A Q&A guide to corporate governance law in Switzerland.
The Q&A gives a high level overview of board composition, the comply or explain approach, management rules and authority, directors’ duties and liabilities, transactions with directors and conflicts, company meetings, internal controls, accounts and audit, institutional investors and reform proposals.
To compare answers across multiple jurisdictions, visit the Corporate Governance Country Q&A tool.
The Q&A is part of the PLC multi-jurisdictional guide to corporate governance law. For a full list of jurisdictional Q&As visit www.practicallaw.com/corpgov-mjg
Most businesses are conducted in the form of either:
A stock company (société anonyme/Aktiengesellschaft/società anonima), which is the most common form of corporate entity.
A limited liability company (société à responsabilité limitée/Gesellschaft mit beschränkter Haftung/società a garanzia limitata), which is the preferred type of organisation for small and medium-sized businesses.
This chapter focuses on the stock company (company). Unless otherwise specified, the answers below relate to all sizes and all types of companies (whether listed or not).
Corporate governance and directors' duties are mainly governed by:
Code of Obligations 1911 (CO) (in particular, Articles 620 to 763 relating to company law and Articles 927 to 964 relating to the Registry of Commerce, company names and commercial accounting).
Federal Act on Mergers, Spin-Offs, Change of Corporate Form and Transfer of Assets 2003.
Federal Act on the Approval and Supervision of Auditors 2005.
Criminal Code 1937 (CC).
The company's bye-laws (bye-laws).
Other specific laws and regulations apply to companies operating in the financial sector (banks, securities dealers, fund administration companies and insurance companies), which include detailed rules on corporate governance matters (see, for example, the Circular of the Swiss Financial Market Supervisory Authority (FINMA) regarding the minimum standards for remuneration schemes of financial institutions 2010/1, amended as of 1 June 2012).
In addition, listed companies are also subject to the provisions of:
Federal Act on Stock Exchanges and Securities Trading 1995 (SESTA).
Ordinance on Stock Exchanges and Securities Trading 1996 (SESTO).
Ordinance on Stock Exchanges and Securities Trading of the Swiss Financial Market Supervisory Authority 2008 (SESTO-FINMA).
Ordinance of the Takeover Board on Public Tender Offers 2008 (O-TV).
Articles 161 and 161bis of the CC on insider trading and price manipulation on stock exchanges.
Finally, the main Swiss exchange (SIX) has also issued numerous rules, directives and circulars, including:
Listing Rules 2010 (revised) (LR).
Additional Rules for the Listing of Bonds 2010 (ARB).
Additional Rules for the Listing of Derivatives 2010 (ARD).
Additional Rules for the Listing of Exchange Traded Products 2010 (ARETP).
Directive on Information Relating to Corporate Governance 2008 (DCG), which provides for publication of information on a comply-or-explain basis.
Directive on Financial Reporting 2012 (DFR).
Directive on Ad hoc Publicity 2008 (DAH).
Directive on Disclosure of Management Transactions 2010 (DMT).
Directive on the Delisting of Equity Securities, Derivatives and Exchange Traded Products 2010 (DD).
Many listed companies have also issued their own corporate governance codes.
The following non-binding recommendations also apply:
Swiss Code of Best Practice for Corporate Governance 2002/2007 (SCBP) issued by Economiesuisse (the umbrella organisation for Swiss businesses) (see Question 3).
Guidelines on Independence of the Swiss Institute of Certified Accountants 2007 (Guidelines on Independence), which are binding for its members. These are of particular relevance for the auditing process (see Questions 29 to 33).
Most of the above rules and regulations are available in English at www.six-exchange-regulation.com/regulation_en.html, www.economiesuisse.ch or www.ifac.org/about-ifac/membership/members/treuhand-kammer-swiss-institute-certified-accountants-and-tax-consulta.
There is no specific regulatory body or authority responsible for the enforcement of corporate governance rules. However, the SIX, the FINMA and the Federal Audit Oversight Authority, among other tasks, also supervise compliance by regulated companies (that is, listed companies, companies active in the financial sector or auditors).
Swiss private entities have issued several sets of regulations, binding and non-binding rules, relating to corporate governance (see Question 2). The SCBP and the Directive on Information Relating to Corporate Governance 2008 (DCG), issued by the SIX, can be considered as the core regulations relating to corporate governance.
The SCBP covers the following areas:
Exercise of shareholders' statutory rights and shareholders participation at general meetings.
Board's functions and composition.
Board's procedures and chairmanship.
Conflict of interests and advance information.
Balance between direction and control of the company.
Internal control systems in relation to risk and compliance.
Board's committees.
Flexibility of the SCBP rules in particular circumstances.
Auditing.
Disclosure of information relating to corporate governance.
Compensation of board members.
The DCG provides for a certain amount of information regarding corporate governance to be published in the annual report of listed companies. The information required covers the following areas:
Group structure and shareholders.
Capital structure.
Board of directors and senior management.
Compensation, shareholdings and loans.
Shareholders' participation rights.
Change of control and defence measures.
Auditors.
Information policy.
The SCBP contains 30 non-binding recommendations divided into four parts (Shareholders, Board of Directors and Executive Management, Auditing, and Disclosure) and its Appendix 1, which comprises ten non-binding recommendations on compensation for the board of directors and executive board.
The SCBP claims to represent the current standards widely accepted by Swiss companies. Although its recommendations are mainly intended for listed companies, non-listed but economically significant entities often get some inspiration from these guidelines. Companies with active major shareholders (including listed subsidiaries), as well as small and medium-sized businesses, can adapt or simplify the SCBP. Most of the main business organisations have expressly endorsed the SCBP.
The DCG contains nine articles and lists in a detailed Annex the information that must be published in a separate section of the company's annual report. It applies to all companies listed on the SIX with registered offices in Switzerland (companies without registered offices in Switzerland must comply with the DCG if their shares are listed on the SIX, but not in their home country).
The SCBP is soft law, which means that its recommendations are not mandatory. The comply or explain principle is not expressly mentioned in the SCBP.
The DCG is binding on listed companies and refers explicitly to the comply or explain principle. Therefore, the issuer must publish information relating to corporate governance in a separate section of its annual report, and if the issuer refrains from disclosing certain information, the annual report must contain an individual, substantiated justification for each instance of non-disclosure. Sanctions may be imposed on non-compliance with the DCG, which range from a reprimand to delisting from the SIX.
In corporate practice, an increasing number of listed companies comply with the recommendations of the SCBP. Most listed companies comply with the DCG's requirements. However, sanctions have been imposed on several listed companies for failing to comply with the DCG (see www.six-exchange-regulation.com/enforcement/sanction_decisions/corporate_governance_en.html).
The reform of company and accounting law (see Question 37) is expected to introduce important elements of effective corporate governance into law.
Companies have a unitary board structure (that is, a board of directors (conseil d'administration/Verwaltungsrat/consiglio d'amministrazione) presided over by a chairman). The board has the overall responsibility for all matters not expressly left to other corporate bodies (see Question 14, Directors' powers).
Company law allows for considerable flexibility when it comes to the organisation of boards and the powers allocated to directors and/or committees, or delegated to the management (see Question 15).
Unless the bye-laws provide otherwise, directors manage the company collectively. It is usual for large companies that the management be delegated to certain directors only (administrateurs-délégués/Delegierte/delegati), or to committees and/or to managers (directeurs/Direktoren/direttori).
These delegations must be provided for in the company's bye-laws. The board must adopt organisational regulations to specify management positions, duties and reporting requirements.
Specific rules apply to financial institutions. In particular, management in banks must be clearly distinct and separate from the board.
Only individuals can serve as directors. Directors should have all the necessary qualifications to ensure an independent decision-making process. If the company has a significant part of its operations abroad, then the board should include members from abroad or members with a long-standing international experience (SCBP).
Employees have no right to be represented on the board. However, the company's bye-laws may grant employees, who are also shareholders of the company, that right.
Unless the bye-laws provide otherwise, a board can comprise one or more directors.
The size of a board depends on the company's needs and particulars; it should be small enough to allow an efficient decision-making process and large enough for its members to contribute experience and knowledge from different fields and to allocate management and control functions among themselves (SCBP).
There are no age restrictions, unless the bye-laws provide otherwise. However, the bye-laws of listed companies usually provide for an age limit beyond which members of the board must resign from their position, with or without possibility to stay as an honorary member of the board.
There are no nationality restrictions. However, at least one person domiciled in Switzerland (whatever his/her nationality), whether a director or a manager, must be in a position to validly represent and bind the company by his signature.
The board composition is not subject to gender restrictions under Swiss law.
Listed companies must identify executive and non-executive directors and must provide information on their activities and on their interests outside the company. Non-executive directors must also identify their (former) connections with the company (DCG).
In practice boards usually comprise non-executive directors. However, this is not a legal requirement. The SCBP recommends that the majority of the board should comprise non-executive directors.
The SCBP recommends that members of both the compensation and the audit committees are independent. A non-executive director is independent if he:
Is not involved in the management of the company provided that he has not been involved in the company's management recently (that is, in the previous three years).
Has no (or comparatively minor) business relations with the company.
A member of the compensation committee is not independent if he is subject to the supervision or authority of one of the company's directors or officers in another company regarding his own compensation.
Whenever there is a cross-membership in the board (known as interlocking directors), the independence of the respective members should be carefully checked.
The board can add additional criteria regarding the independence of non-executive directors.
Additional criteria apply to banks, securities dealers and insurance companies.
As a rule, non-executive directors are subject to the same duties and liabilities as executive directors (see Questions 16 and 17).
The board is autonomous in its internal allocation of duties and responsibilities. It determines whether a person can be simultaneously chairman of the board and chief executive officer (CEO), based on the company's needs and availability of qualified managers (SCBP).
If a person holds both these functions, then the board of directors should provide for adequate control mechanisms, for example by appointing an experienced non-executive director (lead director), who would be specifically entrusted with the task to exercise that control. This lead director should be entitled to convene on his own and chair meetings of the board when necessary (SCBP).
As a rule, banks and insurance companies should not appoint the same person to act as the chairman of the board and CEO.
Directors are appointed by the shareholders at shareholders' meetings (general meetings). They are elected by an absolute majority of the votes allocated to the shares represented, unless the bye-laws provide for a different rule. The chairman is chosen by the board among its members (or by the shareholders, if the bye-laws so provide).
In listed companies, the board must set up a nomination committee setting out the governing rules for the selection of candidates and for their re-election. Candidates are selected in accordance with those rules (SCBP).
Shareholders can remove a director at any time and without cause at general meetings by an absolute majority of the votes allocated to the shares represented, unless the bye-laws provide for a different rule.
Directors are elected for three years, unless the bye-laws provide for a longer or shorter period (which cannot exceed six years). Re-election is possible.
As a rule, directors should not be appointed for a duration of more than four years; staggered terms are preferred (SCBP).
Directors do not have to be (and are usually not) employed by the company.
The board or the general meeting can and, under certain circumstances, must authorise shareholders to review contracts between the company and its directors, provided that commercial secrets or other interests are not jeopardised (see Question 23). Listed companies must disclose directors' remuneration (see Question 12, Disclosure).
Directors can own shares in the company but are not required to do so. However, under certain circumstances, the acquisition (or sale) by a director of shares of the company of which he is a director may be a criminal offence (see Question 21).
The shares allotted to, or held by, directors of a listed company must be disclosed (see Question 12, Disclosure).
The board sets the directors' remuneration in compliance with general principles of company law (duty of care and loyalty, and obligation to reimburse, under certain conditions, unjustified benefits). For listed companies, the board should set up a compensation committee that issues rules for directors' and senior management's remuneration (they should be submitted to the board for approval) (SCBP and its Annex 1).
In addition, it is recommended that (SCBP and its Annex 1):
The board decides which compensation system the company is to adopt and determines the role and responsibility of the compensation committee.
The compensation committee is exclusively composed of independent directors without interlinked interests (but who may be, or may represent, significant shareholders).
The overall remuneration package corresponds to performance and employment market conditions, and is designed in a way that senior managers' interests are aligned with the company's interests.
The remuneration is conditional on the company's sustainable success and individual contributions. The interests of the managers should be aligned with those of the company and false incentives avoided. The compensation system should contain both fixed and variable components. It should reward medium- and long-term achievements.
The dilution effect caused by share option schemes for senior managers is minimised, and the conditions for exercising options should not be subsequently modified in the option-holders' favour.
Contracts with senior managers contain provisions on termination of employment in line with market conditions and drafted so as to protect the company's interests. As a rule, the company is not to grant golden parachutes or severance compensations.
The compensation committee undertakes a critical review of salary comparisons with other companies.
The board establishes a compensation report to be submitted to the general meeting. The shareholders are also involved in these matters when discussing the company's accounts and financial statements and, as the case may be, when voting (consultative vote) on these matters.
The board ensures transparency, for example by providing readily comprehensible information and involving the shareholders' meeting in the debate on the compensation system in an appropriate form.
The issue of remuneration will be addressed by a federal act, most probably in 2013 (see Question 37). The FINMA has adopted minimum standards regarding remuneration schemes for financial institutions (including banks) (see Question 2, General regulations).
Listed companies must disclose in the notes to their financial statements the remuneration, indemnities and advantages in various forms of, and loans and guarantees to (Article 663b bis, CO):
The directors, on an individual and aggregate basis.
The members of the advisory board (if any) on an individual and aggregate basis.
The senior managers on an aggregate basis.
The senior manager with the highest remuneration.
The former directors, senior managers and members of the advisory board (under certain conditions).
The respective relatives of (former) directors, senior managers and members of the advisory board whenever these remunerations, loans and guarantees are not consistent with market practice.
All participations in the share capital of listed companies (as well as conversion and option rights) held by directors, senior managers and members of the advisory board (together with their respective relatives) must also be disclosed on an individual basis (Article 663c(3), CO).
In addition, listed companies must disclose the content of the directors' remuneration and disclose the method of computation of their compensation packages (including authority and procedure) (DCG).
Although it has become subject to greater shareholders scrutiny, directors' remuneration does not require shareholders approval, except in relation to:
Profit sharing bonuses (tantièmes/Tantiemen/partecipazione agli utili).
Ratification of transactions whenever there is a potential conflict of interests (see Question 21).
Questions of internal management are mostly governed by:
The company's bye-laws.
Its organisational regulations and other internal directives.
The company's practice.
The chairman usually calls board meetings, but each director can also ask the chairman to call a meeting on short notice.
The following provisions of company law apply, unless the bye-laws (or the organisational regulations) provide otherwise:
Board resolutions are adopted by the majority of the votes cast.
The chairman has a casting vote.
There are no quorum requirements to hold a meeting or to adopt a resolution. However, as a rule, resolutions passed at a board meeting held without having properly convened all board members should be regarded as null and void (except in some specific cases). Resolutions can be adopted by written consent to a proposal, unless a member of the board demands a discussion of an underlying specific issue.
The board sets its procedures as it deems appropriate. However, they should include the following (SCBP):
At least four meetings a year (depending on the company's requirements), with additional meetings to be held whenever necessary.
Preparation and conduct of board meetings according to SCBP recommendations.
The board has the non-delegable powers and authority to, among other things:
Decide on the company's general strategy and issue the corresponding instructions.
Organise the company.
Choose the accounting, financial control and financial planning methods.
Appoint and remove senior management and the persons who are authorised to represent the company.
Supervise the senior management.
Prepare the annual report, including the (consolidated) financial statements.
Organise the general meeting and carry out its resolutions.
Notify the courts if the company becomes over-indebted (that is, whenever its liabilities exceed its assets).
The following topics are within the exclusive authority of shareholders' general meetings:
Adoption of, and amendments to, the bye-laws.
Election and removal of directors and auditors.
Approval of the annual report, including (consolidated) financial statements.
Use of the profits and the distribution of dividends.
Discharge of the directors.
Decisions on other matters, which, by law or according to the bye-laws, are within the exclusive authority of shareholders' general meetings.
The internal organisational structure of listed companies (for example, the allocation of tasks within the board and the working methods of the board and its committees) and the allocation of responsibilities between the board and the management must be disclosed (DCG).
Restrictions on the powers of directors to represent the company are not enforceable against third parties acting in good faith, unless those restrictions are entered into the Registry of Commerce. However, these restrictions can only relate to:
The fact that the company can only be validly represented collectively by several directors (usually two).
The fact that the authority of certain directors is limited to the representation of either the principal establishment or of a given branch.
The board can delegate responsibilities for specific issues to one or several directors or committees, in accordance with the company's organisational regulations.
Although the board is not required to delegate tasks, it is recommended that the board establish certain committees, including (SCBP):
An audit committee.
A compensation committee.
A nomination committee.
Listed companies usually set up these committees.
Banks (and securities dealers whenever managers and board members are not the same persons) must set up an audit committee whenever certain thresholds are met.
Instead of setting up committees, small and medium-sized companies can assign specific responsibilities to certain individuals or entrust the full board with these tasks (SCBP).
The internal organisational structure of listed companies must be disclosed (DCG).
Directors (and managers) are personally liable vis à vis the company, its shareholders and creditors for damages caused by intentional or negligent violations of their duties as directors or managers of the company or, as the case may be, in their capacity as founders or liquidators of the company.
Unless the shareholders and the company's creditors suffer direct damages (this notion has been narrowly interpreted by the Swiss Supreme Court), any indemnity granted by the court can only be paid to the company itself (and not to the shareholders, nor to the company's creditors). If the company has been declared bankrupt, then the trustee in bankruptcy is first entitled to assert the shareholders' and creditors' claims (they can only collectively assert their claims in situations where the trustee in bankruptcy waives its right to do so).
The CC provides for certain specific offences, including:
Filing false statements with the Registry of Commerce (Article 153).
Disclosing trade or commercial secrets (Article 162).
Fraudulently obtaining an incorrect official recording (Article 253).
Economic espionage (Article 273).
Failure to comply with accounting regulations (Article 325).
Violation of regulations pertaining to business names (Article 326ter).
Directors can be criminally liable for fraud or theft under the general principles of law in particular whenever they are found to be guilty or responsible for:
A breach of confidence (Article 138, CC).
Fraudulent representations (Article 146, CC).
False statement about commercial business (Article 152, CC).
Disloyal management (Article 158, CC).
Exploitation of the knowledge of confidential information (Article 161, CC).
The forgery of documents (Article 251, CC).
As a rule, these breaches also trigger civil liability.
Civil liability can arise as a result of (wrong or misleading) statements made in a prospectus offering securities or bonds (Article 752, CO). As a rule, directors are liable for statements made in the prospectus published by the offeror or the target in the context of a public takeover offer. It is debated among legal scholars whether directors can be held liable for wrongful disclosures made in ad hoc publicity (see Question 23).
The following are considered criminal offences (CC):
Insider trading (see Question 22).
Price manipulation on a stock exchange (Article 161bis).
Misleading statements about commercial business (made, for example, in the prospectus for a public offer of shares) (Article 152).
Under certain conditions, fraudulent representations (made, for example, in a prospectus) (Article 146).
In addition, there are specific offences of (SESTA):
Omitting to disclose qualified participations in the share capital of listed companies.
Failure of the target's board to submit a report to the shareholders in the context of a public takeover offer.
Violation of certain obligations imposed on securities dealers (in particular in relation to how they must keep their accounts and records).
Violation of professional secrecy duty.
Directors incur civil liability if they fail to promptly notify the courts of the company's over-indebtedness (that is, where the company's liabilities exceed its assets).
Criminal offences include (CC):
Fraudulent bankruptcy and fraud in connection with a seizure procedure (fictitious reduction of assets or creation of debts) (Article 163).
The artificial reduction of assets to the prejudice of creditors (Article 164).
Mismanagement (Article 165).
The granting of preferences to certain creditors (Article 167).
The appropriation of seized property (Article 169).
Obtaining a judicial composition agreement by fraud (Article 170).
Civil and criminal liability can apply for breaches of health and safety regulations or, in certain circumstances, failure to prevent those breaches.
See above, Health and safety.
Directors can face civil liability for breaches of anti-trust regulations or, in certain circumstances, failure to prevent those breaches. As far as criminal liability is concerned, the Federal Act on Cartels and other Restraints of Competition (CartA) lists a number of monetary sanctions, which may be applied to directors in cases of non-compliance with official Competition Authority's orders.
Directors may be subject to specific civil and criminal liabilities for:
Certain tax contributions and tax offences by the company.
Social security contributions which the company failed to pay.
Money laundering offences.
Where criminal law imposes on a company certain obligations violation of which triggers criminal liability, those obligations (and, in the case of their violation, the associated criminal liability) can be attributed to individuals (for example, directors and managers) who, within the company, have an effective decision power in the field of activity where that violation was committed (Article 29, CC).
Directors cannot limit their responsibility vis à vis the company unless the general meeting grants them full and unqualified discharge of and from personal liabilities (décharge/Entlastungsbeschlusses/discarico). Discharge can only be granted in relation to:
Facts that have been disclosed to the shareholders.
Claims that belonged to the company and those shareholders who consented to the discharge.
Creditors' claims, shareholders' direct claims and claims in the context of a company's bankruptcy cannot be restricted by decisions of general meetings. Shareholders who have not consented to the resolutions granting the discharge have six months to bring their claims before a court.
The responsibility of directors for properly delegated tasks is limited to the duty of using due care in selecting, instructing and supervising the delegated persons.
Within certain limits, a company can indemnify a director who has been held liable. However, this is not possible for criminal fines or liabilities resulting from a director's gross negligence or wilful misconduct.
Directors (and officers) often obtain liability insurance coverage, and it is usual for the company to pay the corresponding premium.
Representatives of a parent company or controlling shareholders that either directly or indirectly participate in the company's management as if they were a director can be regarded as a de facto director. They can therefore be subject to the same civil and criminal liabilities as a formally appointed director.
Generally, a director should not participate in a decision whenever he has a (serious) conflict of interest and the other directors should ensure that he does not do so. Conflicts of interest should be disclosed to the board. Specific rules apply to banks where directors are not allowed to belong to the management.
The SCBP sets out the procedure to be followed whenever a conflict of interest arises. It recommends that anyone with a permanent conflict of interest does not serve as a board member.
Directors have a duty of loyalty towards the company and must look after its interests. They are not allowed to enter into a transaction with the company except in cases where either:
The transaction has been either approved (a priori) or ratified (a posterior) by the board or by the general meeting.
It does not jeopardise the company's interests.
Transactions between a director (or his relatives) and the company should be carried out at arm's length and should be approved by the persons other than the persons involved (SCBP).
Whenever a director acts both for himself and for the company (self-dealing), the transaction must be documented in a written agreement except for everyday minor transactions not exceeding CHF1,000 (Article 718b, CO).
Directors are subject to criminal liability if they use confidential information (obtained by reason of their position in the company) to trade listed shares or to inform third parties (insider trading (Article 161, CC)). They are also subject to criminal liability if, under other conditions, they trade listed shares with a view to significantly influence their market price (manipulation on stock exchanges (Article 161bis, CC)). Insider trading and manipulation on stock exchanges may also be regarded as a breach of the directors' duty of loyalty (general duties) (see Question 16, General duties and Securities law).
The board must take appropriate measures to prevent insider trading (such as setting periods of time during which directors may not trade in the company's securities) in particular in connection with takeovers, before media conferences or before announcing corporate results (SCBP).
Listed companies must disclose to the SIX the direct or indirect purchase or sale of a company's securities by directors, senior managers and related persons (including partners, individuals living in the same household, legal entities directly or indirectly controlled by that person or of which that person is a beneficiary). The SIX makes the information publicly available for a period of three years (DMT).
Certain information is publicly available (most of it online) from the Registry of Commerce and/or is published in the Swiss Official Gazette of Commerce, including:
The objects of the company.
The company's share capital.
Authorised and conditional capital increases.
The identity of members of the board.
The identity of the persons who are authorised to represent the company.
The company's bye-laws.
Shareholders can consult and/or receive a copy of the following documents at the latest 20 days before any general meeting and one year after the approval by the general meeting:
The company's annual report, which includes the financial statements (that is, the balance sheet, the profit and loss statement and the notes), the business report and the (consolidated) financial statements (if any).
The auditors' report.
Creditors with an interest worthy of protection can consult:
The (consolidated) financial statements.
The auditors' report.
At a general meeting, directors must give to the shareholders, at their request, all information relating to the company as is necessary for the shareholders to be in a position to exercise their rights, provided that disclosure of information does not jeopardise business secrets or other company interests. Shareholders can only inspect the company's books and correspondence where they have been authorised to do so by the general meeting or by the board and to the extent that business secrets are safeguarded.
In addition, as a rule, with respect to listed companies:
The annual report must be published, together with the annual financial statements, within four months of the balance sheet date for the latter. In addition, it must be submitted to SIX Exchange Regulation no later than at the time of publication (DFR).
Where a listed company is obliged to produce an interim report under the terms of the Listing Rules (SIX), specific Additional Rules (SIX), and the corresponding implementing provisions, this interim report must be published, together with the interim financial statements, within three months of the balance sheet date for the latter. In addition, it must be submitted to SIX Exchange Regulation no later than the time of publication (DFR).
Listed companies must make certain financial documents available together in electronic form on its website for five years after their publication (DFR).
The annual financial statements must be drawn up in accordance with accounting standards recognised by the SIX (DFR).
Listed companies must disclose in their annual report significant participations of shareholders (usually more than 5% of the voting rights) (DCG).
Listed companies must publish information on changes to shareholdings of persons or entities that directly, indirectly or in concert with third parties, have acquired or sold equity securities or financial instruments in the company and thereby attain, fall below or exceed the threshold percentages of 3%, 5%, 10%, 15%, 20%, 25%, 33.33%, 50% or 66.66% of the company's voting rights (SESTA).
Listed companies must comply with the requirement to publish ad hoc publicity (that is, the company must immediately notify the market of price-sensitive facts). Postponement of ad hoc publicity is only possible under limited conditions (DAH).
Listed companies must disclose all information required by the DCG in a separate section of the annual report. Listed companies may decide not to disclose required information whenever they have valid reasons for the non-disclosure (comply-or-explain principle) (DCG).
Listed companies should disclose all information related to executive remuneration and participations (see Question 12, Disclosure).
Specific rules apply in relation to initial public offerings and public takeover offers. Banks, securities dealers and insurance companies are subject to specific rules.
An ordinary general meeting (OGM) must take place each year within six months after the end of the business year.
The following issues are considered in an OGM:
Approval of the company's annual report.
The use of the balance sheet profits and the distribution of dividends.
Discharging directors from personal liability (see Question 17).
Other matters that require shareholders' approval (see Question 14, Directors' powers).
Shareholders who either represent at least 10% of the share capital or hold shares of a par value of at least CHF1 million may request that the board convene a general meeting and/or include specific items on the agenda.
The SCBP recommends that the bye-laws lower these thresholds to facilitate the exercise of shareholders' rights.
A shareholder can propose that specific facts be subject to a special audit if this is necessary for the exercise of his rights, provided that he first makes use of his right to information or inspection (see Question 23). If the proposal is rejected by the general meeting, then the requesting shareholder can request the court to appoint a special auditor, provided that the requesting shareholder (alone or together with other shareholders) either holds at least:
10% of the share capital.
Shares with a par value of at least CHF2 million.
Decisions of a general meeting can either be rescinded (on the request of either the board or a shareholder) or, under restrictive conditions, treated as void. In contrast, decisions of the board cannot be rescinded but, under restrictive conditions, can be regarded as being void.
Provided they have valid reasons for doing so, shareholders representing at least 10% of the share capital may apply for the company's winding-up. However, the courts can order other alternative solutions.
Whenever the company's organisation no longer fulfils the legal requirements, any shareholder can request the courts to take the necessary measures to remedy the situation.
In cases where the directors' or managers' activities may trigger their criminal or civil liability (see Question 16), shareholders have the possibility to report these activities to the relevant criminal authorities or to initiate the relevant civil actions.
It is part of the general duties of the board to set up an internal control system covering financial and operational risks, which can be regarded as adequate in view of the size of the company and the type of activities in which it is engaged. In addition, the notes to the financial statements must disclose information regarding the implementation of risk evaluation measures.
The statutory auditors of companies that are subject to regular audits (see Question 29) must certify the existence of appropriate internal control systems.
For listed companies, the audit committee (to which the internal audit unit reports) should assess the quality of the internal control systems, including risk management (SCBP).
As a rule, banks, securities dealers and insurance companies must set up an internal control function entrusted with specific duties as well as compliance and risk control procedures.
The board must:
Decide on the accounting methods, and on the financial controls and planning.
Prepare the annual report.
Submit the annual report and the auditors' report to the general meeting for approval.
Directors are liable for the company's accounts (see Question 16, General duties).
For listed companies, the audit committee should decide whether it can recommend to the board to present the (consolidated) financial statements to the general meeting for approval (SCBP).
Specific rules apply to banks, securities dealers and insurance companies.
There are two different types of audit:
Regular audit.
Limited audit.
The required type of audit depends on:
The size of the company.
Whether the company is listed or not.
Whether the company has issued bonds or not.
Whether the company must file (consolidated) financial statements or not.
If the conditions for a regular audit are not fulfilled, the company's financial statements are subject to a limited audit, except in cases of opting-up, that is in cases where:
That regular audit is foreseen in the bye-laws.
That regular audit is decided by the general meeting of the company.
Shareholders representing 10% of the voting rights request that the company be subject to a regular audit.
Shareholders of small companies with less than ten full-time employees can choose, by a unanimous vote, to ease or waive the requirements of the limited audit (opting-down or -out).
Auditors are appointed by the general meeting for one to three business years. Their mandate can be subsequently renewed.
For companies subject to a regular audit, the lead audit partner must rotate every seven years (it can be reappointed subsequently after three years).
Auditors performing regular or limited audits must be registered with the Federal Auditing Oversight Authority (FAOA). In addition, auditors of listed companies or companies having issued bonds are supervised by the FAOA.
Auditors must be independent and fulfil certain professional requirements. The requirements are different for auditors performing regular or limited audits. Detailed rules apply, in particular in relation to (past) activities of the auditors' employees and officers.
Auditors of listed companies must have been approved by the SIX.
Special rules apply for banks, securities dealers and insurance companies.
Auditors who perform regular audits must not perform any work for the company that would be incompatible with their auditing mandate (such as bookkeeping). Auditors who perform a limited audit can also carry out other mandates, such as bookkeeping. Chinese walls need to be established in certain circumstances.
The audit committee must ascertain the auditors' independence and the compatibility of auditing responsibilities with any consulting mandates (SCBP).
The total fees for non-auditing services charged by auditors of listed companies must be disclosed (DCG).
Auditors are liable to the company, its shareholders and its creditors for damages caused by an intentional or negligent breach of their duties.
Auditors may be held liable towards third parties (for example, a person who has bought shares in reliance on the auditors' report) whenever they are in a special relationship with that third party.
As a rule, auditors' liability cannot be limited or excluded.
There are no legal requirements or non-binding rules on these matters, but it is increasingly common for listed companies to voluntarily adopt a code of conduct and/or report on social, environmental and ethical issues.
Although the company secretary does not play a formal role in corporate governance, his role has become increasingly more involved in the administrative monitoring of the board processes.
Institutional investors and other shareholders' groups exercise an increasing influence on corporate governance mainly through the recommendation of votes, publications and reports, discussions with companies and lobbying activities. Ethos (set up by two Swiss pension funds), Philias and Actares are examples of active organisations in this area. Although the influence of these groups is difficult to evaluate, Ethos and Actares have attracted increasing attention following their recent public statements relating to UBS SA and Novartis SA, among others.
The Parliament initially discussed a thorough reform of company and accounting law relating, for the main part, to corporate governance, the structure of the share capital, general meetings, and accounting and financial reporting requirements.
However, while this reform was being discussed, a popular initiative relating to different aspects of corporate governance (in particular, to the remuneration of directors and managers) was lodged. Consequently, the Parliament split the reform.
With respect to accounting law, the bill was adopted by the Parliament and no popular opposition was filed. The reform entered into force on 1 January 2013.
With respect to the popular initiative, the Parliament has drafted a counter-project whose outcome will depend on the result of the people's vote on the popular initiative (scheduled for 3 March 2013).
With respect to company law, the legislative process has been suspended and will be resumed when the results of the popular vote are known.
Two reforms are to be discussed by the Parliament in the coming months regarding whistleblowing:
A very general reform, which aims at including whistleblowing as a new justification in the CC, that is, it aims at protecting from any criminal sanction persons who internally or publicly reveal irregularities that have been discovered at their place of work.
A more specific reform, which aims at creating a communication office for bribery matters, to which whistleblowers can report all suspicions relating to possible bribery offences. Whistleblowers are assured that the reporting will be treated confidentially and that no sanction will be taken against them following the reporting.
Several members of the Parliament have asked the Federal Council to provide a number of reports examining the opportunity to amend corporate law in order to implement certain corporate governance or even corporate responsibility principles (in the form of a federal act). The process is still at a very early stage and it is not yet known whether one or more bills will be drafted following these consultations.
Main activities. The Register of Commerce aims at registering and disclosing to the public certain facts of legal relevance, in particular in relation to the authority to represent and bind a company. Although each Swiss Canton administers a Register of Commerce, all of them are overseen by the Register of Commerce Federal Office.
W www.bj.admin.ch/bj/fr/home/themen/wirtschaft/handelsregister.html
Main activities. The FINMA is an independent federal authority whose task is to supervise financial markets and ensure their effective functioning.
W www.finma.ch/e/pages/default.aspx
Main activities. As the leading Swiss stock exchange, SIX Swiss Exchange is in charge of the implementation of stock exchange regulations applicable to listed companies.
W www.six-swiss-exchange.com/index_en.html
Main activities. The FAOA is a public institution whose task is to grant the required licences to individuals and audit firms who offer audit services, and to oversee audit firms who audit public companies.
Description. Official website of the Swiss Confederation. Contains an up-to-date version of all federal acts and ordinances, some of which are available in English (English translation for guidance only).
W www.finma.ch/e/regulierung/gesetze/pages/default.aspx
Description. Official website of the Swiss Financial Market Supervisory Authority (FINMA). Contains all regulations issued by FINMA and associated relevant federal regulations in the financial markets area. English translations are available (for guidance only).
W www.six-exchange-regulation.com/regulation_en.html
Description. Official website of the SIX Swiss Exchange. Contains all regulations issued by SIX and associated relevant federal regulations in the stock exchange area. English translations are available (for guidance only).
W www.economiesuisse.ch/de/PDF%20Download%20Files/pospap_swiss-code_corp-govern_20080221_en.pdf
Description. Swiss Code of Best Practice for Corporate Governance 2002/2007 (SCBP) issued by Economiesuisse. Contains a set of non-binding recommendations.
T +41 22 704 3700
F +41 22 704 3777
E tavernier@taverniertschanz.com
W www.taverniertschanz.com
Qualified. Geneva Bar, 1975
Areas of practice. Corporate and commercial transactions; corporate finance and M&A; banking; private client and family matters.
Recent transactions. Edmond Tavernier sits on the board of directors of several major banks and various international companies and is a board-designated non-voting Swiss member of the Global Fund to fight AIDS, tuberculosis and malaria.
