Nullity of shell companies – Art. 684a and 787a CO

On January 1st, 2025, the introduction of Articles 684a and 787a of the Swiss Code of Obligations marked a significant step in the fight against the abuse of shell companies and organised corporate burial. This amendment to the law codifies the long-standing case law of the Federal Supreme Court on so-called shell company trading and expressly clarifies that circumventing transactions in connection with shell company trading are void from the outset.

Shell companies are companies that have been effectively liquidated and exist solely as a ‘shell’ – without any operational business activities. Despite the Federal Supreme Court’s decades-old opinion that trading in such companies is invalid, they continue to be advertised on the internet and in newspapers. Sellers and buyers hope to avoid liquidation costs, cancellation expenses and new formation formalities as well as save on taxes. In addition, the acquisition of an existing shell company often makes it possible to continue an already established company name.

A particularly serious abuse is the so-called organised company funeral. Here, small business owners in particular find themselves in financial difficulties and call on the help of intermediaries. They organise – for a fee – a so-called company undertaker, who takes over the bankrupt company, relocates the registered office, changes the company’s purpose and name and delays the bankruptcy. In the course of this process, assets are often withdrawn, business documents destroyed and debts manipulated so that creditors are considerably disadvantaged. Employees and social security institutions can also be harmed by omitted wage deductions and other irregularities.

With the introduction of the new articles, it is now made clear that such circumvention transactions are considered a clear breach of due diligence and fiduciary duties and are considered null and void from the outset. This regulation strengthens legal certainty, protects creditors and sends a clear signal to the company bodies concerned and potential business partners that trading with shell companies and organised company burials will not be tolerated.

The amendment to the law that came into force on January 1st, 2025, therefore creates a clear legal framework against the abuse of shell companies and sets the course for more transparency and legal certainty in corporate law. Companies and their advisors should be aware of the new regulations in order to recognise and avoid potential risks at an early stage.

If you have any further questions or require individual advice, please do not hesitate to contact us.