Avoiding shell company transactions: what you need to know about transferring shares in inactive companies

Since January 1^st, 2025, Swiss legislation has officially codified previous Federal Supreme Court rulings on the abusive transfer of inactive companies. This practice — known in Swiss legal terminology as Mantelhandel, or shell company trading — is now regulated under the Swiss Code of Obligations. The goal is to prevent the misuse of inactive companies to bypass legal requirements for company formation and liquidation. Anyone considering the purchase or sale of shares in such companies should be fully aware of the legal framework and potential risks involved.

What is a shell company transaction?
Shell company transactions involve the transfer of ownership in a company that formally still exists but has ceased all business activities. These companies often exist only on paper and are effectively liquidated but have not been removed from the commercial register. The sale of such “empty shells” bypasses legal provisions governing company formation and dissolution. Consequently, contracts for such transactions are void under Article 684a of the Code of Obligations (CO) — they have no legal effect and cannot be enforced in court. The same applies to limited liability companies (GmbH) under Article 787a CO.

How can you identify a shell company?
Inactive or effectively dissolved companies often reveal themselves through key indicators in their financial statements:

• Assets: these are typically limited to liquid funds such as cash or receivables from shareholders. Fixed assets are usually either fully depreciated or no longer exist. It’s also common to see a loss carryforward from previous years.
• Liabilities and Equity: shareholder equity is often partially or fully depleted, and only a small number of liabilities may still be on the books.
• Income Statement: little to no revenue or expenses are recorded, indicating that business operations have come to a standstill.

Taken together, these signs point to a company that continues to exist only as a legal entity — a shell — without any real economic activity.

Commercial Register and notarial requirements
Commercial register offices are increasingly vigilant and assess whether proposed company changes may involve prohibited shell company transactions. If there is reasonable suspicion under Article 65a of the Commercial Register Ordinance (HRegV), the following actions may be taken:

• Request for the current signed annual financial statement,
• Rejection of the proposed registration if suspicion is confirmed,
• Request for additional documentation and declarations.

Red flags include:

• Simultaneous changes to the company name, purpose, registered office, or governing bodies,
• Full or staggered transfer of GmbH shares,
• Registration at an address already linked to suspicious companies,
• Involvement of individuals previously connected to voided transactions.

Notaries are also required to scrutinize such cases more closely. The most recent annual financial statement is generally requested, especially when all shares are being transferred, as this often coincides with broader amendments to the articles of association.

Practical consequences and risks
Buying or selling shares in a shell company can lead to the rejection of commercial register entries and additional administrative costs — particularly when prepared changes cannot be carried out. Moreover, there is legal uncertainty as to whether subsequent actions (such as changes to the board of directors or relocation of the company’s domicile) are even valid. For this reason, it is essential to assess whether a company is active or inactive before proceeding with a transaction — ideally with the support of legal experts.

Recommendation: incorporation instead of shell company transactions
The apparent advantage of saving time and effort by acquiring an existing company often proves illusory. Legal pitfalls, lack of transparency regarding liabilities, and the risk of reversal make shell company transactions a high-risk endeavor. Moreover, promised tax or administrative benefits rarely materialize in practice. A proper incorporation offers a legally secure, transparent, and often more cost-effective alternative.

Conclusion
Shell companies may appear attractive at first glance — but the legal risks clearly outweigh the benefits. For those seeking clarity, legal certainty, and a solid foundation, a new company formation or the orderly liquidation of existing companies is the wiser path.

This blog article does not constitute legal advice, it is made available “as is” and makes no claim to completeness or accuracy. Hoop makes no warranty or liability as to its content. This is excluded to the extent permitted by law. Use is at your own risk. Legal advice is recommended if necessary.