28 September 2023

Are you, as a board member, aware of the new Swiss Corporate Law provisions?

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  • Compliance
  • Legal
  • Notary
  • Transactions / M&A

The transition period to adapt the articles of association to the new Corporate Law lasts until 1 January 2025. In addition to other changes, the new provisions and obligations in relation to the board of directors must be taken into account in particular.

  • Stephan F. Greber

    Legal Associate

  • Michèle Landtwing Leupi

    Legal Partner

I. New or extended duties of the board of directors

a. Increased and more clearly regulated financial responsibility

The legislator increases the financial responsibility of the board of directors and introduces clear new duties. The legislator now explicitly emphasises the duty to constantly monitor solvency as part of financial planning obligation. The board of directors' duty to act now already begins when the company is threatened with insolvency and not, as before, only when half of the capital is lost or the company is over-indebted. Imminent insolvency exists if the company is not likely to be able to meet its financial obligations over a longer period of time (a short, temporary liquidity bottleneck is not sufficient). Continuous planning and monitoring of the cash flow by the board of directors is therefore indispensable. What this means in concrete terms in individual cases always depends in particular on how large the company is and what kind of business activity is carried out.

b. Duties to act in case of capital loss and over-indebtedness

In the event of a capital loss, the extraordinary general meeting must now only be convened if restructuring measures require its approval. In return, the board of directors is obliged to have an annual financial statement with a capital loss always audited by a licensed auditor, at least to a limited extent. This also applies to companies that have waived the limited audit. If the required audit report is not available, the resolutions on the approval of the annual accounts and the appropriation of the balance sheet profit are null and void. The obligation to have the annual accounts audited by an auditor is only not applicable if the board of directors has filed an application for a composition moratorium with the court.

Over-indebtedness occurs when the company's liabilities are no longer covered by assets. The board of directors has new duties in the event of a justified concern of over-indebtedness. If there is a justified concern that the liabilities of the company are no longer covered by the assets, the board of directors shall immediately prepare interim financial statements at going concern value and at realisable value. The interim financial statements at realisable values may be waived if the going concern assumption is given and the interim financial statements at going concern values do not show any over-indebtedness. If the company is not a going concern, the interim financial statements at going concern values may be waived. The interim financial statements, like the annual financial statements with a capital loss, must be audited (at least to a limited extent) by a licensed auditor.

At the same time, the board of directors is granted more flexibility. The notification of the court can be omitted if there is a justified prospect of successful restructuring within 90 days or in the case of a debt subordination to the extent of the over-indebtedness. According to the new law, the valid subordination must also include the interest claims during the period of over-indebtedness. Otherwise, there is an obligation to notify the court immediately, whereby either a composition moratorium or bankruptcy proceedings must be applied for. The bankruptcy moratorium is no longer provided for in the new company law.

The new discretionary powers increase both the chances of success of the restructuring efforts as well as the accountability risks of the board of directors.

c. Duty of care and loyalty in the event of conflicts of interest

Members of the board of directors and the executive board must avoid conflicts of interest due to their duty of care and loyalty. They are now explicitly obliged to inform the board of directors immediately and completely about any conflicts of interest affecting them, such as dual board membership, self-dealing or the exercise of an additional advisory function. What "immediately" means must be examined in each individual case. The board of directors must then take the necessary measures to protect the interests of the company. Failure to act may result in liability claims and criminal charges against all board members.

II. Further relevant provisions concerning the Board of Directors

a. Individual election of the members of the Board of Directors

The individual election of the members of the Board of Directors is now required by law. A (re-)election of the entire board of directors as a unit is no longer possible. Previously, this requirement only applied to listed companies. By means of a provision in the articles of association permitting simultaneous election, or with the consent of all represented shareholders, it is still possible to deviate from individual election in the case of non-listed companies limited by shares. A tacit renewal of board mandates is no longer carried out.

b. Virtual meetings and electronic resolution

The new Corporate Law provides for more flexibility and bureaucratic relief for resolutions of the board of directors. It is now possible for the board of directors to pass resolutions virtually without a physical meeting place (e.g. via Teams/Zoom Meeting). Furthermore, the board of directors can now also adopt circular resolutions electronically (e.g. via DocuSign, e-mail or WhatsApp), provided that no member requests oral consultation. Handwritten signatures of resolutions and minutes are no longer required. However, it should be noted that resolutions with relevance for the Commercial Register (e.g. constitution of the board of directors by circular resolution) still require a handwritten signature (or qualified electronic signature), which again limits the newly granted flexibility.

c. Delegation of management as a standard practice

The board of directors is now always authorised to delegate management of the company within the permissible scope, unless the articles of association provide otherwise. Previously, an express provision in the articles of association regarding the transfer of management was required.

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It should be noted that after the expiry of the transitional period mentioned above, all provisions of the articles of association that are not compatible with the new company law will automatically become invalid (Die Aktienrechtsrevision – was hat sich geändert?)..

MME's corporate law team is looking forward to advise you on all questions regarding the new or extended duties of the board of directors and will support you in the revision of your articles of association as well as your organisational regulations.
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