Switzerland: Practical Aspects Of Initial Token Offerings (Part 2)

 In every Initial Token Offering (also known as Initial Coin Offering) we have to strive to create a token which will catch the interest of the community. This first of all requires forethought and an understanding of what is driving the community, but it also needs to focus on creating a sound legal basis for years to come, no matter how often the token has been transferred, be it online or through the transfer of an offline wallet. Token structuring therefore is also a task for the lawyers.

1. The Art of Creating Valuable Token-Economics

We are seeing Initial Token Offerings where tokens have been created by just mirroring the structures known to private equity investments, and in many cases even watered down in their economic effect to a marginal quota of both ownership and future profit participation without having any relation to decentralisation or the blockchain. These token sales are not doing the block-chain justice. They neither build on its potential, nor are they taking into account that many to-ken-holders are not only investing because of revenues, but also because they want to be engaged ecologically, socially or politically.

The legal system has been built to be flexible and has sustained many changes and new technologies over the last decades. The idea of tokenization and of crowdfunding is exciting because it allows us as lawyers to advise on the basis of all the different tools the law offers. Token holders can co-own assets, receive portions of specific revenue streams, can hold membership rights, can form a simple partnership and can vote on specific subjects determined in the smart contract.

When choosing the right token structure lawyers need to support the clients in determining what should be tokenized and what the message behind the tokenization should be. In doing so, they should be open-minded - last, but not least, because old school investment structures come with a serious legal drawback.

2. The Issue of the Assignment

The assignment of claims under Swiss law is valid only if it is done in writing. This also applies to the transfer of uncertificated securities. The minimum requirement is a handwritten or, alternatively, qualified electronic signature under a machine-written text. The transfer of tokens on the blockchain does not fulfil this requirement. It is correct, that two parties can agree not to be bound by this formal requirement and such an agreement can be implemented in the initial terms and conditions between token issuer and the first token holder. But it will not automatically also be applicable to the second and the third token holder.

Therefore it is advisable to steer clear from any structure which has tokenized rights requiring transfer via assignment until the lawmaker has decided on a (hopefully technology neutral) new law instead of the existing need for written assignment.

3. Interesting Alternatives

In our discussions and workshops with clients we tend to first think about the business of the client, the interests token holders may have to see progress and how they can engage in the success of the company more visibly than only based on annual accounts. The following few examples may give a good starting point to think about what to offer the token holders:

Create asset tokens. This is not the same as an asset-backed token, where the assets only create an underlying security interest. Possession of an object may be acquired without physical delivery if a third party or the transferor himself retains possession of it in terms of a special legal relationship. In the case of an asset token the token holder has ownership rights and the token represents the instruction to the possessor of the asset to acknowledge ownership ("Besitzesanweisung"). Therefore the asset can remain with the issuer as possessor who accepts every token holder as partial owner of the asset. Similarly, certain IP rights can be tokenized.

Alternatively, create a limited ownership right on the revenues derived from of certain goods, assets or IP rights, rather than merely give a claim to revenues (so-called usufruct).

In the case of asset-backed tokens or similar contracts, there is a high probability that you will have rights and obligations on both the issuer and the token holder. In this case make sure that the entire contract between issuer and token holder is tokenized. Then the contractual rights and obligations will roll over from one token holder to the next, contrary to the situation created by the role-over of a mere claim (see section 2 above). Under Swiss law the transfer of an entire con-tract does not require a written agreement.

If you do want to give old-school equity rights (and there may be good reasons to take that decision) do not use uncertificated securities, but maybe think of creating a global certificate which you tokenize. Then you transfer ownership as set out in section 3(i) above by means of an instruction to the possessor of the global certificate. However, do beware of the obligations to maintain shareholder and beneficial ownership registers and you will have to make sure you do not fall foul of prospectus requirements in the different jurisdictions.

Alternatively create a partnership of token holders similar to a shareholders' group and tokenize the partnership agreement. The shares of the company are then held by all token holders jointly and an escrow agent will act in accordance with the instructions of the majority of the shareholders.

Obviously there are many more options and all of these can be tweaked to suit the individual needs of the issuer. And whilst these options do not claim to solve all problems for a global distribution of the tokens and the token generally speaking will still remain a security under US laws, they at least come with the upside that the transfer of the token is valid if Swiss law applies to the token and its transfer.


Founded in Zurich in 1966, Froriep is one of the leading law firms in Switzerland, with offices in Zurich, Geneva and Zug, as well as foreign offices in both London and Madrid, serving clients seeking Swiss law advice.

We have grown a domestic and international client base ranging from large international corporations to private clients. Our unique, truly integrated, international structure mirrors our strong cross-border focus. We value and promote continuity and strong client relationships. Our teams are tailor-made, assembled from every practice area and across our network of offices.

Many of our lawyers are recognised as leaders in their practice areas, and our clients benefit from our in-depth knowledge and the rich diversity of talents, languages and cultures that makes our lawyers particularly versatile and adaptive.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions