligations dated 23 November 2016, Revision of Company Law, p 513.

(2) Not to be confused with authorised share capital under US law, referring to the maximum number of shares a company is legally allowed to issue or offer according to the articles of association. Further information is available here.

(3) Marc Bauen/Robert Benet, Schweizer Aktiengesellschaft, No. 269.