Advice from Entrepreneurs & Executives Desks
Because entrepreneurs' personal and business assets are so tightly intertwined, Credit Suisse offers them advice from a single source through its Entrepreneurs & Executives desks (E&E desks): Advisory teams comprised of a private client advisor and a corporate client advisor meet a wide range of client needs and help clients to optimize their portfolio structure.
Through its "Bank for Entrepreneurs" initiative, Credit Suisse is invoking its entrepreneurial DNA. The initiative allows the bank to use its many years of experience in asset management, the corporate client business, and investment banking to provide entrepreneurs with comprehensive advice. There are now 20 E&E desks at locations across Switzerland. At each location, a corporate client advisor and a client advisor work together as an advisory team. On the private client side is a specialized advisor who is well-versed in tax and legal matters as well as corporate finance. This advisor works closely with the corporate client advisor and other internal experts to develop joint solutions for the entrepreneur. This is also often done with the involvement of other external experts. The E&E advisor helps the client with specific issues and a periodic review of the client's asset structure, and presents options for optimizing the portfolio. Together the advisor and the entrepreneur prioritize the entrepreneur's current needs. This is because the advice will differ depending on the client's current business phase and personal life stage. Because Credit Suisse has a very broad and deep range of solutions and services, it is one of the very few banks that is able to advise clients in all phases, from the company founding, during the growth phase, through to succession planning.
Intermediary between Young Entrepreneurs and Investors
For example, a startup in the foundation and early growth stages needs additional equity capital to grow, i.e. venture capital. Finding (risk) capital is relatively difficult for young entrepreneurs in Switzerland. In this respect, Credit Suisse can play an ideal intermediary role thanks to the cooperation between its corporate client and private banking business areas. On the private banking side, investors are constantly looking for attractive investment opportunities, but they often have little knowledge of the young entrepreneur scene. Credit Suisse brings the two sides together. For example, the bank created an event called the Private Investors Club at which seven select young entrepreneurs chosen by an external jury comprised of experts have the unique and exclusive opportunity to present their companies to about 80 investors from the Entrepreneurs & Executives segment. The winner, chosen in a round of live voting at the event, receives a voucher for the digitalization of his or her shares.
The digitalization of shares through the creation of book-entry securities helps companies to take a giant step toward professionalization and flexibility. This step is particularly important if there are upcoming rounds of financing, changes in ownership, or an IPO.
This event has been very well received by both investors and young entrepreneurs. Entrepreneurs have access at an early stage to our network of interesting investors, as well as partnerships with, for example, startups.ch, Switzerland Global Enterprise, and the Swiss Venture Club.
Creating Professional Structures
Furthermore, it has been shown that it is essential, particularly in the initial phase of a company, to create professional structures in order to be well positioned for success later on. In this respect, it is important to think about, for example, a pension solution that is optimal for company shareholders. It has been shown that second pillar retirement savings are often the first "personal assets" that an entrepreneur has. Many of an entrepreneur's so-called levers are at the company level, so it makes sense to look at these issues with our internal and external specialists. Another example is the optimal formulation of an income strategy during a later phase. Here, the questions involve the optimal salary level and the right dividend strategy. Long-term added value for entrepreneurs can only be created if their personal and professional situations have been optimized. That is why the advisory services offered by Credit Suisse do not wait until the entrepreneur has already accumulated significant private assets, but start in an earlier phase, when the entrepreneur is taking decisive entrepreneurial steps. The approach of the Entrepreneurs & Executives Desk is therefore a significant addition to the range of traditional private and corporate banking services.
From Business Assets to Private Assets
With growing entrepreneurial success, the accumulation of private assets described briefly above becomes increasingly important. An entrepreneur can only access all succession options if the assets tied up in the company and the entrepreneur's personal and pension assets are balanced. Cash-heavy companies, i.e. companies with large amounts of liquidity that is not needed for operations, are often a stumbling block for successful company succession planning. Potential buyers, such as direct competitors, the company's own management team, or potential investors, are either unwilling or unable to finance excess liquidity. In addition, there are many other reasons to distribute excess liquidity and protect it against entrepreneurial risks such as liability risks and the general risk of bankruptcy. So at a certain point it makes sense to transfer assets to private assets. Various considerations need to be kept in mind during such a transfer. First, the transfer to private assets may, in individual cases, first require a reorganization of the company and then a subsequent lock-up period. Second, it is important to be prepared for future changes in the law. Currently, Tax Proposal 17 (formerly known as Corporate Tax Reform III) may offer opportunities to entrepreneurs. In any case, entrepreneurs should review their situation with respect to opportunities at an early stage together with the bank's advisors. In doing so, E&E advisors can meet all of the client's needs and structure the transfer of business assets to personal assets as efficiently as possible.
Another important issue currently occupying many entrepreneurs is the deregulation of extra-mandatory coverage provided by pension funds (Pillar 2b). This will result in greater Pillar 2 investment flexibility. Investors will be able to invest their assets in various ways, depending on their time horizon and risk tolerance. It may make sense to separate the extra-mandatory portion from the mandatory portion and transfer it to a separate pension fund. This prevents the extra-mandatory pension assets from being redistributed and/or used for the restructuring of a fund. Tax considerations also play a decisive role in the structuring of extra-mandatory pension assets. Here, too, Credit Suisse can provide targeted advice in collaboration with its external experts.
Escrow Mandate Solution
For startups, binding partners to the company is crucial. In the case of personal companies, a wide variety of obligations may be agreed with partners in the partnership agreement. By contrast, joint-stock companies are expressly prohibited by Art. 680(1) of the Swiss Code of Obligations (SCO) from defining any contractual obligations for shareholders apart from full payment of shares. So a solution outside of company law is necessary. This comprises a shareholders' agreement (SHA) outlining the partners' mutual obligations. Contracts concerning the mutual rights and obligations of partners are important not only for joint-stock companies, but for other company forms as well – particularly limited liability companies. The shareholders' agreement is not defined in law. The freedom to determine the terms of a contract within the limits of the law set out in Art. 19(1) SCO means that shareholders' agreements are legally permitted. In practice, shareholders' agreements often contain elements that qualify them as partnership agreements ‒ mainly as simple partnerships. If all shareholders of a joint-stock company are also partners to the shareholders' agreement, this results in a so-called split company. In addition to the joint-stock company, there is also a simple partnership, which in line with its purpose supplements the rules under the Stock Company Act. The most common feature of shareholders' agreements is a restriction of the right of disposal. The aim is to keep the circle of shareholders small and manageable. In practice, purchase rights, pre-emption rights, and first refusal rights are agreed between shareholders. In addition to such typical clauses, clauses regarding any other rights and obligations may be agreed. In particular, these include fiduciary duties, capital funding obligations, and, rarely, personal performance obligations. Credit Suisse's escrow mandate solution may be appropriate for fiduciary duties, for example. In this case, the bank is responsible for the fiduciary safekeeping of shares for shareholders' agreements and allows clients to see the shares at any time. The safekeeping of the shares is carried out digitally. This simplified system provides clients with an efficient cost structure and increased security.