The non-tax drivers behind the location of a European holding company

Why the tax answer often arrives too late

A typical sequence runs like this. A group decides it needs a European holding company, asks its tax advisers to compare three or four jurisdictions, receives a careful memorandum on participation exemptions, withholding and treaty access, picks the winner, and then discovers a residency requirement, a capital timing problem or a licensing constraint that makes the chosen structure awkward or impossible. The work is not wasted, but it is done in the wrong order, and the cost of reversing a decision that has already been communicated to investors is higher than the cost of asking four questions first.

To be clear about the boundary: tax residence, withholding on dividends and interest, participation exemptions, treaty access, transfer pricing and the global minimum tax rules are decisive to the outcome and are matters for qualified tax advisers in each jurisdiction. This note does not address them, and no structure should be adopted on the strength of the legal analysis alone.

Constraint one: where a licensed entity has to sit

If any part of the group is or will be regulated, the licence fixes the geography and the holding company arranges itself around that fact. A licence attaches to a legal person and to its establishment: FINMA authorises Swiss companies and, for banks and securities firms, Swiss branches of foreign institutions; the FCA authorises the whole firm, incorporated in the UK or abroad, and expects a UK establishment from which the business is run; an EU authorisation requires establishment in the relevant member state. The holding company can sit elsewhere; what it cannot do is move the licence. No choice of holding company jurisdiction moves a licence, and no group should design a holding structure on the assumption that the licensed entity can be relocated to suit it.

Two consequences follow at the planning stage. First, inserting a new holding company above a licensed entity is itself a regulatory event: it changes who holds the shares and the voting power in the licensed firm, and in most regimes that means a filing, an approval or both before the step can be implemented. Second, the substance the regulator expects, mind and management, decision-making, key functions, has to sit with the licensed entity, and a holding structure that concentrates real decision-making at the top can create a supervisory problem even where the legal ownership chain is impeccable.

Constraint two: who has to be resident, and what that costs in governance

Residency requirements are the constraint that most often defeats an otherwise sensible plan, because they turn on the people the group has, and the seat carries personal exposure for whoever fills it.

Ireland is a clean example. Under section 137 of the Companies Act 2014, at least one of the directors of an Irish company must be a person resident in an EEA state. There are two alternatives. The first is a bond in the prescribed form, held in force to the value of EUR 25,000, which secures certain fines and penalties. The second is a certificate under section 140 of the same Act, granted by the Registrar where the company proves a real and continuous link with one or more economic activities carried on in the State; a written statement from the Revenue Commissioners, given within the two months before the application, is deemed proof of that link. Failure to comply is a category 4 offence for the company and any officer in default. The section also states that director for this purpose does not include an alternate director, which excludes the alternate-director route. The post-Brexit point matters for UK groups: the test is EEA residence, and the United Kingdom is not an EEA state, so a board of London-resident directors does not satisfy it.

Switzerland imposes a comparable but differently drafted requirement. It must be possible for the company to be represented by a person resident in Switzerland; the statutory test is residence, Wohnsitz, and a Swiss address alone does not satisfy it. For a company limited by shares that person may be a member of the board of directors or a director, under Article 718 paragraph 4 of the Code of Obligations; for a limited liability company, a manager or a director, under Article 814 paragraph 3. The requirement is about the capacity to represent the company, which makes it a question of signing authority as well as of headcount, and it needs to be reflected in the commercial register entry and in the internal signature regulations.

The practical consequence differs. An Irish company with an EEA-resident director anywhere in the group, a bond or a section 140 certificate imports nobody, though tax residence and any regulatory substance test are separate questions that none of those routes answers; a Swiss company always needs a Swiss-resident representative with signing authority. Where the requirement does bring in a person, that person carries duties and potential liability in a jurisdiction where the group may have no other presence. Appointing a local director or a resident representative as an administrative convenience, without a proper mandate, information flow, insurance and such indemnity as the law allows (in Ireland, section 235 of the Companies Act 2014 voids indemnities against liability for negligence, default, breach of duty or breach of trust in relation to the company, leaving defence costs where the officer succeeds and directors' insurance), transfers real risk to an individual and creates a governance weakness at the top of the structure.

Constraint three: capital, and the form it has to take

Minimum capital is rarely the binding constraint by amount, but it shapes the mechanics of formation and of later capital changes. In Switzerland a limited liability company requires a minimum share capital of CHF 20,000, and a company limited by shares requires capital of at least CHF 100,000, in each case contributed in cash or as contributions in kind. A limited liability company's contributions must be paid in full at formation (Article 777c); the capital of a company limited by shares need not be: at least 20 per cent of the nominal value of each share must be paid up, and not less than CHF 50,000 in aggregate, under Article 632 of the Code of Obligations.

Since the company law revision in force from 1 January 2023, the share capital may also be denominated in a foreign currency that the business requires, from the list the Federal Council permits (currently the euro, US dollar, pound sterling and yen), provided it is worth at least CHF 100,000 at formation (CHF 20,000 for a limited liability company, Article 773 paragraph 2), at least CHF 50,000 of it is paid in, and the company keeps its accounts and financial reporting in that currency (Articles 621 paragraph 2 and 632 paragraph 2). Ireland's private company limited by shares has no equivalent minimum, which makes formation cheaper but tells you nothing about how much capital the business will need.

Two points are worth planning around. Contributions in kind, the transfer of receivables, intellectual property or shares into a new holding company, involve valuation and documentation steps that take longer than a cash subscription and can require third-party confirmations, so a reorganisation timetable built on cash assumptions will slip. And later capital changes are formal acts in civil law jurisdictions, requiring notarisation and register filings where a common law company needs a board resolution, which matters when the structure is expected to take investment quickly after formation. A holding company that will raise within months should be formed with the mechanics of that round designed in: in Switzerland, a capital band in the articles of association (Articles 653s to 653v of the Code of Obligations) lets the board increase the capital by up to half of the registered amount for up to five years without a further general meeting, each step still a notarised act with a register filing; in Ireland, where there is no minimum, the questions are the directors' authority to allot and the pre-emption terms in the constitution (section 69 of the Companies Act 2014), and the nominal amount is beside the point.

Constraint four: whether the structure can move later

Groups plan holding structures for the long term and change them sooner than planned. Optionality therefore has value, and the legal routes for moving a company are not symmetrical across Europe.

Within the European Union, Directive (EU) 2019/2121 provides a harmonised framework for cross-border conversions, mergers and divisions, giving a company established in one member state a defined legal route to convert into a company governed by the law of another while preserving its legal continuity, subject to the procedures and safeguards the Directive requires and to national implementing law. An EU holding company therefore retains a route to move within the Union.

Switzerland is outside that framework, though not without a route of its own. Under Articles 161 to 164 of the Swiss Private International Law Act a Swiss company may subject itself to a foreign law without liquidation or re-establishment, provided it meets Swiss requirements and continues to exist under the foreign law, after a public call to creditors and an audit confirmation that their claims are secured or satisfied; a foreign company may move to Switzerland on the mirror conditions if its own law allows it; and cross-border mergers, demergers and transfers of assets are provided for on the same model.

Whether the route is open in a given case depends on the company law of the member state at the other end, which the Directive does not harmonise for third countries, and on the tax treatment of the move in both states, which belongs with the tax advisers. Where the receiving state does not recognise the transfer, the move becomes a transaction, a transfer of shares or assets into a new entity, with the contractual and tax consequences of that. None of this argues against Switzerland; it means the exit route should be checked against the likely destination before formation; a group that expects to redomicile into the EU for listing or investor reasons within a few years should have that check done first.

What investors and buyers expect

The last driver is market practice, and it should be labelled as such. Investors and acquirers have familiarity preferences: the governing law of the shareholders' agreement, the mechanics of drag and tag provisions, the reliability and cost of enforcement, the shape of the cap table, whether options and incentive arrangements can be implemented cleanly for employees in several countries, and which listing venues are realistic later. Where a lead investor has a strong preference, that preference frequently decides the question regardless of what the comparative analysis says. It is legitimate to weigh it, and it should be recorded as the commercial choice it is.

The sequence we would recommend is therefore: fix the licensed entity's location if there is one; test the residency requirements against the people the group has; check the capital and contribution mechanics against the funding timetable; decide how much value to place on the ability to move later; then take the tax analysis on the two or three jurisdictions that survive, without the options the legal constraints have already removed.

What this means for you

• Start with the licence. A regulated entity's location is fixed by its authorisation, and inserting a holding company above it is a regulatory event, in most regimes requiring a filing or approval before implementation.
• Test residency against the people you have. Ireland requires an EEA-resident director, a EUR 25,000 bond or a section 140 certificate of a real and continuous link with economic activity in the State, and UK residence does not satisfy the test. Switzerland requires that the company can be represented by a person resident in Switzerland.
• Treat the resident seat as a governance appointment. Whoever fills it carries duties and exposure. Mandate, information flow, insurance and such indemnity as the law permits should be in place at formation.
• Match capital mechanics to the funding timetable. Contributions in kind and later capital changes are formal, documented steps in civil law jurisdictions and take longer than a cash subscription.
• Price the option to move. An EU holding company has a conversion route under Directive (EU) 2019/2121. Swiss law allows a transfer without liquidation under Articles 161 to 164 PILA where the other state's law accepts it; check the likely destination before formation and treat the tax side as a separate question.
• Record investor preference as the commercial choice it is. Where a lead investor's familiarity with a governing law, a cap-table shape or a listing venue decides the jurisdiction, weigh it and minute it separately from the four legal constraints.

Isak Legal advises international groups, founders and investors on holding structures, group reorganisations and the governance that goes with them, working with local counsel and tax advisers where required. See our Corporate and Market Entry pages, or get in touch.

This client update is provided for general information only, reflects the position as at 26 September 2026 and does not constitute legal advice or create a lawyer-client relationship. It does not address tax, and no holding structure should be adopted without advice from qualified tax advisers in each relevant jurisdiction. The Irish requirements are taken from the revised text of the Companies Act 2014; the Swiss capital and representation requirements from the Code of Obligations and the official SME portal of the Swiss Confederation, and the Swiss transfer provisions from the Private International Law Act, with notarial acts and any other matter that Swiss law reserves to registered Swiss lawyers undertaken with Swiss notaries and registered Swiss lawyers; the position on cross-border conversions is taken from Directive (EU) 2019/2121 and depends on national implementing law in each member state. For advice on a specific matter, please contact us.