LIECHTENSTEIN: An Introduction

The following Overview featured in Global 2023 and is awaiting update from the firm.

The Principality of Liechtenstein 

With a population of only around 39,000 and an area of approximately 160 km2, Liechtenstein is one of the smallest countries in Europe. However, what many would see as a disadvantage has enabled Liechtenstein to achieve a unique position in the legal market and in the competition between business locations. The small size of the country, its efficient government structure and authorities that see themselves as service providers to people and businesses have enabled the country to create a thriving environment for small and large businesses alike.

Liechtenstein is a constitutional hereditary monarchy with the Prince as Head of State. The Princely Family has played an important role in the country's recent history and is closely associated with its key attributes of political stability and economic prosperity.

Located in the heart of Europe, Liechtenstein is a double landlocked country, bordered only by Austria and Switzerland. Its geographical location predestines the Principality to act as a bridge between the Eurozone, the European Union and Switzerland, with its unique economic characteristics, to embrace the best of both worlds. As a result, Liechtenstein has the Swiss franc as its official currency and is closely linked economically to Switzerland, while at the same time it is a member of the European Economic Area (EEA), which ensures access to the EU's single market. This unique combination of features makes it particularly promising for economic activity and attractive to foreign individuals, companies and capital.

Unique Conditions for Private Clients, Businesses and Charities

Liechtenstein company law dates back to 1926, and Liechtenstein has been the first and only continental European trust jurisdiction for just as long. Liechtenstein's liberal business and corporate law, with its plethora of different legal entities that can be used to create tailor-made structuring solutions for both corporate and private (UHNWI) clients, has long made the Principality a destination for a sophisticated client base. This has led to the emergence of a highly developed and internationally renowned sector of service providers specialising in legal, fiduciary, tax, asset management and private banking services.

However, it is not only the business and private wealth environment that is exceptionally favorable in Liechtenstein. The country is also a renowned jurisdiction for the pursuit of charitable activities and philanthropy, as evidenced by the growing number of charitable trusts and foundations that have made Liechtenstein their domicile of choice.

Over the past decade, Liechtenstein has established itself as a highly anti-money laundering compliant jurisdiction, an important factor for institutional investors and family structures alike. This was prominently acknowledged in a recent evaluation report by MONEYVAL (the Council of Europe's Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism). As a result, the country is subject to the regular MONEYVAL reporting process, along with only five other jurisdictions that have achieved this status to date.

Financial Centre and FinTech Hub 

In addition to its traditional strong focus on private wealth structures, including trusts, foundations and institutions, and an economic environment that allows businesses to flourish, the small country has earned a reputation as a boutique financial centre over the past few decades. It is rated AAA by Standard & Poor's and its banks are particularly well capitalised, with a Tier 1 ratio of 21.74% at the end of 2022.

The continuously expanding and diversifying financial sector of the Liechtenstein financial market is mainly focused on private banks, investment funds, asset managers and insurance companies. In the broader context of this development, Liechtenstein has recently seen particularly dynamic growth in the investment fund sector, with both conventional fund solutions and novel products (e.g. crypto funds and tokenised fund units) increasingly in demand. One of the most exciting trends from a legal perspective with an impact on products and processes is sustainable finance.

FinTechs (including a remarkable number of InsurTechs) and other enterprises with blockchain-based business models have found a particularly fruitful political, economic and legal environment in Liechtenstein. Several private banks have taken advantage of new technologies and started to cater to the specific needs and requirements of clients, active in the FinTech, InsurTech and blockchain sector.

This development has been enabled by two crucial factors. With the Blockchain Act (TVTG), Liechtenstein introduced trailblazing legislation to address the contemporary requirements of the rise of blockchain and crypto business models as early as 2019. Further to that, and contrary to the authorities in many other jurisdictions who took a more reluctant approach towards these new technologies, the Liechtenstein authorities decided to embrace technological change and innovation which resulted in a service-oriented and generally welcoming environment for businesses.

In its efforts to remain at the forefront of technological innovation in entrepreneurship, the Liechtenstein government has also launched a specialist new agency, the Office for Financial Market Innovation and Digitalization (Stabsstelle für Finanzplatzinnovation) which is in charge of bringing private and public stakeholders of the digitalization process together and serves as a first point of entry into the Liechtenstein market for foreign enterprises.

A Contemporary Corporate Law: Modernisation and Digitalisation

Another area that has seen major recent developments of note is the modernization of procedural requirements in corporate and company law. Recent legislative amendments to the Persons and Companies Act (Personen- und Gesellschaftsrecht; PGR) have enabled corporations to hold virtual and hybrid (a combination of virtual and physical attendance) assemblies of their corporate bodies. The legislation applies to all governing bodies of corporations, including the board of directors (usually the essential management body) and the general assembly (supreme corporate body). Further legislative steps are planned to introduce a comprehensive modernisation of Liechtenstein company law, which will ensure that Liechtenstein remains a jurisdiction with a modern and flexible company law that meets the requirements of global business activities.

In a rapidly changing global environment, Liechtenstein continues to live up to its reputation for stability, consistency and openness to innovation and remains a reliable partner for family structures and innovative business models.