Legal form

An association is a group of people that pursue a joint purpose. With the foundation of an association, they create a legal entity with an independent and autonomous legal identity. Associations have an ethical purpose: They are committed to political, religious, scientific, artistic, charitable, social or other non-economic objectives. An association needs written articles of association and executive bodies such as the general meeting and the executive committee, which can take decisions for it and act on its behalf. Associations are an important part of civil society. They create a structure that allows interest groups to stand up for their cause.

Setting up and managing an association does not require authorisation. For certain actions and events, however, the association has to obtain permits from the municipality or the canton. Where public land is used for actions or festivities, where public funding events are organised or where lottery tickets are sold, a permit is required and local regulations must be observed.

Members form the basis and thus the foundation and the support of any association – they are not just a “necessary evil”. Therefore it is important to respect member rights and to take into account the members’ interests.

The term civil society refers to the network of organisations and initiatives that work without profit for the public benefit and contribute to the further development of a society worth living in (associations, citizens' initiatives, environmental movements, etc.). The sociologist Anthony Giddens says about the value of such organisations: “I think we know now what a good society looks like. It’s a kind of balance between government, markets and civil society.”

In Switzerland, there are an estimated 100,000 associations. Since only some of these associations are registered in the commercial register, there is no precise information available.

Associations are organisations centred on persons. The focus is on people and not on capital as in the case of foundations or stock companies.

Within the framework of legal and statutory provisions, associations are free to organise the association’s affairs. They are autonomous and have the right of self-determination. Associations may decide whom to accept as members. However, in the case of associations with a particular dominant market position such as professional associations, there may be a right to acceptance, if the statutory requirements are met.

The cooperative also brings together people who share a common purpose. The members of a cooperative are partners and acquire a share certificate. A cooperative mostly pursues an economic purpose; it is people-oriented and capital-oriented, while associations are only people-oriented. The legal provisions on cooperatives can be found in the Code of Obligations (CO) in Articles 828 to 926.

The term “interest group”, abbreviated as IG, does not designate any legal entity. An IG can be organised either as an association or as an unregistered partnership.

Question

My partner and I work in the therapeutic field. We would like to shift the focus of our services to people with disabilities. We want to set up an association for this purpose. I have read that only two people are needed for an association. Can my partner and I set up an association and provide therapy within the scope of the association?

Answer

An association must not operate for the purpose of generating a profit (Art. 60 ZGB). If the association is intended to enable its members to earn a living or a part thereof, it is by definition profit-driven. Associations are given preferential treatment with regard to taxes and liability. Any circumvention is therefore punishable by law. In your situation, a different legal form should be chosen, or the association should be organised differently. 

However, associations are generally permitted to employ people to fulfil their non-profit objectives. Pursuant to Article 68 of the Swiss Civil Code, its members must recuse themselves from any transactions concerning themselves, their spouses and cohabiting partners and close relatives. This means that you, in your function as a representative of the association, cannot appoint yourself or your partner, nor can you hire yourselves. 

However, you could formulate an idealistic or charitable objective in the purpose of the association (e.g. reduction of costs for affected people). This would allow you to recruit people who value the focus on people with disabilities and who are willing to take on responsibility as board members in the association. The Board of Directors could hire or commission you as a superior body on behalf of the association. You yourself could be represented on the Board in an advisory capacity. 

It is important to choose a legal form suitable for the association’s purpose. In the case of an idealistic purpose without economic objectives, associations, foundations and, in some cases, simple partnerships are suitable legal forms. In the case of an economic purpose, limited companies, stock corporations, cooperatives or sole proprietorships are suitable legal forms. Our work aid “Different legal forms” provides an overview of the most important legal forms in Switzerland.

A group of people can join forces to pursue a common purpose, e.g. to organise a holiday trip. Such partnerships are subject to the provisions of the Swiss Code of Obligations (CO), in particular Articles 530ff CO. In the case of the simple partnership, all partners are personally liable. As long as an association is not fully set up, the persons who are joining forces form a simple partnership.

In Switzerland, the term “social enterprise” is used for different forms of organisations, which are economic actors, but pursue a social goal and not the maximisation of profit. Social enterprises are primarily involved in work integration.

Question

We want to hold a festival. Somebody has advised us that we should form a community of interest rather than an association. What actually are the differences between an association, a club and a community of interest?

Answer

If a community of persons is duly established as an association (non-economic purpose, written articles of association, founding minutes, bodies), it is considered to be an association in a legal sense in accordance with Article 60 et sequitur of the Swiss Civil Code (ZGB). An association is not required to include the term "association" in its name. It is clear from the articles of association (usually in the first article) that it is an association. For example, associations refer to themselves as communities, societies, parties or organisations. Associations with various sections or sub-associations are usually refereed to as organisations.

"Community of interest", "club", and "organisation" are not legal terms. Communities of interest and clubs are, however, often organised as associations. It is also possible for them to take a different corporate form, for example that of an ordinary partnership.  However, members of an ordinary partnership assume personal liability and groups that take this legal form are unable to open their own postal or bank account in their name.

Like associations, foundations are legal entities. They often provide funds for charitable institutions. They are governed by the Civil Code (CC) in Articles 80 to 89bis. Foundations are not people-oriented, they are capital-oriented. A foundation is not based on members but on foundation capital dedicated to a specific purpose. The Board of Trustees makes sure that the foundation’s purpose is pursued. Similar to the executive committee of an association, the Board of Trustees is responsible for the management of the foundation. Foundations are supervised by the cantons or the federal government. A distinction is made between operational foundations and grant-making foundations. An operational foundation does not fund projects by third parties. It invests its funds in projects that it initiates and implements itself. In practice, many foundations perform both operational and grant-making activities. Swiss Foundations (www.swissfoundations.ch) is an association of grant-making foundations in Switzerland.

Many foundations manage large fortunes and fund targeted projects within the scope of their purpose. The foundation directory shows which foundations are suitable for which funding purposes. There are cantonal directories and a federal foundation directory.

Most foundations or government agencies have deadlines for funding applications or applications for subsidies. It is worth noting down these deadlines in the annual planning and to start early with the compilation of the necessary documents: Depending on the requirements of the sponsors, the funding application should be accompanied by documents such as the articles of association, the mission statement, concepts, project descriptions, budgets, financing plans, etc. Usually, the required information is indicated on the website of the respective organisation.

The Migros Culture Percentage is a voluntary initiative by Migros, incorporated in its articles of association that demonstrates the company’s responsibility towards society. Migros is committed to providing a wide access to culture and education for the general public, allowing the company to interact with society and empowering people to participate in social, economic and cultural changes. Key elements of this commitment are culture, society, education, leisure and economy.

The Swiss Foundation Code contains three principles and 22 recommendations for founding and managing foundations – especially grant-making foundations. The three principles can also be applied to associations: Effectiveness (see Effectiveness and efficiency), Checks & balances and Transparency.

The association as a legal entity can act as a party in litigation. It may act as plaintiff or defendant.

An association that has been founded in a formally correct way is capable to sue and be sued, i.e. it can assert its rights in a lawsuit.

A legal person is an independent legal entity, a corporation. It can establish rights and duties like a natural person and it acts through its bodies. If an association has been set up properly with a foundation meeting and articles of association, it becomes a legal entity and acts through its bodies, i.e. the general meeting and the committee.

The association acquires legal personality with its lawful foundation, i.e. as soon as the founding members have held the foundation meeting and approved the written articles of association. From that moment, the association is a legal person and can establish rights and obligations. It has legal capacity to act as soon as its governing bodies are appointed. The legal capacity of the association ends with the association’s complete liquidation.

Question

Is it admissible for an association to consist of committee members only?

Answer

An association that has no members other than committee members is legitimate, too. In this case, the general meeting consists of the committee members only. It is important that such an association comply with the legal provisions governing associations: It has to convene a general meeting, hold elections, adhere to democratic processes, observe obligations to refrain from voting, etc. For such an association it is particularly important to choose one or two auditors in order to provide supervision and some sort of protection for the executive committee, because the committee cannot relieve itself.

It may be stipulated in the articles of association that the executive committee shall decide on the admission of new members. The executive committee thus determines whether further members are to be admitted or whether membership remains limited to members of the executive committee.

Business associations are interest groups. They operate in an economic environment, but are not designed directly for making profits and therefore permissible. They include employers’ associations and trade unions, trade associations or transport associations. As is the case with professional associations, their objective is to safeguard the specific economic interests of their members.

Associations are important interest groups. By means of a collective appeal, they can uphold the interests of their members or the public in certain areas with specific statutory legitimacy. Such associations are, for instance, environmental organisations, organisations active in the field of equal opportunities and workers’ organisations.

Compulsory membership exists only exceptionally and due to statutory provisions or in some cases for professional associations, which perform a supervisory function. As a principle, nobody has to join an association.

Sports federations or professional associations that conduct competitions issue disciplinary regulations that lay down rules and consequences for infringements of the rules.

In Switzerland there are an estimated 100,000 associations with an incredible diversity of purposes, for example: associations for relatives, library associations, choirs, umbrella organisations, owner associations, women's associations, carnival marching bands, local associations, interest groups, hunting societies, cultural associations, laughing clubs, human rights associations, fool guilds, orchestral associations, political parties, district clubs, associations for rose breeders, associations for home care, associations for baby minders, environmental associations, bird protection associations, business associations, numerous sponsoring associations, yoga clubs and journal clubs.

Where members belong to a section and the corresponding association at the same time, this is referred to as dual membership.

An association with different sections or sub-units is often called federation. The umbrella organisation (central federation) consists of several associations or sections. Federations can be organised as associations.

Associations that support an institution with financial and other resources are called funding associations. Their purpose is to provide a legal framework and suitable bases for the financing and fulfilment of the association’s purpose for the respective institution.

The term group of municipal associations refers to the joining together of various associations in a municipality. Such a group of associations is usually organised as an umbrella organisation for local associations. It stands up for the interests of the individual local associations and provides them with relevant information. An important function is also the coordination of different events in the municipality and the maintenance of a list of associations. A group of municipal associations is an important link between municipality and associations. Groups of municipal associations can also take on an advisory role for their member associations. They also go by other names such as interest group (IG) associations.

The term “interest group”, abbreviated as IG, does not designate any legal entity. An IG can be organised either as an association or as an unregistered partnership.

An association that operates internationally must have its headquarters in one country and is subject to the laws of that country.

Associations often state in their articles of association that they have no political or religious affiliation. That means they do not want to be associated with a political tendency or religious organisation. However, such a clause does not mean that an association should not advocate its own convictions and purposes. Other associations are expressly oriented towards a certain political or religious ideology. They are not neutral.

The abbreviation for non-profit organisation is NPO or possibly NGO (non-governmental organisation). The NPO addresses a social concern and does not primarily pursue commercial goals. Many NPOs are organised as associations. In contrast to the private sector and the public sector, the NPO sector is also called the third sector. It would be more correct to call NPOs “not-for-profit organisations”, since a NPO does not pursue any profit. Surpluses are allowed but will not be distributed to members or the management.

In Switzerland, political parties are usually organised as associations, as the democratic structure of the association is well suited for this purpose. The parties determine in their statutes who shall be accepted as members. Legal persons are not eligible. Unlike other countries, Switzerland does not require political associations to be registered in a public register.

Members of a specific professional group are organised in professional associations. These associations represent the professional interests of their members externally (e.g. recognition of professional qualifications, quality assurance or training standards, economic standing, wage demands) and constitute an important element in occupational politics. As professional associations represent the interests of their members, they are not exempt from tax.

In addition to the churches regulated by public law, there are many religious groups that are organised as associations. They are not considered charitable and do not benefit from tax exemption.

Sections are units of a central federation or umbrella association. They can be independent associations or form a sub-unit of the central federation. The sections’ autonomy (decision-making power) with respect to the umbrella organisation may vary considerably. It can be very limited or provide a great deal of independence. Some umbrella associations stipulate what the sections’ articles of association should be like and define the appearance of their sections. Other associations give more freedom to their sub-units. An association with sections is called a federation. Sections can be referred to as bodies of the umbrella association.

Service clubs are organisations that aim to foster charity while providing their members with a network for their professional and social interests. Service clubs accept new members by invitation or proposal. New members have to meet the admission criteria. Examples of service clubs are Rotary, Lions and Kiwanis.

Municipalities can employ the legal form of special-purpose associations to better perform some of their administrative tasks. These form part of publicly owned associations.

Associations whose main purpose is to financially support a project or an institution are often called sponsoring associations.

Support groups can be organised as associations. They are aimed at people with a common interest or problem. Support groups are not recognised as charitable and not exempt from tax, because usually only the members and possibly their relatives benefit from the association’s services.

The Swiss NPO Code was initiated by the Conference of Presidents of Major Aid Societies (KPGH for its German initials). This code of conduct contains good governance guidelines for directing and managing a non-profit organisation and is intended for all non-profit organisations, regardless of their legal form. In particular, however, it applies to large relief organisations in Switzerland which collect donations and provide social services. Compliance with the guidelines is obligatory for organisations that wish to be awarded the “label” NPO and must be shown in the annual report.

It is possible to create and run an association for a certain time only, e.g. for organising and holding an important event.

Trade unions are associations that represent the interests of workers or employees. Like employers’ associations, they are organised in the form of associations.

Many associations, which are active on a local, regional and country-wide level, consist of sections, cantonal associations and the Swiss umbrella association, the central association. The umbrella association unites several independent associations operating in the same or a similar business field. The relationship between section and umbrella association varies according to the organisation, which is defined in the articles of association. Either only the sections (partial associations) are members of the umbrella association, or the individual members are members of both the section and the umbrella association.