Responsibilities of the board (supervisory)

Board structure

Is the predominant board structure for listed companies best categorised as one-tier or two-tier?

In listed companies the predominant board structure is a two-tier structure, as the board normally delegates some of its duties to the management.

Board’s legal responsibilities

What are the board’s primary legal responsibilities?

The board is responsible for managing the business of the company, in accordance with its duty of care and fiduciary duty, to the extent that tasks have not been delegated to the management. In general, the board may adopt decisions on all matters that are not explicitly reserved to the shareholders’ meeting by law, by the articles of association or delegated to the management based on organisational regulations. The board often delegates a major part of the transferable responsibilities to a management. In such a case, however, the board remains liable for the due selection, instruction and supervision of the parties to whom it has delegated responsibilities.

Board obligees

Whom does the board represent and to whom do directors owe legal duties?

The board represents the company, and directors are obliged to act in the company’s best interest. The company’s purpose is stated in its articles of association. There is no clear view in legal literature or court practice as to which interests must be considered by the directors, in particular whether the focus must be on shareholders’ interests or whether and to what extent other stakeholders’ interests may have to be taken into account.

The Swiss Code of Best Practice for Corporate Governance (SCBP) is focused on safeguarding ‘sustainable company interests’, which implies a time component (long-term perspective) often taken into account by boards in their decision-making process.

Enforcement action against directors

Can an enforcement action against directors be brought by, or on behalf of, those to whom duties are owed? Is there a business judgement rule?

Any director and any other persons engaged in, and with a significant influence on, the management or the liquidation of a company may, irrespective of whether or not formally appointed as directors, liquidators or any other similar function, be held liable for any intentional or negligent breach of their duties.

Whenever shareholders or creditors suffer direct damage (as opposed to indirect damage resulting from direct damage to the company itself), they are entitled to bring action for compensation of the damage. With respect to damage to the company, the company as well as the shareholders and, in the case of an insolvency only and subject further to the insolvency administrators not having taken legal action, the creditors may bring action, whereby both the shareholders and the creditors may only ask for the compensation of the company’s damage (ie, payment to the company).

It is established case law that decisions of the board in compliance with the business judgement rule do not constitute a breach of duty, even if these decisions prove to be wrong retrospectively. To be compliant with the business judgement rule the board must apply the following principles when making business decisions:

  • an unbiased and independent board and no conflicts of interest;
  • a decision-making process based on appropriate information;
  • consideration of alternative scenarios; and
  • test of justifiability.
Care and prudence

Do the duties of directors include a care or prudence element?

Yes, the directors must act in compliance with their duty of care and loyalty.  

Board member duties

To what extent do the duties of individual members of the board differ?

The duties of the individual members of the board do not differ as they are defined by objective criteria. In particular, the duty of care and loyalty requires the board to act in the same way as a diligent and competent member would have acted in the same circumstances. Compliance with these duties is assessed by reference to an objective standard of diligence, unless a member of the board is an expert in a certain field. In this case, the standard applicable to this director will be assessed by reference to a diligent and competent director with the same level of expertise in the relevant field.

Delegation of board responsibilities

To what extent can the board delegate responsibilities to management, a board committee or board members, or other persons?

Except for its non-transferable and inalienable duties, the board may delegate its responsibilities to third parties, individual board members or committees, or to the management, in each case in accordance with organisational regulations issued by the board. The board, however, remains liable for the due selection, instruction and supervision of the parties to whom it has delegated responsibilities.

Non-executive and independent directors

Is there a minimum number of ‘non-executive’ or ‘independent’ directors required by law, regulation or listing requirement? If so, what is the definition of ‘non-executive’ and ‘independent’ directors and how do their responsibilities differ from executive directors?

No. Nevertheless, for listed companies, the SIX Swiss Exchange Directive on information relating to corporate governance (DCG) contains certain disclosure obligations for non-executive members of the board, and the SCBP recommends that the majority of the board should consist of independent members, meaning non-executive members who have either never, or at least not for the past three years, been members of the management, and who have no (or comparatively minor) business relations with the company. In addition, proxy adviser guidelines often contain specific requirements regarding the independence of members of the board, typically based on years of service, the relationship with significant shareholders and commercial arrangements with the company, among other things.

Board size and composition

How is the size of the board determined? Are there minimum and maximum numbers of seats on the board? Who is authorised to make appointments to fill vacancies on the board or newly created directorships? Are there criteria that individual directors or the board as a whole must fulfil? Are there any disclosure requirements relating to board composition?

The board must be composed of at least one member; there is no maximum number specified by law or any regulations, but the articles of association may provide for these limits. The size is determined by the shareholders’ meeting electing the board members and filling vacancies. The SCBP recommends that the size of the board should match the needs of the individual company and that the board should be composed of members of both genders.

Only natural persons may be elected as board members, and there must be at least one Swiss resident – not necessarily also a Swiss citizen – authorised to legally bind the company (with individual signing authority), but this person does not need to be a board member. There are currently no gender diversity requirements or age limits in force.

As regards disclosure, the names, functions and residence of each board member are publicly available in the commercial register. The DCG requires listed companies to disclose information on the board composition, including details on the organisation of the board and the compensation of its members.

Board leadership

Is there any law, regulation, listing requirement or practice that requires the separation of the functions of board chair and CEO? If flexibility on board leadership is allowed, what is generally recognised as best practice and what is the common practice?

The separation of the two functions of board chair and CEO is generally considered as best practice, even though in many SMEs and even in a small minority of listed companies, the board chair and CEO are the same person.

Board committees

What board committees are mandatory? What board committees are allowed? Are there mandatory requirements for committee composition?

Non-listed companies are not required to establish any board committees. Listed companies are required by the Ordinance against Excessive Compensation in Listed Companies to establish a compensation committee, whose members are elected by the shareholders’ meeting. There are no restrictions with respect to the establishment of (additional) committees.

The SCBP recommends establishing further committees, such as a nomination committee. Listed companies and larger non-listed companies often establish a compensation (and nomination) committee, an audit committee, and some also a strategy committee.

Board meetings

Is a minimum or set number of board meetings per year required by law, regulation or listing requirement?

Unless the articles of association provide otherwise, only one board meeting per year is required (to prepare for the annual shareholders’ meeting and to resolve on the agenda and the respective motions). The SCBP, however, recommends a minimum of four board meetings per year.

Board practices

Is disclosure of board practices required by law, regulation or listing requirement?

Non-listed companies are not required to make any such disclosure. Listed companies are required by the DCG to disclose certain board practices, in particular the allocation of tasks within the board, the members list, tasks and areas of responsibility for each board committee and the working methods of the board and its committees.

Board and director evaluations

Is there any law, regulation, listing requirement or practice that requires evaluation of the board, its committees or individual directors? How regularly are such evaluations conducted and by whom? What do companies disclose in relation to such evaluations?

No, there is no formal legal requirement to conduct evaluations. However, boards of larger non-listed companies and of listed companies regularly conduct an annual self-assessment. The SCBP recommends that the board should self-evaluate its own performance and that of its committees annually. Listed companies that conduct these evaluations may disclose this in their annual reports but are not obliged to make any disclosure (in particular of the results of the evaluation).

Law stated date

Correct on

Give the date on which the information above is accurate.

1 April 2020