Acquiring or selling shares of an inactive company – Beware of shelf company trading

Wed, 05.03.2025, 10:00

As of January 1, 2025, the previous case law of the Federal Supreme Court on so-called shelf company trading has been incorporated into the Swiss Code of Obligations.

What is a shell company?

A shell company trade means that the shares of an inactive company (GmbH or AG) that is effectively dissolved and no longer operational are transferred.

Such companies, also known as shell companies, must be deleted from the commercial register. If the shares of such a company are nevertheless sold or acquired, this is considered a circumvention of the statutory rules on formation and liquidation. Such purchase agreements are therefore legally void, have no effect and cannot be enforced.

This also means that changes in the commercial register may no longer be effective.

Example: Anyone who acquires a shell company and then wishes to change its registered office or purpose cannot legally implement this effectively, as the purchase agreement for the shares is void and the person is therefore not considered a legal shareholder.

How are such shell companies recognized?

Factually liquidated companies that no longer carry out any operational business activities can often be identified on the basis of their balance sheet and income statement:

Assets page: As a rule, there are only cash assets or other liquid assets, such as loan receivables from partners or shareholders. Fixed assets are greatly reduced and there is often a loss carried forward.
Liabilities side: Often there is only equity, possibly with a few remaining liabilities. In many cases, equity is no longer fully covered.
Income statement: Hardly any remaining expense or income items indicate a de facto cessation of business.

This means that the company has effectively ceased its business activities, but is not legally dissolved and is still entered in the commercial register. It only exists as a legal shell - a so-called shell company.

Shell companies and commercial register entries

Commercial register offices are increasingly investigating possible violations of the ban on shell companies. If there is a suspicion of a void transfer of shares, the submission of the current signed annual financial statements can be requested. If the suspicion of shell company trading is confirmed, the entry in the commercial register will be rejected. There may be grounds for suspicion in the following cases in particular:

Simultaneous or successive changes of purpose, registered office, company name, management or board of directors;
In the case of a limited liability company: transfer of shares in the company all at once or in stages;
Registration at a domicile (company address) at which other companies are already registered for which void transactions have already been established; at which other companies are already registered for which void sham transactions have already been established;
Participation of persons who have already been involved in void transactions.

For this reason, we and our notaries are obliged to request the most recent annual financial statements in the event of a change in the commercial register if there is a suspicion of shell trading. By default, we request the latest annual financial statements when all shares in a limited liability company are transferred. This is in line with the practice of various offices, which always require the annual financial statements to be submitted in such cases, as experience has shown that the transfer of all shares is often followed by a general amendment to the articles of association with a change to the company name, purpose and registered office. If necessary, we also request additional declarations and documents in order to establish that the transfer of shares is not null and void.

Furthermore, we reserve the right to charge additional expenses for changes to the commercial register that have been initiated but cannot be completed.

Conclusion

The sale and acquisition of shell companies are legally void and should be avoided at all costs. The associated risks are considerable and can lead to undesirable legal consequences. In addition to the uncertainty as to whether a transfer of shares is effective, tax and legal advantages are often promised that do not materialize in practice. In fact, the actual costs and effort of a shell company often exceed those of a regular new company formation many times over.

Instead of selling your shares: If you have an inactive company, an orderly liquidation is the best solution. Rather than passing on your company as a shelf company and potentially facing legal risks, you can liquidate it safely and professionally with our service.

Liquidation: Professionally and legally securely liquidate your existing company: https://www.ifj.ch/get-started/modification

Instead of buying a shelf company: Rather than relying on risky shelf companies, establish your business quickly, securely, and effortlessly with our reliable online incorporation service. We help you set up your GmbH or AG on a solid legal foundation without hidden risks. With our service, you benefit from a simple, transparent, and efficient solution that gets you to your goal quickly and safely.

New company formation: Start a new business easily and online: https://www.ifj.ch/incorporate/service

Rely on our experience and expertise—whether for incorporation or liquidation—to make your venture a complete success!

Additional Links

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