SWITZERLAND Law and Practice Contributed by: Lorenzo Olgiati and Pascal Hubli, Schellenberg Wittmer Ltd
deemed to be non-executive members of the board who: • have never been a member of the executive management or, if they have, then more than three years ago; • have never served as lead auditor or who served as lead auditor more than two years ago; and • have no or only minor business relations with the company. The board of directors may establish further cri - teria for independence. Importantly, in cases of cross-involvement with other boards, the inde - pendence of the member in question should be carefully examined on a case-by-case basis. According to the SCBP, the nomination commit - tee should be predominantly composed of inde - pendent directors. For the compensation com - mittee, only independent members of the board of directors should be proposed for election by the shareholders. Members who have reciprocal board memberships – ie, a committee member responsible for co-determining the compensa - tion of a member of the board of directors or the executive management under whose super - visory or directive authority the committee mem - ber serves in another company – should not be proposed. Banking and Insurance For banking and insurance entities, FINMA has issued rules in its circulars “Corporate Govern- ance – banks” (2017/01) and “Corporate Gov- ernance – insurers” (2017/02). Pursuant to these rules, at least one third of the board of a banking entity must consist of non-executive and inde - pendent directors. Board members are gener - ally 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 direc - tors should not maintain significant business relations with the entity that could lead to con - flicts of interest and/or should not act on behalf of significant shareholders. Conflicts of Interest The statutory duty of care and loyalty requires directors to perform their duties with due care and safeguard the company’s interest in good faith, including avoiding and properly addressing conflicts of interest. If a director fails to comply with its 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 4.8 Consequences and Enforcement of Breach of Directors’ Duties ). Members of the board of directors and of the executive management should promptly inform the board of directors of any conflicts of inter - est affecting them. However, board members are not required to be completely “disinterested” ; for the conflict to be considered relevant, it needs to be of a certain intensity. The board of directors must then decide on and take the appropriate measures required to safeguard the company’s interests. For an overview of such measures and further guidance, the SCBP can be consulted. In practice, companies’ organisational regula - tions often provide for appropriate rules and measures in the case of a director’s conflict of interest (such as disclosure of conflict and pos - sible abstention from voting and/or meetings). 4.6 Legal Duties of Directors/Officers The board of directors is responsible for the ultimate management and representation of the
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