The Legal Nuances of Companies Limited by Shares in Liechtenstein

Josef Bergt
2023

In the Principality of Liechtenstein, the establishment and management of companies limited by shares (in German ‘Aktiengesellschaft’ or ‘AG’) are governed by a set of comprehensive regulations, as outlined in Article 261 to Article 366 of the Liechtenstein Persons and Companies Act (PGR). This article aims to provide a short overview of this type of corporation, highlighting the nuances of managing companies limited by shares in Liechtenstein.

A company limited by shares is a legal entity with its own name, whose capital, stipulated in advance, is divided into partial sums, known as shares. For the liabilities of such a company, only the assets of the company are liable. It is mandatory for the company limited by shares to be entered in the Commercial Register.

At least two founders are required to set up a company limited by shares, although immediately after it has been set up all shares may be united in the hands of one person, creating a so-called one-person company. Founders may be natural persons or legal entities, irrespective of their place of residence or registered domicile.

The supreme body of the company is the shareholders' meeting, which expresses the will of the company vis-à-vis the shareholders and managing bodies. It has the power to elect the board of directors and the appointment of the auditor, accept the annual report and the consolidated annual report as well as determine the dividends, discharge the management, pass resolutions on the acceptance and amendment of the articles and, insofar as the articles do not stipulate otherwise, the setting up of branch offices, and pass resolutions on all matters that are reserved for the shareholders' meeting by law or the articles, or that are presented to it by other management bodies.

The board of directors is responsible for the management and representation of the company limited by shares. The members of the board of directors are elected by the shareholders’ meeting. The board of directors may consist of one or more members. In the case of companies limited by shares with share capital of at least one million Swiss francs, the board of directors must consist of at least three members. The board of directors has all powers and duties that are not delegated to or reserved for another management body.

In general, an auditor must be appointed for a company limited by shares, and the auditor must be recorded in the Commercial Register. The auditor is appointed by the shareholders’ meeting and must fulfil the statutory requirements. Under certain conditions, a review and thus the appointment of an audit authority may be waived.

If a company limited by shares is organized according to the so-called dualistic system, a supervisory board must be appointed, which can be assigned the function of permanent supervision, monitoring and control of the management and participation in the administration. The members of the supervisory board must be entered in the Commercial Register. 

The board of directors of a company limited by shares that has issued bearer shares must appoint a custodian, with whom all bearer shares of the company limited by shares are to be deposited. The custodian must be entered in the Commercial Register together with this function.

In addition, a representative must also be appointed, insofar as no domestic service address is designated. The representative is authorized to receive declarations, communications and notifications and to represent the legal entity in dealings with public authorities.

The articles of a company limited by shares must contain the information and provisions required by law. Certain other provisions and information are only valid if they are provided for in the articles. These include, for example, provisions on authorized or conditional capital, restrictions on the transferability of registered shares, or restrictions on the voting and representation rights of shareholders. The registered domicile of the company limited by shares shall be at the place where the company limited by shares has the seat of its administrative activities, unless the articles stipulate otherwise. 

The company limited by shares may pursue any commercial or non-commercial purpose, provided it is legally admissible. The purpose of the company limited by shares must clearly state, however, whether or not it is engaged in activities of a commercial nature. The investment and management of assets or the holding of participations or other rights does not constitute an activity of a commercial nature, unless the nature and size of the enterprise requires commercial operations and orderly accounts.

The minimum capital of the company limited by shares is CHF 50’000.00. If the capital is registered in Euros or US-Dollars, the minimum capital requirement is either EUR 50,000.00 or USD 50,000.00. The minimum capital must be fully paid up or contributed at the time of incorporation. At least 25% of each share must be paid up in cash or covered by the contributions in kind described in more detail in the articles. This rule only applies, however, to share capital of CHF 200,000.00 or more, as the minimum capital of CHF 50,000.00 must always be fully paid up.

The shares may be registered shares or bearer shares. Both classes may also exist simultaneously in the ratio stipulated by the articles. Bearer shares must be deposited with the custodian. The custodian must keep a register of the deposited bearer shares.

In terms of liability and responsibility, the company limited by shares is liable for its obligations with its entire assets. The shareholders are not personally liable. The members of the board of directors and the members of the supervisory board are liable to the company, the individual shareholders, and the creditors of the company for the damage they cause through intentional or negligent breach of their duties.

The company limited by shares is subject to the regulations concerning account rendering and disclosure obligations. The annual financial statements and the annual report must be disclosed by being deposited with the Office of Justice for public inspection. The (audited) annual financial statements and the annual report must be disclosed within six months of the end of the financial year.

Source: Factsheet AJU/ h70.004e.01

Executive Summary:

• A company limited by shares is a legal entity with its own name, whose capital, stipulated in advance, is divided into partial sums, known as shares.
• At least two founders are required to set up a company limited by shares, although immediately after it has been set up all shares may be united in the hands of one person, creating a so-called one-person company.
• The supreme body of the company is the shareholders' meeting, which expresses the will of the company vis-à-vis the shareholders and managing bodies. It has the power to elect the board of directors and the appointment of the audit authority, among other responsibilities.
• The board of directors is responsible for the management and representation of the company limited by shares. In the case of companies limited by shares with share capital of at least one million Swiss francs, the board of directors must consist of at least three members.
• An auditor must be appointed for a company limited by shares (unless a review-waiver is possible for small- and micro-companies), and the auditor must be recorded in the Commercial Register.
• If a company limited by shares is organized according to the so-called dualistic system, a supervisory board must be appointed, which can be assigned the function of permanent supervision of the management and participation in the administration.
• The board of directors of a company limited by shares that has issued bearer shares must appoint a custodian, with whom all bearer shares of the company limited by shares are to be deposited.
• A representative must also be appointed, insofar as no domestic service address is designated. The representative is authorized to receive declarations, communications and notifications and to represent the legal entity in dealings with public authorities.
• The minimum capital of the company limited by shares is CHF/EUR/USD 50,000.00.
• In terms of liability and responsibility, the company limited by shares is liable for its obligations with its entire assets but the shareholders are not personally liable..
• The company limited by shares is subject to the regulations concerning account rendering and disclosure obligations.
• The members of the board of directors and the members of the supervisory board (if applicable) are liable to the company, the individual shareholders, and the creditors of the company for the damage they cause through intentional or negligent breach of their duties.
• Under certain conditions, a review and thus the appointment of an auditor may be waived.