Business Management and Duties of the Board of Directors in Switzerland
Board of Directors’ Obligations and Specific Duties under the Swiss Code of Obligations
The Board of Directors (BoD) plays a fundamental role in the management and direction of a company. Its responsibilities are governed by both general principles and specific duties, clearly defined in the Swiss Code of Obligations. These guidelines establish the non-transferable and inalienable powers of the Board of Directors, as well as the specific duties it must assume.
General Principles:
In accordance with Article 716a of the Swiss Code of Obligations, the BoD is vested with non-transferable and inalienable powers. The exclusive powers of the Board of Directors include, but are not limited to:
- Directing the overall orientation of the company and issuing necessary directives.
- Establishing the organizational structure.
- Defining accounting principles, financial control, and developing a financial plan if necessary for the management of the company.
- Appointing and revoking those responsible for management and representation.
- Ensuring strict supervision of individuals in charge of management to ensure compliance with the law, statutes, regulations, and given instructions.
- Preparing the management report, organizing the general assembly, and implementing its decisions.
- Filing for a concordat moratorium and informing the court in case of overindebtedness.
- In the case of publicly traded company shares, preparing the remuneration report.
Additionally, the board of directors has the option to delegate to its members, individually or grouped in committees, the responsibility to prepare and execute its decisions, as well as supervise specific areas. It ensures that its members have the necessary information.
The Board of Directors has the duty to exercise rigorous financial control, establishing the company’s financial plan and exercising high-level oversight over those in charge of management. This oversight aims to ensure compliance with prevailing laws and regulations.
Under Article 717 paragraph 1 of the Swiss Code of Obligations, the BoD is bound by a duty of diligence. This obligation requires prudent and careful conduct in managing the affairs of the company.
Specific Duties:
Among the specific duties imposed on the Board of Directors, the maintenance of an early warning system holds a prominent place. This system is based on balance sheet tests and involves constant monitoring of the solvency of the company.
Article 725 paragraph 1 of the Swiss Code of Obligations states the obligation to monitor the solvency of the company. In the event of insolvency risk within six months, including a possible request for a concordat moratorium, the Board of Directors must take remedial measures.
The Board of Directors must also be vigilant regarding capital loss, as defined in Article 725a of the Swiss Code of Obligations. When equity falls below share capital, reserves, and accumulated losses, corrective measures or proposals for measures are necessary.
In cases of overindebtedness, as described in Article 725b of the Swiss Code of Obligations, the Board of Directors has the duty to file for bankruptcy, except in exceptional cases provided by law.
In summary, the Board of Directors is entrusted with general and specific obligations aimed at ensuring the financial health and legal compliance of the company, closely monitoring key indicators such as solvency, capital loss, and overindebtedness. Adhering to these obligations is essential to ensure the viability and compliance of any business.
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