SWITZERLAND Law and Practice Contributed by: Frank Gerhard, Andreas Müller and Timo Hasler, Homburger
8.5 Conflicts of Interest While directors and officers do owe a duty of loyalty to the company, shareholders – including controlling shareholders – do not, unless they act as shadow directors of the company. Depending on the severity of a conflict, the board and/or the conflicted director have to take different countermeasures (eg, disclo - sure, recusal, shareholder vote, resignation) devel - oped by case law and the legal doctrine. In a public takeover, the target board has to disclose potential conflicts of interest of its members or mem - bers of the management in the board report. The Inde - pendent Review Body has to be independent from the bidder and the target as a matter of law. Hostile tender offers are permitted in Switzerland and some of the rules governing public tender offers are designed to facilitate hostile or competing bids. How - ever, there have hardly been any hostile tender offers in the past decade. 9.2 Directors’ Use of Defensive Measures Before a public tender offer is announced, the board of a potential target may adopt defensive measures (provided they do not breach corporate law), even if the board knows that an offer is imminent. However, the board has restricted room for manoeuvre in this respect, as many defensive measures require share - holder approval (see 9.3 Common Defensive Meas- ures ). In Switzerland, “poison pills” are hardly used and would only be lawful under very limited circum - stances. Between the launch or pre-announcement of a public tender offer (whether friendly or unfriendly) and the publication of the final result, the board must not take any action to frustrate the offer unless the sharehold - ers approve such action in a general meeting. For example, the board must not, without shareholders’ approval: 9. Defensive Measures 9.1 Hostile Tender Offers • buy or sell assets that represent more than 10% of the target’s assets or earnings, or assets that
of Due Diligence ). After the public announcement of an offer, the target board must not take certain defensive measures and must report intended defen - sive measures to the TOB (see 9.2 Directors’ Use of Defensive Measures ). 8.2 Special or Ad Hoc Committees It is possible to establish a special committee of (independent) directors to review a potential busi - ness combination, but it is not common outside con - flict of interest situations. Public takeovers are usu - ally management-driven and sometimes initiated by the chairpersons of the two boards. It is typically the entire board of directors, not just a board committee, to which proposals for approval are presented. 8.3 Business Judgement Rule There is limited case law concerning the fiduciary duties of the board of directors of a public company in a public takeover context. With respect to business decisions of non-conflicted directors and officers of private companies, the Swiss Federal Supreme Court applies a business judgement rule similar to the one in the USA. It should also be mentioned that shareholders’ rem - edies are limited to damages (and restitution in the case of illicit enrichment), with injunctions against board decisions being generally unavailable. Swiss procedural law is generally less plaintiff-friendly than procedural laws in the USA. 8.4 Independent Outside Advice In business combinations of a certain size, whether private or public, the companies involved are usually advised by financial advisers (typically an investment bank or a management consulting firm), legal advisers and tax advisers, and perhaps pension and environ - mental advisers. In most public takeovers, the financial adviser is an investment bank. The Independent Review Body selected by the target and the firm providing the fair - ness opinion (see 7.2 Type of Disclosure Required ) are not advisers of the target in a strict sense but may nevertheless give the target board some comfort as to the adequacy of the consideration.
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