How do you set up a simple company?
The société simple is not a legal entity, unlike the LLC or the LTD this means that any contract between the société simple and a third party entails the direct and joint liability of the various partners.
The simple partnership is the basic and subordinate form of company and gives way to all other forms of company and their rules under company law, provided that the conditions for these other forms of company are met (art. 530 para. 2 CO).
Setting up a simple partnership is a very straightforward process. All that is needed is for the founders to agree to pursue a goal together with common efforts or means.
There are generally no formalities to be complied with and, although strongly recommended, a written agreement between the partners is not necessary. The simple partnership cannot be registered in the commercial register and cannot sign under a legal name.
Organisation of a simple partnership
The ordinary partnership may, to a large extent, be adapted by agreement to specific needs. If the shareholders do not opt for specific rules, the provisions of Art. 530 to 551 of the Swiss Code of Obligations apply. Some of these provisions are set out below.
Distribution of profits
The profits and losses of a simple partnership are divided equally between the partners, irrespective of the size and nature of their contributions (art. 532 CO).
If the partnership agreement provides only for the sharing of profits or losses, it applies to both (art. 533 para. 1 CO).
Decision-making
Resolutions must be passed unanimously (art. 534 para. 1 CO). However, the shareholders may include other provisions in the partnership agreement, with the exception of the appointment of a general representative, the admission of new shareholders and decisions that go beyond the scope of ordinary management.
All shareholders have the right to participate in the management and to act on behalf of the company, unless management has been delegated exclusively to third parties or to several shareholders (art. 535 para. 1 CO).
Shareholders are obliged to refrain from competing with the business of the ordinary partnership in a way that would defeat or compromise the purpose of the partnership (art. 536 CO).
Liability
A société simple cannot enter into contractual relationships with third parties, assume rights or liabilities, or own property.
The individual partners jointly own the assets of the company and are jointly and severally liable for any liability or claim arising from a partner or managing director acting on behalf of the company in the ordinary course of the company's business.
Dissolution
A simple partnership entered into for an indefinite term or for the life of a partner may be terminated by any partner giving six months' notice (art. 546 para. 1 CO). In addition, a simple partnership may be terminated for good cause with immediate effect. Such termination is only possible if the continuation of the company is absolutely unacceptable to a partner. Other possible grounds for dissolution of a simple partnership are as follows:
- Pursuing the object becomes impossible
- A partner dies or goes bankrupt
- Mutual agreement or expiry of the period for which the company was established
- By court order in the event of a request to dissolve the company for valid reasons
Common uses
In the business world, single companies are often used, for example, for joint ventures, consortia in the construction sector to manage large projects, or consortia of banks.
Shareholders who organise the exercise of voting rights and the management of a company by virtue of a shareholders' agreement are deemed to be simple companies, as are the founders of a company until such time as it is duly incorporated.
