Swiss association

Last updated

A Swiss association ("Verein" in German, "association" in French, "associazione" in Italian) is a type of corporation in Swiss law. It is similar to the Anglo-American voluntary association. Unlike in Germany, a Swiss association does not need to be registered in order to obtain legal personality, [1] but must be registered if it "conducts a commercial operation". [2] An association can serve as a non-profit organization (NPO) or non-governmental organization (NGO) and this form is used by several Swiss sections of international NGOs such as Amnesty International, and the World Wildlife Fund, by business firms (see below) or by international organizations such as the Fédération Internationale de Football Association (FIFA). The form can also be used by political parties and alliances, such as trade unions.

Contents

As the establishment of an association involves little paperwork and no registration or fees, it is an important legal form in Switzerland [1] and often used by groups such as sport and social clubs. [1] It has also become a useful form for multiparty business organizations. The only requirement is that prior to the establishment, two persons draw up bylaws and appoint the organs of the association (such as the board and the auditors). [3]

Commercial organizations

The association can also be used as a legal form for a business organization consisting of a number of independent offices, each of which has limited liability vis-à-vis the others. [3] The form is often used by multinational professional firms so they can operate globally under one brand whilst maintaining separate profit pools (and ring-fencing liability) in each country in which they operate. [3] One advantage to the Verein structure is that because control of the firm is decentralized, offices are only bound by regulators in their country. For instance, non-US offices of accounting firms in a Verein structure are not bound by Securities and Exchange Commission subpoenas from the United States. [3]

Since the assets and earnings of a Swiss association are controlled by the member firms, Swiss association borrowers should provide a lender with guarantees from member firms or backup letters of credit.

Several court cases against accounting firms have attempted to use vicarious liability and veil piercing arguments to find liability for the association based on a member's activities. Only one such argument has been successful in American courts: see Cromer Fin., Ltd. v. Berger, No. 00 CIV. 2284 (DLC), 2002 WL 826847, 2002 U.S. Dist. LEXIS 7782 (S.D.N.Y. May 2, 2002) (parent association may be liable for office's securities fraud based on agency doctrine). Most associations now expressly note their status on web sites, e-mails and letterhead in order to prevent future arguments based on agency.

The Swiss Verein is similar to the European Economic Interest Grouping (EEIG), but differs in that EEIG member firms share their liabilities while Verein member firms maintain separate liabilities. [3]

Law firms

Baker McKenzie was the first major law firm to become a Swiss verein, in 2004. Since 2009, Swiss vereins have been used in several mergers of large multinational law firms, as they allow regional profit pools and their related tax, accounting and partner compensation systems to remain separate while allowing strategy, branding, information technology and other core functions to be shared between the constituent partnerships. [4] The main advantage of the verein structure is that profits can be shared between constituent partnerships, incentivizing partners to share clients and work between the member partnerships. [4] Most law firms as vereins overcome cost sharing problem in return for work referrals, which allows for the indirect sharing of profits. [3] This issue is not unique to vereins, as some firms structured as a single partnership maintain multiple profit centers so as to limit profit sharing within the partnership. [5] In many cases, this works like a corporate structure, where the Swiss verein is the holding company and the member firms are the subsidiaries, making the centralization, profit and fund management more efficient.

Vereins are usually consolidated as single firms in law firm revenue and headcount rankings such as The American Lawyer's "AmLaw 100," while international referral networks such as Lex Mundi and informal "best friends" alliances are usually not consolidated for this purpose. However, some law firm vereins such as DLA Piper have minimal financial integration and primarily serve as referral relationships. [6]

The cost sharing between verein members often has the economic effect of splitting fees between member firms in cases where work is referred between them, although revenue sharing between such member firms is often prohibited (this restriction being one of the major considerations underlying the verein structure). The details of cost sharing are not always clearly disclosed to clients and may result in higher fees than what would be charged outside of the verein relationship. [7]

Vereins can also give rise to conflicts of interest. For example, the US arm of Dentons advised a plaintiff in suing Gap Inc., a longstanding client of the Canadian arm, which a US administrative court found created a conflict despite the fact that the two arms were operationally separate. [8]

As of 2014, there are six major law firms structured as Swiss vereins, each averaging 3,100 attorneys and 46 offices in 33 countries (Dentons being the largest law firm worldwide by lawyer headcount): [9]

The model is also used by some smaller international firms such as the employment law specialist Littler Mendelson. [10]

The Anglo-Canadian law firm Gowling WLG, formed by a merger in February 2016, uses a variant of the Swiss Verein structure in which the firm's two partnerships are members of an English company limited by guarantee. [11]

Accounting firms

Accounting firms structured as Swiss associations include:

See also

Related Research Articles

Business is the practice of making one's living or making money by producing or buying and selling products. It is also "any activity or enterprise entered into for profit."

<span class="mw-page-title-main">Partnership</span> Business organization in which parties cooperate in an endeavor

A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations may partner to increase the likelihood of each achieving their mission and to amplify their reach. A partnership may result in issuing and holding equity or may be only governed by a contract.

<span class="mw-page-title-main">Limited liability company</span> US form of a private limited company

A limited liability company (LLC) is the United States-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. An LLC is not a corporation under the laws of every state; it is a legal form of a company that provides limited liability to its owners in many jurisdictions. LLCs are well known for the flexibility that they provide to business owners; depending on the situation, an LLC may elect to use corporate tax rules instead of being treated as a partnership, and, under certain circumstances, LLCs may be organized as not-for-profit. In certain U.S. states, businesses that provide professional services requiring a state professional license, such as legal or medical services, may not be allowed to form an LLC but may be required to form a similar entity called a professional limited liability company (PLLC).

<span class="mw-page-title-main">Private limited company</span> Type of company used in many jurisdictions

A private limited company is any type of business entity in "private" ownership used in many jurisdictions, in contrast to a publicly listed company, with some differences from country to country. Examples include the LLC in the United States, private company limited by shares in the United Kingdom, GmbH in Germany and Austria, Besloten vennootschap in The Netherlands, société à responsabilité limitée in France, and sociedad de responsabilidad limitada in the Spanish-speaking world. The benefit of having a private limited company is that there is limited liability.

<span class="mw-page-title-main">Law firm</span> Business entity formed to practice law

A law firm is a business entity formed by one or more lawyers to engage in the practice of law. The primary service rendered by a law firm is to advise clients about their legal rights and responsibilities, and to represent clients in civil or criminal cases, business transactions, and other matters in which legal advice and other assistance are sought.

<span class="mw-page-title-main">Baker McKenzie</span> Multinational law firm

Baker McKenzie is one of the largest international law firms, headquartered in Chicago. Founded in 1949 under the name Baker & McKenzie, it has 77 offices in 46 countries and employs 4,809 attorneys and approximately 13,000 employees.

Gowling Lafleur Henderson LLP (Gowlings) was a Canadian and international law firm, with about 700 legal professionals in 10 offices in Canada and as well as London, Moscow, and Beijing. The firm offered legal support in business law, advocacy/litigation and intellectual property law.

<span class="mw-page-title-main">DLA Piper</span> Multinational law firm

DLA Piper is a law firm with offices in over 40 countries throughout the Americas, Asia Pacific, Europe, Africa, and the Middle East. In 2021, it was the third largest law firm in the United States by revenue.

Quinn Emanuel Urquhart & Sullivan, LLP is a global white shoe law firm headquartered in Los Angeles, California. The firm employs approximately 800 attorneys throughout 33 offices around the world.

<span class="mw-page-title-main">Company limited by guarantee</span> Type of corporation

A company limited by guarantee (CLG) is a type of corporation where the company has no share capital. Members instead act as guarantors of the company's liabilities: each member undertakes to contribute an amount specified in the articles in the event of insolvency or of the winding up of the company.

Dentons is the world's largest global law firm by number of lawyers and the 6th-largest law firm by revenue.

Reed Smith LLP is a global law firm with more than 1,500 lawyers in 30 offices throughout the United States, Europe, the Middle East and Asia.

The Seven Sisters refers to a historical collection of seven law firms with offices across Canada, the majority of which have head offices in Toronto, Ontario.

Wragge & Co LLP was a UK-headquartered international law firm providing a full range of legal services to UK and international clients. Wragge & Co merged with the London law firm Lawrence Graham in May 2014, forming Wragge Lawrence Graham & Co. In 2016, Wragge Lawrence Graham & Co merged with the Canadian law firm Gowlings to become Gowling WLG.

SNR Denton was a multinational law firm co-headquartered in London and Washington, D.C. The firm operated in 60 locations across 43 countries and had around 1,250 lawyers. It was one of the 25-largest law firms in the world, with revenues of around $750 million in 2011/12.

The legal services sector of the United Kingdom is a significant part of the national economy; it had a total output of £22.6 billion in 2013, up from 10.6 billion in 2001, and is equivalent to 1.6% of the country's gross domestic product for that year. The sector has a trade surplus is £3.1 billion in 2013 and directly employees 316,000 people, two-thirds of whom are located outside London. The UK is the world's most international market for legal services. It allows virtually unrestricted access for foreign firms, resulting in over 200 foreign law firms with offices in London and other cities in the UK. Around half of these are US firms, with the remainder mainly from Europe, Australia and Canada. The UK legal market has a strong global position due to the popularity of English law. Some 27% of the world's 320 legal jurisdictions use English Common law.

Gowling WLG is a multinational law firm formed by the combination of Canada-based Gowlings and UK-based Wragge Lawrence Graham & Co in February 2016, in the first multinational law firm combination co-led by a Canadian firm. Gowling WLG ranks at number 16 in The Lawyer UK 200 2019. On the list of largest law firms by revenue, Gowling WLG ranked as the highest revenue producing firm in Canada and 74th in the world (US$587,140,000) in 2017.

References

  1. 1 2 3 Hasselback, Drew (16 November 2010). "More on the Swiss Verein system". Financial Post.
  2. ↑ "210 Swiss Civil Code, Art. 61" . Retrieved 18 February 2014.
  3. 1 2 3 4 5 6 Johnson, Chris (7 March 2013). "Vereins: The new structure for global firms". The American Lawyer.
  4. 1 2 Enter the Swiss Verein: 21st-century global platform or just the latest fad? By Nick Jarrett-Kerr and Ed Wesemann.
  5. ↑ Maiwurm, James J. (25 November 2015). "In Search Of Our Best Law Firm Selves". Law360. Retrieved 4 December 2015. But as we assess vereins, we must acknowledge that many so-called "single global partnerships" operate on a day-to-day basis, and utilize compensation systems, that are more profit centric than some vereins. To compare all vereins to a "gold standard" single global partnership is misleading.
  6. ↑ Kalis, Peter (2 May 2011). "The Am Law 100: Grand Illusion". AmLaw Daily. Retrieved 4 December 2014.
  7. ↑ Reeser, Edwin B. (1 October 2013). "Are verein-style law firms ignoring fee-splitting ethics rules?". ABA Journal. Retrieved 4 December 2014.
  8. ↑ Gray, Jeff (23 August 2015). "Dentons knocked off Gap patent case over conflict of interest". The Globe and Mail. Retrieved 25 August 2015.
  9. ↑ Simpson, Jake (3 August 2014). "Verein Tie-Ups Gain Allure As Firms Eye Global Expansion". Law360. Retrieved 4 December 2014.
  10. ↑ Strickler, Andrew (15 October 2015). "Littler Recasts Megafirm Model in Overseas Expansion". Law360. Retrieved 5 February 2016.
  11. ↑ "About the structure of Gowling WLG" . Retrieved 24 February 2016.Mackrael, Kim (8 July 2015). "Gowlings Law Firm to Combine With U.K.'s Wragge Lawrence Graham". The Wall Street Journal. Retrieved 24 February 2016.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.