What are the statutory duties of the Board of Directors of a public limited company?

Pursuant to Art. 716 para. 2 CO, the Board of Directors is responsible for the management of a public limited company. The Board of Directors is also authorized to represent the company externally and has legally regulated non-transferable and irrevocable duties (Art. 716a CO). The management of the company can be delegated to an executive board (Art. 716b CO).

Non-transferable statutory duties of the Board of Directors of a company limited by shares (Art. 716a CO):

• Overall management of the company
  
• Determination of the organization
  
• Accounting, financial control & financial planning
  
• Appointment and dismissal of the management and the appointed representatives
  
• Overall supervision of the management
  
• Preparation of the annual report, preparation of the AGM and implementation of AGM resolutions
  
• Notification of the judge in the event of over-indebtedness
  

These duties are the responsibility of the Board of Directors and are non-transferable and irrevocable. They can therefore neither be assigned to the AGM nor delegated to the Executive Board. The Board of Directors therefore has a central position within the AG. However, unlike the shareholders, who have no fiduciary duties, the Board of Directors must safeguard the interests of the company (Art. 717 CO).

Delegation of management

The Board of Directors can delegate the management of the company to third parties (Art. 716b CO). This requires

• a provision in the Articles of Association that is adopted by the AGM and contains an authorization for delegation,
  
• organizational regulations, which are written by the Board of Directors and contain the principles of delegation.
  

Management may be delegated to members of the Board of Directors (so-called “delegates of the Board of Directors”) or to third parties. If the delegation is made to third parties who are not members of the Board of Directors, this is referred to as a dual system. The Executive Board (CEO, CFO, etc.) takes over the operational management of the company, while the Board of Directors (Chairman of the Board of Directors and members of the Board of Directors) retains mainly supervisory functions and the strategic direction of the company.

Which tasks can be delegated?

The minimum content of the organizational regulations is described in Art. 716b CO. Accordingly, the organizational regulations must specify who the executive bodies are, what powers and duties they have and how reporting is regulated (who must report to whom, how often and on what?). There is no need to draw up a detailed list of duties. As a rule, the Board of Directors delegates the implementation of strategic objectives, operational management (day-to-day business) and the supervision and control of the other members of the Executive Board to the CEO.

In addition to the minimum content, the organizational regulations can also regulate other areas. In practice, they often also regulate the authority to convene management meetings, the frequency of meetings, the passing of resolutions, rights of inspection and information and spending authorizations (e.g. CFO may independently spend up to CHF 500,000).

The non-transferable and inalienable duties of the Board of Directors pursuant to Art. 716a CO may also not be delegated on the basis of an authorization in the Articles of Association.

Representation of the company limited by shares

Unless otherwise stipulated in the Articles of Association, each member of the Board of Directors has individual signing authority. This can be modified for each member of the Board of Directors and, for example, limited to individual persons or a collective signature by two persons is provided for. All transactions “which the purpose of the company may entail” can be carried out (Art. 718a para. 1 CO).

Further information on the responsibility and liability of the board of directors is available in our blog.