Purpose

This provision of the articles of association describes the purpose of the association, its important issues, its objective and the reason why it was founded. The article stating the association’s purpose should be open and accurate to allow the association to evolve and make it clear to interested people what it is about.

Every association has – and needs – a purpose. The purpose is the reason for setting up an association. It can be freely chosen within the framework of the law and must be described in the articles of association (article stating the association’s purpose). An association serves an idealistic purpose and is devoted to political, religious, artistic, charitable or other non-economic activities. An association may not pursue a primarily economic purpose.

Question

What needs to be taken into account if an association wishes to amend its articles of association?

Answer

An association wants to give itself a new purpose or a new name or now also wishes to gain benefactor members. Changes of this kind require an amendment to the association's articles of association.

Responsibility for any revision to the articles of association lies with the general meeting, with any change possibly requiring a qualified majority of votes. In the case of important amendments to an association's articles of association that are likely to be subject to controversial debate, it is advisable to convene an extraordinary general meeting to address this single topic. The committee provides the members with the proposed amendments together with the invitation within the period stated in the articles of association. In the case of a total revision or in instances in which major changes are to be made, it is advisable to present the amendments synoptically (the currently applicable text is presented opposite the new text).

At the (extraordinary) general meeting, the provisions to be revised are put forward for discussion individually. At the end, an overall vote is held. Changes to the association's name and its purpose must also be communicated to absent members following the (extraordinary) general meeting in the minutes. If a member is not in agreement with the change of purpose, they may declare their withdrawal from the association in accordance with Article 74 of the Swiss Civil Code (ZGB). If the association is entered in the commercial register, changes to its name and purpose must be reported. It is advisable to also inform the association's most important financial backers prior to the distribution of the next annual report.

In the general meeting, members may decide on a change in the association’s purpose. In most cases, the articles of association provide for a qualified majority, e.g. a two-thirds majority. Non-consenting members do not have to accept the change of purpose; they can immediately leave the association. They can also object to the change of purpose by challenging it for breach of Article 74 of the Civil Code, which includes the protection of the association's purpose.

Question

In our committee, a dispute has arisen in connection with the question of how old the association is. The association was founded 19 years ago. Five years ago, it was renamed, the purpose was altered slightly and the entire committee was replaced. The current chairperson claims that the association is only five years old rather than 19. Which age is correct?

Answer

The name of an association is part of the articles of association and in most cases is mentioned in the first article along with the purpose. The articles of association can be amended, meaning this is also the case for an association's name and purpose. This matter is addressed by law, however, in Article 74 of the Swiss Civil Code (ZGB): "No member may be forced against his or her will to accept a change in the objects of the association". If the purpose is changed (and not merely adjusted), a member is therefore allowed to immediately leave the association. However, the association continues to exist.

An indication that your association has existed since its foundation is the fact that the association was never dissolved. Conclusion: you can celebrate your association's 20th anniversary next year.

In addition to the general part and the various types of contracts, the Swiss Code of Obligations (CO) contains provisions for those legal entities that pursue an economic purpose.

An association may not be established primarily for an economic purpose; there are other organisational forms for that purpose. An association is not allowed to primarily engage in economic activities, but must pursue an ethical purpose. In order to achieve this ethical purpose, however, economic activities are permissible. In accordance with the Code of Obligations (CO), organisational forms suitable for an economic purpose are the simple partnership, the limited partnership, the limited company, the cooperative and the stock corporation. By law, all of these forms of organisation are better suited for an economic purpose that is oriented towards gaining money and making a profit.

Question

When it is appropriate for a project to take on the form of a profit-oriented association rather than a GmbH (limited company) or an AG (public company)?

Answer

Under Swiss law (Article 60 ff. of the Swiss Civil Code [ZGB]), associations are not allowed to pursue an economic purpose. The purpose of the association is the pursuit of idealistic, non-economic purposes and may not provide its members with any economic advantages.

An economic purpose is deemed to exist if members are to be provided with an economic, financial advantage via the association's activities, for example through the payment of wages or the distribution of profits. The decisive factor here is not the articles of association and other association regulations, but rather the association's actual activities. However, it is absolutely allowed for an association to be economically active with respect to the funds it requires for the fulfilment of its idealistic purpose. It is allowed to employ people and conduct business in a commercial manner. In the latter case, it must be entered in the commercial register. Otherwise, an entry is voluntary.

Associations that already seek to pursue an illicit economic purpose at the foundation stage cannot be legally founded. Associations that go on to pursue an illicit purpose or engage in an illicit mixture of purposes at a later stage face the threat of liquidation or, in a liability case, the revocation of their legal form as an association.

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. 

If an association has both an economic and a non-economic purpose, its purpose is a mixed purpose. If the economic purpose is subordinate to the ethical purpose, the form of association is permissible.

Every association has – and needs – a purpose. The purpose is the reason for setting up an association. It can be freely chosen within the framework of the law and must be described in the articles of association (article stating the association’s purpose). An association serves an idealistic purpose and is devoted to political, religious, artistic, charitable or other non-economic activities. An association may not pursue a primarily economic purpose.

An association must have an ethical purpose; an economic purpose is not admissible. An association shall not be concerned with achieving material gains, but shall pursue ethical values such as community, a better environment and social, sporting or cultural concerns.

If an association has a wrongful or immoral purpose, it will be dissolved by law. Regardless of how the purpose is described in the articles of association, the actual conduct of the association’s executive bodies is what counts. Immoral conduct refers to behaviour that is contrary to accepted manners and the standards of morality. This applies, for instance, to a sect that excessively restricts personal freedom or an organisation with the purpose of obtaining kickbacks.

If an association has both an economic and a non-economic purpose, its purpose is a mixed purpose. If the economic purpose is subordinate to the ethical purpose, the form of association is permissible.

If an association permanently reveals a basically illegal approach through its activities, it has an unlawful purpose. That fact leads to its dissolution, even if the official statutory purpose is admissible.