I. Legal Basis and Concept of the Stock Corporation
The legal basis of the stock corporation (hereinafter called cor
poration) is patterned after the Swiss corporation. The Liechtenstein Persons and Company law (PGR) treats the corporation in its second section, entitled "Legal Entities". The PGR defines the corporation as an association with its own name, with a stated capital divided into shares and with liability limited to the extent of its assets. Shareholders are only liable to observe statutory requirements and are not personally liable for the obligations of the company.
The corporation has its own legal personality, can undertake lawful business in its own name, can sue and be sued.
II. Formation
1. General
The corporation must be formed by at least two natural or legal persons. The founders may be Liechtenstein or foreign citizens.
The corporation may be formed by the founders themselves, by power of attorney or on a fiduciary basis for a third party. The formation of the corporation is usually handled by authorized trust companies on a fiduciary basis. The trust companies subscribe and take over all the shares and then transfer these to the de facto incorporator(s) so that the client?s anonymity is protected.
The name of the corporation may be chosen freely. Descriptive words following the core of the name may have personal meaning to the owner, describe the firm?s activities, relate to the incorporator?s heirs or beneficiaries, include a trade name, relate to the place in which the firm is situated, or be pure fantasy, provided that the name is not misleading, immoral or illegal, or contrary to the competition laws.
Subtitles and names chosen purely for publicity or advertising purposes are not permitted.
The name of a holding or domiciliary corporation may not contain words with national connotations, such as "Liechtenstein", "State", "National", or words such as "Bank", "Law", or "Trust", either alone or in connection with other words in the name. Names indicating a relationship to the local community and those suggesting an affiliation to an international public organization, require special approval.
The name of a holding or domiciliary corporation may be totally in a language other than German. Should the name be registered in more than one language, the various linguistic versions must be as accurate as possible translations of each other.
The name of the corporation must contain the unabbreviated word ?Aktiengesellschaft? or the abbreviation ?AG? or the corresponding expression in a foreign language (English: ?Corporation?, French: ?Société Anonyme?, Italian ?Società Anonima?, etc.). The object of a corporation may be chosen as desired and be of a commercial or non-commercial nature provided that it is not immoral or illegal in use. The object may be stated in detail or in general terms.
Corporations conducting insurance and banking business require an official permit.
2. The Statutes
The law requires the following information to be included in the statutes of the corporation:
- Name and registered office of the corporation
- Objects of the corporation
- Founders
- Share capital and the value of assets contributed as capital
- Number, nominal value or quota of the shares, whether they are bearer or registered shares and the rights relating to such
- Calling of the general meeting, the voting rights of the shareholders and the passing of resolutions
- Board of directors
- Auditors
- Manner of giving notice to shareholders and third parties
- Approximate formation costs.
Such matters as are not specified in the statutes will be presumed to conform to the legal norms for corporations (Article 261-367 PGR), or, in the absence thereof, those norms contained in the general provisions pertaining to legal entities.
3. The Formation
A corporation may be formed by the "successive" or the "simultaneous" method.
- The "successive" method is usually selected when capital is to be raised by public subscription.
- The "simultaneous" formation is resorted to when all of the paid-up capital of the company is supplied by its incorporators.
a) The Simultaneous Formation
The vast majority of companies are formed by the simultaneous method. The incorporators supply the paid-up capital and subscribe to the shares.
The procedure is quite simple as the incorporators have the majority of the shares and can stipulate the content of the statutes and the organization of the company.
In connection with the preparation for formation, the incorporators prepare a declaration to be signed by them and recorded as a public deed. The declaration states their intent to form a stock corporation and provides the following:
- The statutes of the company
- Provisions for the delivery of the shares of the company
- Provisions for the payment of the incorporation capital (either in cash or in kind)
- Appointment of the necessary administrative organs
- Approval of the granting of privileges to the incorporators.
The preparation of such a declaration of incorporation replaces the usual organizational meeting of subscribers.
b) The Successive Formation
In this case the incorporators do not provide the initial capital themselves, but depend upon public subscription to the stock of the company. Inasmuch as the incorporators and the subscribers are not the same persons, the law provides certain protection for the subscribers.
The successive formation takes place as follows:
- Phase 1:
The contents of the company statutes are fixed by the founders in a public deed whereby the draft statutes must be signed by the founders.
- Phase 2:
Subscription of the shares.
- Phase 3:
The constitutive general meeting of the subscribers for shares shall determine by resolution that the share capital has been fully subscribed and that the minimum sums, but at least 25% on each share, has been brought in as cash or in other assets. Furthermore, it shall appoint the necessary organs and approve the definitive statutes of association. A vote is to be held on the draft, and the resolution and the final version of the statutes is to be recorded in a public deed. If property or rights have been brought in as payment for a part of the share capital or if certain shareholders are to be granted special rights, an expert must submit a written report to the general meeting or to the meeting of incorporators before passing the resolution.
The report by the expert must contain the following:
- Description of each item of property brought in
- Methods of valuation used for determining the value of the property brought in
- Details as to whether the values determined correspond at least to the number and nominal amount or calculated value and possibly the additional amount of the shares to be given in exchange;
- Information concerning the founder?s rights granted, the reason and appropriateness of such.
4. The Public Registry
The corporation acquires a legal personality and becomes legally constituted at the moment when it is entered in the Public Registry.
The application for registration must be accompanied by the following documents:
- Minutes of the general meeting of subscribers, or the declaration of incorporation;
- Company?s statutes;
- Declarations of acceptance and signatory authorities and confirmations of the residence of the members of the board of directors and of the auditors;
- Proof that the share capital has been paid up.
The following data are recorded in the Public Registry:
- Date of approval of the statutes;
- Name and registered office of the corporation;
- Objects and possibly the duration of the corporation;
- Amount of the capital, the value of the assets contributed as capital;
- Number, nominal value or quota and the type of shares, the transfer restrictions and the priority and conversion rights of the individual categories;
- Contribution in kind and the shares issued in return for such, the acquisition in kind and the counter-performance of the corporation and the content and value of the special rights;
- Number of dividend-right certificates with details of the content of the associated rights;
- Members of the board of directors, of the supervisory board and the representatives with details of names, first names, residence and nationality or of the firm and registered office;
- Details of representation;
- Name or corporate name of the auditors with details of residence, registered office or of a branch recorded in the Public Registry;
- Form of legal notices;
- Resident agent.
On request, the Public Registry will provide certified abstracts of entries for individual corporations. Such abstracts contain only the information noted above.
Any resolution involving an amendment to the statutes is to be publicly recorded. .
III. Share Capital and Reserves
1. Share Capital
The minimum share capital which a stock corporation must have is Swiss francs 50.000,? which capital must be fully paid in.
At the time of registration, a bank certificate must be provided attesting that the capital has been deposited in a special incorporation account at any Liechtenstein or Swiss bank. The capital remains in this account until registration is complete.
Should the capital exceed Swiss francs 50.000,?, and if the company is to have registered shares, then the greater of 25 % of the capital or Swiss francs 50.000,? must be paid in. If the company is to have bearer shares the total capital allocated to each share must be paid in before the shares may be issued.
If the capital paid in consists of assets in kind, an appraisal and valuation by a recognized appraiser must be submitted at the time of registration of the company.
Immediately after registration, the capital becomes available to the company for the conduct of its affairs. The administrative apparatus of the company, and in particular the board of directors, are legally responsible for the prudent management of the capital. .
2. Reserves
The law requires that a certain portion of profits remain undistributed and recognizes the formation of such additional reserves as are required by the company?s statutes.
The legally required reserve and the capital reserves may be used for covering losses, provided that together they do not exceed half of the share capital.
The company?s statutes may require the formation of a higher reserve than required by law, and they may also provide for further reserves, such as reserves for charity, renovation reserves, amortization reserves, etc., and prescribe the purpose and use of such reserves.
IV. The Shares
1. Bearer and Registered Shares
Shares may be registered, or may be bearer shares, meaning that the bearer or possessor of the shares is deemed to be their owner. A company may have both types of shares issued at the same time. Bearer shares must be fully paid in before being issued, any such shares issued before being fully paid for are invalid.
Registered shares may be transferred by endorsement and delivery to the buyer. The company?s statutes may restrict the transfer of shares. This is often done in the case of closely held or family companies.
The names and addresses of the owners of registered shares must be recorded in the shareholders? register maintained by the company. Registered share certificates must bear a notation as to the amount paid in for the shares unless they were fully paid for upon issue.
2. Par and No-Par Shares
A company may issue shares with a stated par value or shares with no stated par value. No-par shares may also be issued in relationship with par value shares.
3. Preference Shares
The statutes, or amendments thereto, may provide for the issue of preferred shares and will indicate the special rights or preferences to be given preferred shareholders. Beyond those preferences contained in the statutes, ordinary and preferred shares rank equally. Preferred shares may be given special rights as to:
- Voting;
- Decisions in certain administrative or business areas;
- Dividends;
- Liquidation proceeds;
- Subscription rights to new shares to be issued;
4. Voting Rights of Shareholders
Shares without voting rights are not recognized under the laws of Liechtenstein. However the statutes of the company may diminish the weight given the votes of certain classes of shareholders and may also increase the weight given the votes of other classes of shareholders.
5. Bonus Shares
Bonus shares may be issued to shareholders or to third parties, as compensation for expenses incurred. The subscription price of such shares may be covered by the company from its reserves. Bonus shares enjoy all the rights and are subject to all the responsibilities of other shareholders.
6. Shares to Employees
The statutes of the company may provide for shares to be issued to employees. Shares so issued need not be subscribed by the employee, capital need not be immediately paid in, and registration at the Public Registry may be temporarily postponed. Such shares must be registered shares and may not be transferred so long as the holder is in the employ of the company. Subsequent transfers may only be made with the approval of the board of directors. Dividends payable on employees? shares will be applied against the subscription price until the par value is fully paid in. At such point as such shares are paid in as to 25 %, it is necessary to register the increase in the capital of the company with the Public Registry. Upon registration, such employees? shares will be entitled to vote. Upon payment of an additional 25 %, a further capital increase must be registered, etc. When the total par value of the shares has been paid in, the shares are converted to ordinary shares of the company.
7. Dividend-right certificates
Dividend-right certificates are securities without a nominal value. They are a special kind of equity participation. They do not give the beneficiary any membership rights but only asset rights (e.g., a share in the profit or liquidation proceeds or the right to purchase new shares). In effect, they are a substitution for non-voting shares for which there is no provision in Liechtenstein law.
They may be authorized by the general meeting of shareholders for issue to the incorporators, or to any other person who have or had a relationship with the company by reason of equity participation, shareholdings, debt financing, being a creditor or having performed services or worked for the company. Often they are used as an incentive to capital participation.
8. Participation certificates
Participation certificates are securities with a nominal value. They do not create any membership rights. In contrast to dividend-right certificates, beneficiaries do not have to show any connection with the company and the provisions of law concerning share capital, shares and shareholders apply, subject to special provisions.
The statutes may not put participants at a disadvantage in relation to the shareholders as regards the distribution of the profit or liquidation proceeds or the allocation of new shares.
V. The Membership
Membership embodies the total of the rights and duties of the shareholders.
1. Rights of the Shareholders
a) Right to Company Property
- Right to Dividends:
This is the shareholder?s right to a proportionate share in the net profits of the company. Interest may not be paid on the share capital of a company except during the organizational and developmental period of its existence, before it is in full operation.
- Right to Use and Enjoyment:
In addition to or in lieu of the right to dividends, the statutes may provide the shareholders with rights to the use and enjoyment of company property so long as the capital of the company is not thereby diminished or impaired.
- The Right to Preference for New Shares:
Existing shareholders have the right to subscribe for shares in proportion to their existing holdings in the event of a new share issue and increase in the total capitalization.
- Right to Liquidation Proceeds: Shareholders have the right to a proportionate share in the liquidation proceeds of the company.
b) Membership Rights
- Right to take part in General Meetings:
The general meeting exercises the rights of the shareholders respecting the affairs of the company. Each shareholder is entitled to participation in the general meeting. The shareholder may be represented by proxy. In the case of registered shares, such proxy must be in writing..
- Voting Rights at the General Meeting:
This right permits the shareholder to take an active part in the formation of company policies. The shareholders exercise their voting right in accordance with the law and the company statutes.
- Right to Audit:
The shareholders have, as of right, access to the financial statements of the company and the right to audit such statements. This right cannot be abrogated by either the general meeting of shareholders, or by the statutes.
c) Protective Ordinances
- Mandatory Rights: Mandatory rights are all claims and rights of shareholders which are guaranteed by law and may not be abrogated by the general meeting or by the directors. Unless modified by the statutes, these rights include (per Article 292 PGR) voting rights, the right to participate in decisions of the general meeting of shareholders, the right to challenge resolutions of the General Assembly, a claim to interest on capital during the organizational and developmental period, to dividends and to participation in liquidation proceeds.
- Minority Rights:
Quorum requirements are provided by law whereby certain matters may only be decided by a qualified majority. Not less than three-fourths of the shares represented, or two-thirds of the total shares may take decisions in the following matters, unless otherwise specified in the statutes:
- Change in the objects of the company;
- Change of the company to another form of legal entity;
- The removal of legal restrictions set forth in the statutes.
2. The Duties of Shareholders
The only legal duty of shareholders is to pay for their shares (bonus shares excepted). The company cannot relieve them from this liability for payment.
The company statutes may provide for additional consideration in payment for stock, such as one or more instalments of money, or services, or forbearances, or restrictions on the right to call for additional capital, or the limitation of liability .
VI. The Organization
The administrative organs of the corporation are:
- The general meeting of shareholders;
- The board of directors;
- The auditors.
1. The General Meeting of Shareholders
The general meeting of shareholders is the highest policy-making organ of the corporation. The following privileges fall within its competence::
- Appointment of the board of directors and of the auditors;
- Approval of the business report, the consolidated business report and the declaration of dividends;
- Formal approval of the actions of the board of directors;
- Approval and amendment of the statutes, and, if the statutes do not provide otherwise, the establishment of branches of the corporation;
- All other decisions which are by law or by the statutes reserved to the general meeting, and decisions referred to the general meeting by other organs of the company.
The statutes may delegate the legal and statutory duties of the general meeting to other organs of the company.
Within six months after the close of a business year, the annual general meeting of shareholders must take place. The invitation to the shareholders must conform to the procedures contained in the statutes. The complete agenda for the meeting must also be provided to the shareholders.
Special meetings of the shareholders may be called if:
- The holders of at least 10 percent of the total voting shares request such meeting, provided that the company has at least 30 voting shares;
- The holders of at least 3 voting shares request such meeting, if the company has less than 30 voting shares.
The general meeting takes its decisions by simple majority vote provided that the law or the statutes do not specifically require a special majority vote as in the matters such as the amendment of the objects of the company or its corporate form, the annulment of legal restrictions set forth in the statutes, or the liquidation of the company.
2. The Board of Directors
The members of the board of directors are elected by the general meeting of shareholders for a first maximum term of three years and thereafter for maximum terms of six years. Exceptions may be made in special cases. The statutes may regulate the voting to protect minority shareholders. The board may consist of one or more natural or legal persons.
The board of directors shall consist of a president and other members may be named officers as is considered necessary or as prescribed in the statutes or by-laws.
At least one member of the board of directors authorized to represent and conduct business for the corporation must be a citizen of an EEA Member State permanently resident in Liechtenstein and also be authorized to practice as a lawyer, trustee or auditor or have commercial qualifications recognized by the Government. There are no other restrictions as to the nationality or residence of the board of directors.
The board of directors oversees the management and representation of the corporation. The board may transfer these responsibilities in part or in total to directors or managers who must not necessarily hold stock in the corporation. Such delegates are subject to directors? liability with respect to acts or omissions on behalf of the company.
The duties of the board of directors include:
- Preparation of the agenda for the general meeting and executing the resolutions made thereat;
- Preparation of regulations and procedures necessary to the proper conduct of business, and instructing management;
- Supervision of those entrusted with management and representational responsibilities, to ensure observance of the law, the statutes, regulations and by-laws;
- In executing the above, to keep itself informed as to ongoing business operations and the activities of management.
The board of directors must ensure that the minutes of the general meeting of shareholders and meetings of the board are properly recorded and that proper business and accounting records are kept. Minutes are to be kept of its resolutions and shall be signed by the chairman. Furthermore, the board of directors must ensure that the business report is prepared, audited and if necessary published in accordance with the provisions of law.
In the conduct of its managerial and representational functions, the board of directors must observe all restrictions placed upon it by the statutes, or by decisions and regulations of the general meeting of shareholders or in any other way.
3. The Auditors
The general meeting appoints one or more auditors. The appointment of one or more auditors for the corporation is mandatory (Art. 350 PGR).
Pursuant to Art. 193 PGR, the auditors may not be appointed for a first term of more than one year and subsequent appointments may not exceed three years.
The auditors may not hold share rights in the corporation to be audited, including not through third parties. They may not be members of the board of directors and must be independent of the board. An audit company in which the corporation to be audited holds share rights, including through third parties, may not be appointed as auditor.
For medium-size and large corporations, more extensive independence requirements apply (see Chapter VIII).
Provision may also be made for a separate audit authority with its own responsibility for individual business areas, business departments or branches.
The duties of the auditors include the auditing of the annual financial statements comprising the balance sheet, the profit-and-loss account and if necessary the annex and possibly the annual report to ensure that these comply with the law and the statutes.
It is the duty of the auditors to bring irregularities or infringements of the provisions of law or of the statutes found during the execution of their commission to the notice of the general meeting.
4. The Resident Agent (Agent for Service)
According to Article 239 PGR, every corporation must appoint as its resident agent a citizen of an EEA Member State or a Liechtenstein entity. The resident agent represents the company in dealing with the government officials, and is the legal agent for service for communications and notices of any sort for the company. Unless specifically authorized the resident agent has no other function or capacity. He may not conduct business or legally bind the company.
VII. The Liability of the Corporation
The liability of the corporation is limited to its net worth. Provided that the shareholders observe the company?s statutes, they have no personal liability for its debts.
VIII. Accounting for the Corporation
The corporation is required to keep regular accounting records.
The applicable regulations are determined by the size of the corporation. The Persons and Companies Law draws a distinction between small, medium-size and large corporations. The following criteria determine the classification:
| Criteria |
|
small |
medium-size |
large |
| |
|
|
|
|
Balance sheet sum in million CHF
Turnover in million CHF
Number of employees
|
|
bis 5.55
bis 11.1
bis 50 |
5.55 bis 22.2
11.1 bis 44.4
50 bis 250
|
ab 22.2
ab 44.4
ab 250 |
The provisions for the corresponding categories apply when at least two criteria are fulfilled.
The annual financial statements, comprising the balance sheet, profit-and-loss account and if necessary the annex, must show a true picture of the assets, profit and loss and financial position of the corporation.
Medium-size and large corporations (Article 1064 PGR) must prepare an annual report. The annual financial statements and the annual report together constitute the business report.
The annual financial statements are to be prepared within six months of the end of the business year.
Small corporations must submit within 15 months from the accounting date an abbreviated balance sheet, an abbreviated annex and, if these documents do not show the proposal for the appropriation of the profit and the resolution concerning such, also the relevant documents to the Public Registry. There are additional disclosure requirements for medium-size and large corporations.
The annual report to be prepared by medium-size and large corporations need not be submitted to the Public Registry. It must be made available, however, at the registered office of the corporation for inspection by the general public.
Small companies are exempt from the requirement to prepare a consolidated business report.
The annual financial statements and if necessary the annual report must be kept for ten years. The other business books, the business documents and accounting records may be retained in microfilm or data carriers if the records correspond to the documents and can be made legible at any time for at least ten years.
Domiciliary corporations may prepare the annual financial statements and if need be the annual report in German, English, French, Italian, Spanish or Portuguese and in any freely convertible currency.
Stock corporations must submit their annual financial statements to the Liechtenstein tax authority. The tax authority is obliged to maintain absolute tax secrecy.
IX. The Liquidation of the Corporation
1. Causes for Liquidation
With the agreement of the shareholders, a company shall be liquidated when:
- The company was formed for a specified object and this object has been achieved;
- The company was formed for a limited duration;
- The general meeting of shareholders has voted to liquidate the company.
Without the agreement of the shareholders, a company shall be liquidated when:
- The company becomes bankrupt;
- The company has been ordered by a court of law to be liquidated.
2. Liquidation
The general meeting of shareholders is empowered to order the liquidation of the company. Upon resolving to liquidate, the meeting shall designate one or more liquidators and specify their authorities. The general meeting may, at any time, dismiss the liquidators.
The obligations and powers of the liquidators include:
- The unrestricted right to sell the assets of the company to the extent that the general meeting has not otherwise resolved;
- The right to issue legal proceedings;
- The right to settle debts and to incur new indebtedness insofar as it is necessary;
- The obligation to prepare annual financial statements during the course of liquidation;
- The duty to declare the company bankrupt if they determine that the company?s liabilities exceed its assets.
The decision to liquidate must be entered in the Public Registry. The company retains its legal personality and adds "in liquidation" to the company name.
The general meeting of shareholders and the auditors are retained as organs of the company during liquidation, however their functions are restricted to those necessary to the liquidation process and to those which the liquidators cannot themselves carry out. A notice to creditors is published in the official gazette of Liechtenstein.
The liquidation procedure begins with the preparation of liquidation financial statements and continues with the winding-up of ongoing business, settling the obligations of the company insofar as possible, realization of the company?s assets and the collection of amounts due from shareholders insofar as the same is necessary to pay the company?s debts. Known creditors who have not responded to the official notice to creditors may be paid either by depositing funds with the court, or by direct payment to the creditor. Remaining assets are distributed as a liquidation dividend.
At any time during the liquidation, the general meeting may rescind its decision to liquidate and resume the conduct of company business.
If the liquidation is completed and the company has no further outstanding obligations, the company can normally be removed from the Public Registry six months after the appearance of the official notice to creditors. Thereafter, a general meeting is called for the purpose of approving the closing financial statements and discharging the liquidators. All records of a liquidated company must be preserved for ten years.
X. Taxes and Formation Costs of a Stock Corporation for Holding or Domiciliary Purposes
1. Formation Costs
a)
a) When a stock corporation is formed, stamp duty must be paid on the basis of a general exemption limit of CHF 250,000.- and amounting to 1 percent of the sum accruing to the corporation in return for the shares but at least 1 percent of the nominal value.
b)
b) The fee for the registration of a corporation in the Public Registry is CHF 700.- for a share capital of up to CHF 100,000.-. If the share capital exceeds CHF 100,000.-, a further CHF 200.- is to be paid for every additional CHF 100,000.-, or part thereof up to a maximum of CHF 7,000.-, however. Public record fees are an additional few hundred Swiss francs.
2. Annual Taxes
Such corporations as are considered to be holding or domiciliary companies are free from all income, property, and revenue taxes. They pay only a capital tax of one pro mille (0,1%) on capital, on property invested as capital, and accumulated profits, with a minimum annual tax of Swiss francs 1.000,--.
A four percent coupon tax is withheld on dividends paid to the shareholders. There are no other taxes.
XI. Double Taxation Treaties
1. Liechtenstein-Austria
Liechtenstein has only one comprehensive double-taxation treaty, that being with Austria. Its purpose is to avoid the double taxation of income, property, and inheritances. The treaty provides:
? Income taxes may be levied only by the state in which the person receiving the income is resident.
? In the case of income from immovables, in that state in which the immovable property is located.
Provisions which are available to avoid double-taxation are reservations concerning the marginal rate, foreign-tax credits as well as provisions concerning the refund of taxes deducted at source.
2. Tax Treaty with Switzerland
Before 1995 there was no tax treaty with Switzerland. After the new federal taxation code entered into force on the 1st day of January 1995 concerning direct federal taxes as well as taxes at source, it was necessary for Liechtenstein to enter into a tax treaty with Switzerland in order to avoid the double-taxation of commuters and retired persons at the federal level. The basic premises of the treaty provide that
- Interest paid on mortgages may only be taxed by the resident state of the mortgagee,
- The income of commuters may only be taxed by the country of their residence and no taxes may be imposed by the state where the place of work is,
- Pensions, annuities and lump sum pensions may only be taxed by the state of residence of the payee
.
IMPRINT
Publisher and Copyright Owner:
ArComm Treuhand Anstalt
Editing and Arrangement:
Dr. iur. et lic. oec. Norbert Seeger
Address for Publisher, Editor and all Responsible Persons:
Postfach 1618, FL-9490 Vaduz
Am Schrägen Weg 14
Telefophone: +423 / 232 08 08
Facsimile: +423 / 232 06 30
www.arcomm.li
Disclaimer
The material contained in this publication is not intended to be advice on any particular matter. No reader should act on the basis of any matter contained in this publication without considering appropriate professional advice. The publisher, the author and editor expressly disclaim all and any liability to any person in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance upon the contents of this publication.