Welcome to the DAO Legal Guide focusing on the Swiss Foundation, an integral segment of the Pontinova Global Top 100 DAO Legal Report.
Delve into this comprehensive guide to gain insights into the legal set up requirements and the regulatory compliance framework surrounding Swiss Foundations. Explore the other jurisdictions to understand why they excel at fostering DAO initiatives and navigating the intricacies of decentralized governance structures.
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Legal
Swiss Foundations are incorporated under the Swiss Civil Code.
Constitution
Endowment of Assets, Deed of Incorporation, one or more Founders who can be either individuals or companies and do not need to be residents of Switzerland, Entry in the Commercial Register.
Regulatory Board
Swiss Foundations Supervisory Authority (ESA), Swiss Financial Market Supervisory Authority (FINMA)
Administration & Management
Registered Office within Switzerland, Bank Account within or outside Switzerland is not mandatory in the beginning, a Contribution in Kind is sufficient, Foundation Board which consists of one or more persons who can be either individuals or companies and of whom at least one must be a resident of Switzerland.
Reporting, Accounting & Auditing
Reporting and Accounting are mandatory. Auditing is not mandatory, if the Foundation had total assets of less than CHF 200’000 in the past two years, is not issuing any public appeals for donations or other contributions, and an audit is not required to make a reliable assessment of its net assets and results of operations.
Please note that a minimum capital of CHF 50’000 is required to set up a Swiss Foundation. Also, the Swiss foundation is an independent and ear-marked asset. This means that its purpose cannot be changed by the founder after its establishment. A change in the purpose of the foundation is only possible if this is urgently necessary to preserve the assets of the foundation or to fulfill the purpose of the foundation. The foundation supervisory authority monitors the proper use of the endowment and, if applicable, the tax-privileged capital. The calculation of the incorporation fees should include legal consulting fees, notary fees, fees for entry into the commercial register and fees for the supervisory authority. The incorporation duration is about 4 weeks. The Swiss Foundation is particularly suited for non-profit purposes.
Taxation
4.25 % of Federal Tax on Earnings. Cantonal and communal taxes on earnings as well as taxes on capital and value-added tax are added. The overall effective tax rate depends on the Foundation’s seat in Switzerland. If the Foundation makes less than CHF 5’000 profit p.a., there is no taxation on earnings. However, non-profit Foundations may be granted tax exemption from federal corporate income tax, if they meet the following criteria: (a) common public interest, (b) exclusivity of use of funds, and (c) irrevocability of the pursued purpose.
On February 16th, 2018, the Swiss Financial Markets Regulator FINMA published guidelines for enquiries regarding the regulatory framework for initial coin offerings (ICOs). In these guidelines, FINMA bases its own approach to categorization of tokens on its underlying economic function and differentiates between utility tokens, payment tokens and asset tokens. Please note that as soon as your Swiss-based DAO provides services to citizens of the European Union, European regulations, in particular the Markets in Crypto Asset Regulation (MiCAR), must also be observed.
Anti-Money Laundering Act [P / VA S]
Applicable, if the token is intended to be used as a means of payment. In this case, the token issuer qualifies as a financial intermediary. A financial intermediary is required to affiliate to a self-regulatory organization (SRO) or to be subject to supervision (FINMA). The financial intermediary is also required to establish the identity of the beneficial owners. Please note that if the payment function is merely incidental, utility tokens are excluded from the anti-money laundering requirements.
Financial Market Infrastructure Act [A / VA S]
Applicable, if the token qualifies as a security. Securities are standardized certificated and uncertificated securities, in particular uncertificated securities and ledger-based securities, as well as derivatives and intermediate securities, which are suitable for mass trading. Payment tokens are not securities. Neither do utility tokens qualify as securities, if their sole purpose is to grant digital access rights to an application or service and if the utility token can be used in this way at the point of issue. Asset tokens, including equity tokens, are considered securities. Please note that the legal consequences of being treated as a security follow from securities regulations, such as the Financial Services Act and the Financial Institutions Act.
Financial Services Act [A / VA S]
Applicable, if the token qualifies as a security by virtue of (a) being issued, (b) being publicly offered or (c) being traded. In this case, the entity must publish a prospectus, i.e., a comprehensive presentation of the issuer and the securities, and prepare key information documents (KID), i.e., information for retail customers on the financial instruments offered. Please note that the intentional late or incorrect filing or publication of prospectuses and KIDs is punishable by a fine of up to CHF 500’000.
Financial Institutions Act [A / VA S]
Applicable, if the entity is a financial institution, such as a portfolio manager or a security firm. In this case, the financial institution must be authorized by FINMA and is then subject to anti-money laundering monitoring as well as prudential monitoring. Please note that financial institutions must meet high organizational, financial and risk mitigation requirements to be authorized. For example, portfolio managers must have a minimum capital of CHF 100’000 and securities firms CHF 1.5 million. Special requirements apply to branches of foreign financial institutions. This minimum capital must be met in addition to the minimum capital requirements for the legal wrapper and must be maintained.
Banking Act [A / VA S]
Applicable, if the custody of token classifies as deposit. Excluded are tokens with a pure profit-sharing function as well as tokens with an exclusive value transfer and payment function, since no claim is acquired. Like financial institutions, banks must meet rigid organizational, financial and risk mitigation requirements to obtain a banking license. The minimum capital requirement is CHF 10 million. Please note that FINMA may grant a FinTech license to boost innovative financial companies. The FinTech license allows institutions to accept public deposits of up to CHF 100 million or crypto-based assets, if these are not invested, and no interest is paid on them. A further requirement is that an institution with a FinTech license must be a company limited by shares, a corporation with unlimited partners or a limited liability company and must have its registered office and conduct its business activities in Switzerland. The duration of the licensing procedure depends on the complexity of the project and the quality and completeness of the application.
Check the other DAO Jurisdictions:
• Switzerland - Association
• Liechtenstein - Foundation
• Lithuania - Private Limited Liability Company
• Marshall Islands - DAO (Non-Profit) Limited Liability Company
• Cayman Islands - Foundation
• British Virgin Islands - Limited Liability Company
• Abu Dhabi ADGM - Distributed Ledger Technology Foundation
• Ras Al Khaimah Digital Assets Oasis - DAO Association
