Switzerland Update: New Stock Corporation Law – The Circular Resolution of the Board of Directors

Resolutions of the Board of Directors can now also be taken in electronic form. The existing rules on written circular resolutions have been amended accordingly.

How does the Board of Directors take decisions?

In principle, resolutions of the Board of Directors should be taken at a meeting. This is intended to ensure a dutiful examination and consultation of the subjects of negotiation. Normally, according to the so-called Business Judgment Rule, the Board of Directors is not liable if a decision is justifiable, is based on an appropriate information basis and the decision is based on a flawless decision-making process.

Sometimes, for practical reasons, it is not possible to hold a session. In this case, the previous law also allows the circular resolution, i.e. the written consent to a submitted application. Such a decision is valid only if no member requests oral deliberation. In the case of circular resolutions, the decision-making process is shortened and the information base is restricted due to a lack of advice. Due to the Business Judgment Rule, oral consultation should therefore only be dispensed with if a decision is clear and a meeting – physical or virtual – is not possible.

What form does the circular resolution take?

Voting in the circular resolution must be in writing. Under Swiss law, written means that the document with the formulated application must be signed by the members of the Board of Directors themselves or provided with a qualified electronic signature. Approval by e-mail is therefore not provided for under the old stock corporation law. Nevertheless, some resolutions were already passed purely electronically under the old stock corporation law. However, this leads to legal uncertainty because its validity is uncertain.

What will change under the new stock corporation law?

The written form for circular resolutions is no longer mandatory. The Management Board may also take decisions electronically from 1 January 2023. A signature is expressly no longer required for such resolutions. We reserve the right to make a different written determination by the Board of Directors (e.g. in the Organisational Regulations) which restricts this possibility. This means that all types of decision-making by the Board of Directors now result from the text of the law, which increases the scope for action and at the same time improves legal certainty.

In practice, from 1 January 2023, the Board of Directors will be able to pass circular resolutions by e-mail, messenger apps such as WhatsApp or other electronic means. A written signature is no longer required. The new arrangement increases flexibility and can be particularly advantageous in the event of urgent decision-making.

Electronic resolutions are still unsuitable for resolutions that have to be submitted to the commercial register as supporting documents. Such circular resolutions must continue to be signed in writing by all boards of directors.

What are the risks of an electronic circular resolution?

The new flexibility is an opportunity, but it also entails risks: electronic decisions are valid. The practical question, however, is whether the decision can be proven later.

• For example, with a messenger app, further messages could be sent between the request and the consent in the same chat. These may not be related or modify the original application by adding or modifying conditions. Thus, it may be unclear whether consent exists at all or what the consent refers to.
• E-mails now have a relatively high evidential value because they are common in business transactions and are familiar to the courts. Proof could be more difficult with other electronic forms if their features are novel or unfamiliar and there is no court practice. Often other electronic forms are also difficult to export and archive. Consequently, in the case of certain electronic decisions, it may be difficult to prove whether a circular decision has been taken in the event of a dispute.

Recommendation

Electronic decision-making facilitates circular resolutions. Due to the practical questions of evidence, it is advisable to take electronic decisions by e-mail.

As before, applications for decisions by e-mail must also be carefully and unambiguously edited. In particular, these should be clearly recognisable as resolutions and contain the necessary information basis in the text or as a supplement. The reply or approval of the decision must be short and unambiguous and must not contain oral consultation. In particular, consent should not contain any questions or conditions relating to the decision. If questions arise or if there is a desire for modification, an oral consultation should ideally take place. If this is not possible, then a new modified application would have to be sent, which would then have to be approved without reservation.

The Board of Directors may regulate details of resolutions in the Organisational Regulations. There, for example, he can restrict electronic decision-making to e-mails or restrict circular resolution to the traditional written form.

When submitting documents relating to commercial register applications, commercial register offices continue to require the written form.

By Vischer, Switzerland, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact switzerland@transatlanticlaw.com

Disclaimer: Transatlantic Law International Limited is a UK registered limited liability company providing international business and legal solutions through its own resources and the expertise of over 105 affiliated independent law firms in over 95 countries worldwide. This article is for background information only and provided in the context of the applicable law when published and does not constitute legal advice and cannot be relied on as such for any matter. Legal advice may be provided subject to the retention of Transatlantic Law International Limited’s services and its governing terms and conditions of service. Transatlantic Law International Limited, based at 42 Brook Street, London W1K 5DB, United Kingdom, is registered with Companies House, Reg Nr. 361484, with its registered address at 83 Cambridge Street, London SW1V 4PS, United Kingdom.