DigitalSwitzerland recently ran a competition to accelerate digitization efforts across the country. One of the winners was a blockchain project to speed up company formation in Zug. The World Economic Forum ranked Switzerland as 54th out of 138 countries for the time it takes to incorporate. This is despite Switzerland ranking number one in global competitiveness.
The winning team included blockchain startup Proxeus, IBM, the ‘crypto valley’ Swiss Canton of Zug, Swisscom, as well as several lawyers, notaries, and a bank. Proxeus has a workflow system that integrates with Ethereum or Hyperledger Fabric.
In Switzerland, the registration process involves the entrepreneur, lawyer, bank, notary and commercial register. The project moved the digital workflow onto a Hyperledger Fabric blockchain and used a smart contract. This enables many of the steps to happen instantly.
“In the big scheme of things, reducing the complexity and duration of all administrative interactions throughout the entire corporate life-cycle has the potential to strengthen Switzerland’s position as a world-leading business location,” said Ulrich Schimpel, CTO Europe team at IBM.
A group of notaries seemed particularly pleased: “From our perspective as Swiss notaries, the process will speed up the registration from a pushcart to a rocket, facilitate the drafting of legal documents, and it will consolidate the various parties in a most effective way.”
The company formation process
The Swiss process is quite cumbersome:
- a bank confirms the capital money has been paid
- a notary verifies that the necessary documents have been provided and approved
- the commercial register does the final check that everything is lawful
- if all is ok then the filing, which up until that point will have been provisional, will be officially registered with the Commercial Register and Official Gazette of Commerce.
Doubtless, the solution is significant progress for any jurisdiction where company formation involves much bureaucracy. And blockchain helps given the number of parties involved.
However, in other places the process is much more straightforward, meaning it can be digital without the need for a blockchain. For example, you can register a UK company online for GBP 9.99 including a domain name. The elapsed time is however long you take to type the names and addresses of the company, directors, and shareholders. You immediately receive a Certificate of Incorporation even if it’s a few days before it appears in the Government Gazette.
So blockchain certainly helps and is easier to implement compared to fixing a bureaucratic process. But given the bureaucracy still exists, there will always be back and forth when the boxes aren’t all ticked, though that should be faster than before.