What if you need money now? What if you want to reduce your risk? What if you simply want to lock in some gains while keeping the rest?
Here is where the secondary market comes in.
A secondary market allows you to sell your private startup shares before an IPO or acquisition. For Swiss employees holding stock options, early investors seeking liquidity, or founders looking to diversify, understanding how this market works is critical.
This guide explains the mechanics, legal requirements, tax implications, and practical steps for selling private shares in Switzerland.
What Is a Secondary Market Transaction?
A secondary market transaction is a sale between existing shareholders and new buyers. The company does not issue new shares. Money changes hands between private parties.
This differs from a primary funding round, where the company sells new shares to raise capital.
Who sells in secondary markets?
- Early employees who exercised stock options years ago
- Angel investors or early-stage VCs seeking liquidity
- Founders who want to diversify their personal wealth
Who buys in secondary markets?
- Later-stage venture capital firms
- Family offices
- High-net-worth individuals
- Other employees or investors in the company
The Swiss secondary market is developing but remains less liquid than public stock markets. Finding a buyer takes time. Prices are negotiated privately. And you must follow strict legal rules.
How Secondary Transactions Happen in Switzerland
There is no single Swiss stock exchange for private shares. Instead, transactions occur through several channels.
Organized Marketplaces
Specialized online platforms like CapiWell connect sellers with accredited investors. These platforms help with valuation, match buyers and sellers, and manage legal paperwork. Some focus on Swiss startups. Others operate internationally but include Swiss companies.
Switzerland’s Distributed Ledger Technology (DLT) Act supports an innovative approach: tokenized shares. Some Swiss startups issue shares as digital tokens on a blockchain. These tokens represent real equity. They can be transferred between digital wallets. A few platforms allow Swiss corporations to create their own digital share register and trading system on their company website.
This blockchain infrastructure is emerging. Most Swiss secondary transactions still use traditional share transfer processes. But the legal foundation exists for more liquid digital markets in the future.
Brokers and Financial Intermediaries
Investment banks and specialized brokers act as matchmakers. They connect sellers with their network of buyers. This network often includes institutional funds, family offices, and wealthy individuals.
These services come at a cost. Brokerage fees can be substantial — examples range from 5% to 8.5% of the transaction value.
Direct Bilateral Sales
Many transactions happen directly. A seller finds a buyer through their own network. This is common but still requires following all legal transfer requirements in the company’s governing documents.
Company-Organized Liquidity Programs
Some mature, late-stage startups organize formal liquidity events. These programs let employees and early investors sell a portion of their shares to pre-approved buyers. This process can include new institutional investors or the company itself.
The Swiss Legal Framework: What You Must Know
Selling private shares in Switzerland is not like selling public stocks. You cannot just find a buyer and transfer ownership. Swiss corporate law and your company’s shareholder agreement create specific rules you must follow.
The Shareholders’ Agreement Controls Everything
Every Swiss startup has a shareholders’ agreement (SHA). This document, along with the company’s articles of association, sets the rules for share transfers.
The most important clauses are:
Right of First Refusal (ROFR)
This clause is standard in Swiss SHAs. Before you can sell to an outside buyer, you must offer your shares to existing shareholders first.
Here is an example of how it works:
- You find a buyer who offers CHF 100 per share
- You notify the company and existing shareholders
- They have a set period (often 30 days) to buy your shares at CHF 100
- They can buy on a pro-rata basis (matching their current ownership percentages)
- Only if they decline can you sell to your outside buyer
This clause lets current stakeholders control who joins them as co-owners.
Tag-Along Rights
This clause protects minority shareholders. If a majority group agrees to sell their stake, minority holders can “tag along”, meaning they sell their shares to the same buyer under the same conditions.
Drag-Along Rights
This provision empowers majority shareholders. If they decide to sell the company, they can force minority shareholders to sell too. This prevents a small group from blocking a complete exit.
General Transfer Restrictions
Nearly all SHAs restrict free transfer of shares. Most require Board of Directors approval for any sale.
Company Approval Is Required
Swiss AG (Aktiengesellschaft) articles of association commonly require Board approval for share transfers. This serves as a control mechanism over who becomes a shareholder.
The approval process works with the ROFR. When you notify the company you want to sell, it triggers both the ROFR period and the board approval process. Expect this process to take at least a few weeks.
Why the AG Structure Matters
Most Swiss startups choose the AG legal form specifically because it makes share transfers easier. Transferring shares in a GmbH (limited liability company) involves more regulatory effort and formality.
The AG structure is better for companies planning employee stock option plans (ESOPs) or seeking diverse investors. This flexibility supports secondary market activity.
Swiss Tax Treatment: A Major Advantage
For individual sellers, Switzerland’s tax system is highly favorable. But you must understand one critical distinction.
Capital Gains Are Tax-Free for Private Investors
If you are a Swiss resident holding shares as a private asset, your capital gains from selling those shares are generally tax-exempt. This applies at federal and cantonal levels.
You pay no income tax on your profit. This is a fundamental principle of Swiss tax law for movable private assets.
The flip side: you cannot deduct capital losses from your taxable income.
The Professional Trader Classification Risk
Tax-free treatment only applies if you are a private investor. If tax authorities classify you as a professional securities dealer, everything changes. Your capital gains become taxable income. You also owe social security contributions (AHV/IV).
The Swiss Federal Tax Administration uses five criteria to determine your status. You are generally considered a private investor if you meet all five conditions:
- Holding period: You hold shares for at least six months before selling
- Transaction volume: Your annual transaction volume (all purchases and sales) does not exceed five times your portfolio value at year start
- Income proportion: Capital gains do not account for more than 50% of your net income
- Financing method: You do not use debt to finance investments, or your investment income covers the interest costs
- Derivatives use: You use derivatives only to hedge your own securities
Meeting all five criteria provides strong protection for private investor status. Failing one criterion does not automatically make you a professional. Tax authorities evaluate each case individually. But the stakes are high. If reclassified, your tax bill could be substantial.
For anyone selling startup shares worth significant amounts, consulting a Swiss tax advisor is essential.
Wealth Tax Considerations
Unlisted startup shares are part of your taxable wealth. You must declare them annually. The tax value is often determined by a formula that can be lower than actual market value.
When you sell shares in a secondary transaction to an independent buyer, that sale price establishes a new “fair market value.” This new valuation may then apply to all shareholders in the company for wealth tax purposes.
The Canton of Zurich offers a partial exemption for early-stage startups. For the first few years, valuations from financing rounds are disregarded in favor of a lower asset-based value. That means tax relief for founders and employees.
Valuation: The Biggest Challenge
Determining what your shares are worth is difficult. Private companies have no public market price. Information is limited. Negotiations happen in private.
Common Valuation Approaches
Most secondary transactions use one or more of these methods:
Last Round Valuation
The price per share from the company’s most recent venture capital funding round is the primary benchmark. If the company raised money at CHF 50 per share six months ago, that is your starting point.
Comparable Company Analysis
You can estimate value by comparing your startup to publicly traded companies in the same sector. You look at metrics like revenue multiples and apply them to your company’s financials.
Discounted Cash Flow (DCF)
This method projects the company’s future cash flows and discounts them to present value. It relies heavily on assumptions about growth and risk.
The Discount Problem
Secondary shares frequently trade at a discount to the last primary round price. Why?
- Your shares are illiquid (hard to sell)
- Transfer restrictions limit who can buy
- You likely hold common stock, which has fewer rights than the preferred stock issued to VCs
- Selling at a discount can signal negative information about the company
How big is the discount? It depends. International markets show discounts of 15% to 40% to last round valuations. Swiss transactions may differ due to local market conditions and investor protections.
The Information Asymmetry Problem
Professional buyers typically have access to more financial data and market insights than individual sellers (including employees of a company that issued shares).
Private companies have no obligation to disclose financial information publicly. As a seller, you may lack the data needed to accurately price your shares.
Before making an offer, a serious buyer will conduct due diligence that will involve requesting access to:
- Financial performance data
- Growth projections and business plans
- Market position and competitive landscape
- The cap table (showing who owns what)
- Legal structure and any pending issues
The buyer may know more than you do. Having an advisor or using a broker can help level the playing field.
The Practical Process: Step by Step
Selling private shares requires careful planning and patience. Here is what to expect.
Step 1: Review Your Legal Documents
Before anything else, read your shareholders’ agreement and the company’s articles of association. Understand all transfer restrictions, ROFR clauses, and approval requirements.
Step 2: Identify a Buyer
Find a potential buyer through:
- Your own professional network
- A specialized broker or intermediary
- A secondary market platform
This process can take weeks or months. The market for private shares is thin.
Step 3: Negotiate Price and Terms
Agree on a purchase price and the terms of sale. Everything will be formalized in a Share Purchase Agreement (SPA). You may need to provide the buyer with company information for their due diligence.
Step 4: Obtain Company Approval
Formally notify the company’s Board of Directors that you want to sell. Doing so initiates the approval process, including the ROFR period.
Existing shareholders have a window (typically 30 days) to match the offer and buy your shares themselves. Only if they decline can the sale to your outside buyer proceed.
Step 5: Execute the Legal Transfer
If the ROFR is waived, you and the buyer sign the SPA. The share transfer must be documented in the company’s official share register to be legally effective.
Step 6: Finalize Settlement
Once the transfer is legally recorded, the buyer pays the agreed sum to you.
Timeline and Costs
Expect the process to take several weeks to several months from finding a buyer to closing the deal. The ROFR period alone adds at least 30 days.
Be prepared for costs:
- Legal fees: For reviewing documents and drafting the SPA
- Broker or platform fees: If you use an intermediary (can be 5% to 8.5% of the sale price)
Notary fees: If required for your transaction type
Challenges and Risks
The Swiss secondary market is developing, but significant challenges remain.
Finding a Buyer Is Hard
The biggest risk is illiquidity. The market is thin. There may be no interested buyers at a price you find acceptable. The situation is is fundamentally different from selling public stocks.
You May Have Less Information
Sellers, especially employees, often have less information about the company’s detailed financials than professional buyers. You might be at a disadvantage during price negotiations.
Valuation Is Uncertain
The lack of public data and transparent pricing makes it hard to know if you are getting a fair deal. You risk leaving money on the table.
The Legal Process Is Complex
Navigating transfer restrictions, ROFR clauses, and approval requirements takes time. Mistakes can void the transaction.
Tax Classification Risk
The most significant personal tax risk is being reclassified from a private investor to a professional securities dealer. This classification would make your capital gains fully taxable as income and subject to social security contributions.
For buyers, the main risks are overpaying due to information asymmetry and the lack of comprehensive financial disclosures that are standard for public companies.
The State of the Swiss Market
The Swiss secondary market is developing but can be hard to understand. Transaction volumes are not publicly reported. Most deals occur privately without public announcement.
Secondary activity is most common in late-stage, high-growth startups in sectors like medtech, fintech, robotics, and information technology. Often, these startups could go public or be acquired within a few years.
Recent developments show the market is maturing. Swiss single-family offices are creating funds specifically to invest in “venture secondaries” — buying existing shares from early investors and employees. This activity indicates growing demand for these transactions.
Newer platforms like CapiWell are also democratizing access to private market investing. Some offer opportunities requiring far less cash than those available through traditional institutional channels.
Takeaway
If you hold shares in a Swiss startup and need liquidity before an exit, the secondary market offers a potential path. But it requires realistic expectations.
For sellers: Understand that finding a buyer takes time. You will likely sell at a discount to the last funding round price. The legal process requires patience and compliance. But for the right reasons — diversification, major life expenses, reducing concentration risk — it can be the right choice.
For buyers: The secondary market offers access to late-stage private companies without the dilution risk of early-stage investing. But you must conduct thorough due diligence. Information is limited. Valuation is uncertain. Only invest what you can afford to hold for years if needed.
For founders: Secondary sales can be healthy for your company. They provide liquidity to early team members and investors without the company raising new capital. But they also send signals to the market. Manage the process carefully and ensure any transactions align with your long-term strategy.
Disclaimer: Alternative investments in private capital carry risk, including potential loss of capital and limited liquidity. This article provides educational information only and does not constitute legal, tax, or investment advice. The Swiss secondary market for private shares is complex and involves significant legal and tax considerations. Consult with qualified legal and tax advisors in Switzerland before making any decisions about buying or selling private startup shares.
About CapiWell
CapiWell is Switzerland’s first multi-asset private capital platform, designed to connect investors with opportunities across real estate, SME lending, and growth-stage startups. For investors seeking access to Swiss ventures past the early risk phase but not yet public, CapiWell’s offers structured exposure to Switzerland’s innovation ecosystem.
