SWISS COMPANY FORMATION

[Description of Swiss Foundations]

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Private Foundation / Family Foundation:

These are often established as permanent entities to manage family assets for the purpose of supporting current and future generations of the family, similar to a family office. In this case, family assets are transferred to the foundation, which is managed by a board of trustees. The foundation can distribute funds to beneficiaries (such as children or other family members) for specific purposes (e.g., children's education or support for family members). Like a family trust, it plays a long-term role in preserving family wealth across generations without going through the inheritance process.

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Public Benefit Foundation:

These are often established for the purpose of performing charitable or philanthropic activities or fund-raising activities for the public good or part thereof. The foundation raises funds through public or private donations or contributions from the founder or other parties, and these funds are managed to promote specific purposes and cannot be used for personal gain. Examples include foundations that support organizations addressing climate change or seeking cures for specific diseases.

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Pension Fund:

Pension funds are often established by employers to set up pension plans for their employees. Employers contribute donations to the foundation, which invests the funds to provide pensions to the employer's former employees.

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With the exception of family foundations, Swiss foundations are subject to significantly more regulation than corporations or limited liability companies. The purpose and objectives of a foundation must be approved by the relevant foundation supervisory authority, and the foundation's board of directors must submit an annual report on its activities, along with financial statements approved by an auditor. Additionally, foundations are subject to much more rigorous monitoring than limited liability companies.

There are seven foundation supervisory authorities in Switzerland. Each supervisory authority oversees foundations located in a specific canton or multiple cantons. There is also a federal authority that supervises charitable foundations.

Due to the stricter compliance requirements for foundations compared to general corporations, the costs associated with establishing a foundation, appointing local directors, preparing annual financial statements and tax reports, and ensuring compliance with corporate regulations are generally higher than those for general companies.

Foundation structure:

• Swiss foundations are established under Swiss Civil Code Articles 80-89 and are subject to its regulations, as well as supervision by the Swiss financial markets.

• Swiss foundations have separate legal personality, and the foundation's assets and resources are independent and separate from the assets of the founder, the foundation's board of directors, and the beneficiaries.

• A foundation may be established by one or more founders, who may be individuals or legal entities. The founder may be appointed as the chairman of the foundation's board of directors and may determine the methods consistent with the foundation's purpose.

• The minimum donation required to establish a foundation is 50,000 Swiss Francs, which must be deposited into a capital account prior to the foundation's establishment.

• The foundation's board of directors is the governing body responsible for managing the foundation's activities and operations. The board of trustees must consist of at least three individuals, one of whom must have signing authority and reside in Switzerland.

• The board of trustees is vested with all rights and powers not expressly delegated to other bodies. The board of trustees may delegate certain powers to the executive director, committees, or advisory committees.

• The initial Board of Trustees may be appointed by the founder.

• A family foundation or private foundation may designate beneficiaries who may receive benefits in accordance with the foundation's purpose, and the founder may also be a beneficiary.

• Public interest foundations have no beneficiaries, and their assets must be invested or distributed to achieve the foundation's purpose. In such cases, the foundation may not distribute dividends to persons other than those specified in its purpose, and upon dissolution, any remaining assets must be transferred to another corporation or foundation with similar purposes.

• The purpose and articles of incorporation of a public foundation must be approved by the relevant state government authority, and the articles of incorporation provide the organizational rules of the foundation. Once adopted, the articles of incorporation may only be amended with the approval of the relevant foundation supervisory authority under very special circumstances. Therefore, great care must be taken when drafting the articles of incorporation.

• The founder may retain the right to change the purpose of the foundation every 10 years after its establishment, if so provided in the articles of incorporation. This right to change the purpose cannot be transferred or inherited. If the founder is a legal entity, this right expires after 20 years.

Taxes:

• In Switzerland, foundations are subject to corporate tax like corporations and limited liability companies. Corporate tax is levied at the federal, cantonal (state/province), and communal (local government) levels.

• The federal effective tax rate is 7.83% (8.3%, but the taxes paid are deductible for tax purposes, resulting in an effective rate of approximately 7.83%).

• Each canton and municipality has its own tax laws and imposes income tax and capital tax at different rates. For example, if a foundation is located in the city of Zug in the canton of Zug (combined effective tax rate of 11.91%), the city of Lugano in the canton of Ticino (combined effective tax rate of 18.5%), the city of Lucerne in the canton of Lucerne (combined effective tax rate of 12.37%), or the city of Zurich in the canton of Zurich (combined effective tax rate of 19.7%), and Geneva City in the Canton of Geneva (combined effective tax rate of 13.99%), the tax rate imposed by the Canton of Zug varies depending on the specific canton and municipality. Zug and Lucerne are the cantons/municipalities with the lowest tax rates in Switzerland.

• Each canton and municipality has its own tax laws and imposes income tax and capital tax at different rates. For example, if a foundation is located in Zug City, Zug Canton (effective tax rate: 11.91%), Lugano City, Ticino Canton (effective tax rate: 18.5%), Lucerne City, Lucerne Canton (effective tax rate: 12.37%), or Zurich City, Zurich Canton (effective tax rate: 19.7%), and Geneva City in the Canton of Geneva (combined tax rate of 13.99%), the foundation is subject to the lowest tax rate applicable in the Canton of Zug. Zug and Lucerne are the cantons with the lowest tax rates in Switzerland.

• Dividends and capital gains are treated as ordinary income and are generally subject to corporate income tax at the federal, cantonal, and local government levels. There is an exemption from federal tax on dividends arising from a participation of 10% or more.

• Charitable foundations established for charitable purposes may apply for tax exemption.

Corporate compliance:

• Swiss foundations must maintain accounting records. The foundation must submit its annual income along with audited financial statements and file tax returns with the relevant cantonal tax authorities.

• Swiss foundations must appoint an independent and certified auditor to review the foundation's annual financial statements.

• If the foundation does not exceed two of the following values (total balance sheet: CHF 20 million, revenue: CHF 40 million, employees: average of 250 per year), it may undergo a limited statutory audit instead of a general accounting audit.

• The supervisory authority may exempt the foundation from audit requirements if it does not request public funds and its total balance sheet has been less than CHF 200,000 for two consecutive years. Additionally, the foundation's board of directors must prepare an annual report explaining the foundation's activities and how these activities relate to achieving the foundation's objectives as outlined in its reports.

Banking services:

For banks, capital accounts and current accounts can be opened at UBS, Credit Suisse, Postfinance, and MBaer Merchant Bank. If the company has established a certain presence in the canton, accounts at the canton's bank may also be used.

Depending on the company's size and whether reserves are set aside for investments, accounts may also be opened at private banks such as Vontobel, Julius Bar, or Lombard Odier.

Foundation establishment procedure:

The establishment of a foundation consists of the following steps:

1. Foundation establishment documents and application to the foundation supervisory authority

Prepare the articles of association and the foundation establishment application and submit them to the foundation supervisory authority. This process may take 2-4 weeks, depending on the specific questions from the authorities.

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2. Capital account opening and foundation establishment documents

Upon receiving preliminary approval, open a capital account at one of the banks mentioned above. Simultaneously, prepare the relevant filings and applications with the Commercial Registry, the minutes of the first meeting, the application for exemption from the first audit, and the document certifying the signatures. If the shareholder cannot visit Switzerland, a power of attorney must be prepared.

If the founder is a legal entity, an Apostille certification must be obtained and submitted.

Documents are provided in both German/French/Italian and English, but only the German/French/Italian versions have legal validity.

The opening of a capital account typically takes about one week, and the preparation of corporate establishment documents can be completed in 1-2 days if there are no special provisions in the articles of association. However, the opening of a capital account is subject to the bank's discretion and is beyond our control.

3. Appointment of a civil law notary and convening of the corporate establishment meeting

After receiving the signed documents, a video conference must be arranged with the founders and board members. The notary public will verify that the signatures on the documents are those of the actual shareholders. The video conference can be arranged within 1-3 days of receiving the signed documents, but this may vary depending on the circumstances of the founders/board members.

Once the capital is transferred to the capital account and the bank issues a certificate of capital deposit, we will arrange a face-to-face meeting with the notary public and execute the foundation establishment certificate and articles of association in the presence of the notary public (power of attorney).

The meeting with the notary public is generally conducted 1-3 days after the capital is deposited, but may vary depending on the notary public's schedule.

4. Commercial Registration

Once the foundation registration is complete, we submit copies of the foundation establishment certificate and articles of incorporation, along with the foundation establishment documents, to the Commercial Registration Office. The processing of documents at the Commercial Registration Office generally takes approximately 1-2 weeks. During this period, we prepare the post-establishment documents, including the founder registration, tax registration application, and related documents.

5. Bank Account Opening

Once the foundation is registered with the Commercial Registration Office, we proceed with the application for a transaction bank account. The time required to open a commercial bank account after registration with the Commercial Registration Office varies depending on specific circumstances but generally takes approximately 4 weeks. Similarly, the time required for account opening at the bank is subject to the bank's discretion and is beyond our control.