Liability for Corporations' Obligations
Managers' Vote in Discharge Resolutions
Contractual Relationship Between a Corporation and its Bodies


Liability for Corporations' Obligations

Under Swiss law a corporation comes into existence as a legal entity only at the time of its entry in the Commercial Register (Article 643 of the Code of Obligations). To protect the interests of third parties, Article 645(1) of the Code of Obligations states that persons acting on behalf of the corporation prior to its entry in the Commercial Register are jointly and severally liable for their actions. However, these persons are released from any responsibility and the corporation is solely liable if such obligations have been entered into explicitly in the name of the corporation to be formed, and have been assumed by the corporation within a period of three months (Article 645(2) of the Code of Obligations).

In a decision delivered on December 13 2001(1) the Supreme Court considered whether persons acting in the name of a corporation are to be released from their responsibility according to Article 645(2) of the Code of Obligations not only where a new corporation is to be formed, but also where an existing corporation is willing to ratify its obligations. In the case at hand, the corporation which was willing to ratify its obligations had been acquired by the defendant and had changed its corporate name. However, the Supreme Court stated that third parties who have confidence in a corporation that is to be founded may not necessarily have the same confidence in an existing corporation. For this reason it decided that Article 645(2) will not apply analogously in cases where the legal entity already exists.

Managers' Vote in Discharge Resolutions

Article 695(1) of the Code of Obligations states that persons who have participated in any way in the management of a corporation are excluded from voting on a resolution concerning the discharge of the board of directors.

In a recent case a father had authorized his son, who was a manager of the corporation, to represent him at the general meeting of shareholders. As his father's representative, the son also voted on the discharge of the board of directors. On February 7 2002 the Supreme Court decided(2) that the son, as a manager of the corporation, was excluded from voting on the discharge of the board of directors, even though he had been authorized to represent another shareholder who did not participate in the management of the corporation.

Contractual Relationship Between a Corporation and its Bodies

An issue which is often the subject of discussion is the legal relationship between a corporation and its management and board of directors. While the Supreme Court has assumed in some cases that the relationship is ruled by employment law, in other cases it decided that the contractual relationship is similar to a mandate. If the person in question is a manager and not a member of the board of directors, the Supreme Court has generally assumed that employment law, rather than mandate law, is applicable.

The Supreme Court has confirmed in several cases that the legal relationship between a corporation and its bodies has both a contractual and a corporate aspect, which must be distinguished. While the general meeting of shareholders, in its function as a corporate body, is entitled at any time to remove the members of the board of directors, those persons may have claims for compensation under contract law. This is a result of the fact that the termination of the contract, if driven by employment law, follows different rules than the suspension of the functions of a corporate body.

A Supreme Court decision delivered on December 10 2001(3) concerned the dismissal of a manager of a corporation who was not a member of the board of directors. The Supreme Court held that employment law was applicable and so the termination had to be made in accordance with employment law.

Another issue which arose in this case was the authorization to give notice. The manager in question was given his notice by his superior alone, who only had authority to sign such instruments jointly. Therefore, the notice was given without authorization. However, the Supreme Court found that the notice was nonetheless valid because it was subsequently ratified by another manager, and under Swiss law this has the same effect as a prior or simultaneous authorization.


For further information on this topic please contact Markus Doerig or Istok Egeter at Badertscher Doerig Poledna by telephone (+41 1 266 20 66) or by fax (+41 1 266 60 70) or by email ([email protected] or [email protected]). The Badertscher Doerig Poledna website can be accessed at www.bdp.ch.


Endnotes

(1) BGE/ATG 128 III 137 ss.

(2) BGE/ATG 128 III 142 ss.

(3) BGE 128 III 129 ss.