SWITZERLAND Law and Practice Contributed by: Lorenzo Olgiati and Pascal Hubli, Schellenberg Wittmer Ltd
3.6 Legal Duties of Directors/Officers The board is responsible for the ultimate management and representation of the company. Its main duty is to determine the corporate strategy and allocate cor - porate resources (strategic governance). In general, the board is authorised to decide on all matters that are not reserved to the shareholders’ meeting or the auditors (by law or by the articles of association), or that are not delegated to the executive management based on organisational regulations. Statutory law enumerates certain fundamental mat - ters specifically reserved for the board for decision- making (see 2.2 Types of Decisions ). 3.7 Responsibility/Accountability of Directors The board owes its fiduciary duties primarily to the company, and must represent it and act in its best interests. When determining the best interests of the company, the board, according to the prevailing legal opinion in Switzerland, should consider the long-term interests of the shareholders as well as those of other stakeholders, such as the company’s employees or creditors. 3.8 Breach of Directors’ Duties Board members, “de facto directors” (ie, persons not formally appointed as directors but who factually act as directors and significantly influence the company’s decision-making process), and members of the exec - utive management, are liable for damages caused by intentional or negligent breach of their duties. As a rule, directors’ and officers’ (D&O) liability is joint and several, and each director may be held personally liable. Under the business judgement rule, business decisions made in good faith, without conflicts of interest, and with proper and reasonable information are not breaches, even if they later prove to be materi - ally wrong in retrospect. The expected level of care is generally assessed based on an objective standard. However, special - ist knowledge may result in a higher standard when assessing the actions of an individual board member. Liability Actions D&O liability actions may be brought by the company, shareholders, or, in bankruptcy, the company’s credi -
pendent members of the board of directors should be proposed for election by the shareholders. Members who have reciprocal board memberships – ie, a com - mittee member responsible for co-determining the compensation of a member of the board of directors or the executive management under whose super - visory or directive authority the committee member serves in another company – should not be proposed. Banking and Insurance For banking and insurance entities, FINMA has issued rules in its circulars “Corporate Governance – banks” (2017/1) and “Corporate Governance – insurers” (2017/2). Pursuant to these rules, at least one third of the board of a banking entity must consist of non- executive and independent directors. Board members are generally considered to be independent if they are not (and have not been during the past two years) engaged in any other function for the respective entity (including as auditor). Independent directors should not maintain significant business relations with the entity that could lead to conflicts of interest and/or should not act on behalf of significant shareholders. Conflicts of Interest The statutory duty of care and loyalty requires direc - tors to perform their duties with due care and safe - guard the company’s interests in good faith, including avoiding and properly addressing conflicts of interest. If a director fails to comply with this duty and favours personal interests over those of the company, any shareholder may hold such a director, and potentially the board, liable for any damage caused by such a breach of the duty of loyalty, and seek indemnification (for D&O liability claims, see 3.8 Breach of Directors’ Duties ). Additionally, the CO expressly provides that members of the board of directors and the executive manage - ment must inform the board of directors immediately and fully of any conflicts of interest affecting them. The board of directors must then take the measures necessary to safeguard the interests of the company. In practice, companies’ organisational regulations often provide for detailed rules and measures in the case of a director’s conflict of interest (ie, disclosure, abstention from votes or recusal from meetings).
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