Statutory duties of the board of directors of a public limited company (AG – Aktiensgesellschaft)
According to art 716 Para. 2 OR (Code of Obligations), the board of directors is responsible for the management of a public limited company. The board is entitled to represent the company to the outside and has legally regulated, non-transferable and indefeasible duties (Art. 716a OR). Management can be delegated to a management board (Art. 716b OR).
Non-transferable statutory duties of the board of directors of a public limited company (Art. 716a OR):
- Overall management of the company
- Defining organisation
- Accounting, financial controlling & financial planning
- Appointment and dismissal of management and the appointed representatives
- Overall supervision of the management
- Preparation of the annual report, preparing for the AGM and implementation of AGM resolutions
- Notifying the judge in the event of excessive indebtedness
These duties are the responsibility of the board of directors and are non-transferable and indefeasible. They cannot be ceded to the AGM nor delegated to management. The board of directors, therefore, has a key role within a public limited company. Unlike the shareholders who have no fiduciary obligations, the board of directors must protect the interests of the company (Art. 717 OR).
Delegating management
Management can be delegated to third parties by the board of directors (Art. 716b OR). To do so:
- A provision in the articles of association must be agreed to by the AGM which includes the authorisation to delegate
- An organisational regulation is to be written by the board of directors and include the basic principles of delegation.
Management can be delegated to board members, i.e. a ‘Delegate of the Board’, or to third parties. If duties are delegated to third parties who are not members of the board of directors, a dual system is put into effect. Management (CEO, CFO, etc.) takes over operative management and the board of directors (chair of the board and board members) retain primarily supervisory functions and responsibility for the strategic direction of the company.
Which duties can be delegated?
The minimum content of the organisation regulation is defined in 716b OR. Accordingly, the organisation regulation must set out who the executive bodies are, the competences and duties for which they are responsible, and how reporting is regulated (Who has to report to whom about what? How often?). Detailed requirement specifications do not need to be drawn up. Generally, the board of directors delegates the implementation of strategic goals, operational management (everyday business), monitoring and control to the remaining members of management and to the CEO.
The organisation regulation can also govern other areas in addition to the minimum content. In practice, it also governs responsibility for convening management meetings, the frequency of meetings, decision-making, information and inspection rights and expenditure authorisations (e.g. the CFO may independently execute tasks up to CHF 500,000).
The non-transferable and indefeasible duties of the board of directors in accordance with Art. 716a OR may not be delegated on the basis of statutory authorisation.
Representation of a public limited company
Unless otherwise specified by the articles of association, every board member has individual signing authority. This can be altered for each board member, such as being restricted for individual people, or a requirement for a collective signature given in pairs can be imposed. All transactions will be able to be executed which ‘relate to the purpose of the company’ (Art. 718a Para. 1 OR).
For further information on the responsibilities and liability of the board of directors, see our blog.
