There are three bodies in a Swiss corporation, namely: the general meeting of shareholders (the supreme body), the board of directors and the auditors.
The general meeting of shareholders is the supreme authority of the company and is composed of all shareholders. There are two types of meetings:
- Ordinary general meeting. This is held annually within six months after the close of the business year;
- Extraordinary general meeting, which is called as often as considered necessary.
The general meeting of shareholders has the right to adopt and amend the articles, to appoint directors and auditors, to approve the financial statements and the directors’ report, to ratify certain decisions of the Board, and, in general, to make all important decisions which are not delegated to any other body. The shareholders must also approve the proposal of the Board relative to the distribution of annual profits. A general meeting is called by the board or, if it fails in its duties, by the auditors. One or more shareholders, representing together at least 10 % of the share capital, may at any time request the calling of an extraordinary shareholders’ meeting. This must be done in writing, indicating the purpose of the meeting. In general, a simple majority of votes represented at the general meeting is sufficient to pass a resolution and hold elections. However, certain decisions require a vote of two thirds of the votes represented and the absolute majority of the· par value of the shares represented (such as change of corporate purpose, extension of scope of business, distribution of shares with privileged voting rights etc.).
Shareholders cannot be deprived of their acquired rights without their consent. The term acquired rights includes the right to vote, to dividends, to a share of the liquidation proceeds and to receive sufficient information on the financial condition of the company. The Swiss Code distinguishes two kinds of shareholders rights: financial interests and personal membership rights.
Each shareholder has the right to a proportionate share of the profits distributed. Dividends may only be paid out of net profits or out of reserves specially created for this purpose. There is no interest payable on the ordinary share capital and a company may not declare interim dividends out of current year profits. Dividends can only be declared by the general meeting of shareholders and after attribution to the legal reserve. A share of the net profits may be paid to members of the board of directors if:
- the articles specifically provide for such payments,
- the allocations to the legal reserve fund have been made and,
- a dividend of at least five percent has been paid to the shareholders.
Unless otherwise stated in the articles or in the resolution for the increase in share capital, each shareholder has an option to subscribe to new shares in the same proportion that his original holding bears to the total shares issued.
Each shareholder is entitled to a proportionate share of the proceeds of liquidation unless the articles of incorporation provide otherwise. The proceeds are calculated in proportion to the amounts paid in on the share capital.
Most personal membership rights are acquired rights which means that even with the general meeting’s consent, the shareholder cannot be deprived thereof. These include the following:
- Shareholders exercise their rights at the general meeting of shareholders. Every shareholder may attend the meeting in person or be represented by his proxy. A holder of bearer shares is considered authorized to attend if he presents the share. On the other hand, registered shares can only be represented if a written proxy is produced.
- Voting rights.
- Shareholders are entitled to review the financial statements, which must be available for inspection at the address of the company not later than 20 day prior to the annual general meeting. Any shareholder may request a copy to be sent to him before the meeting.
Board of Directors
The company is managed by the board composed of one or more individual directors who must be shareholders. A majority of board members must be Swiss citizens residing in Switzerland. If the board consists of a single member, he or she must be a Swiss citizen residing in Switzerland. The directors are elected at the general meeting for a period fixed by the articles (maximum six years). The directors can however be re-elected indefinitely.
The articles may require that during their term of office they must deposit a certain number of shares at the corporation’s registered domicile. This is designed to protect the corporation against damages that directors may cause in the fulfilment of their duties. The board can delegate part of its authority to either an executive committee or to individual directors, to officers or to agents. At least one director must have power and authority to represent the company. The board designates the individuals authorized to represent the company vis-a-vis third parties and determines the details concerning the signatory powers. The company is unrestricted in the selection of its executive personnel, such as managers and officers, although managers and employees of foreign nationality require a permit to take up residence and employment in Switzerland.
The board is responsible for the preparation of the general meeting. It gives the necessary instructions to the management for the proper conduct of the company’s business and supervises those authorized to act on behalf of the company. It is the primary responsibility of the board, although generally delegated to management, to keep the accounting records and to prepare the annual financial statements. Furthermore, the board must submit a written annual report on the company’s financial position and the results of its activities to the general meeting of shareholders.
The general meeting of shareholders elects one or more independent auditors who may be individuals or legal entities. Auditors must be professionally qualified to fulfil their duties. At least one auditor must have his domicile, registered office, or a registered branch in Switzerland. The auditors may not serve as directors nor be otherwise employed by the company, nor may they assume managerial functions for the company. Auditors may be elected for a maximum period of three years. Re-election is possible.
Auditors must have special professional qualifications if the audited entity:
- has outstanding bond issues;
- has shares listed on a Swiss stock exchange;
- exceeds two of the following parameters in two consecutive years:
- Balance sheet total: CHF 20’000’000
- Revenues: CHF 40’000’000
- Average number of employees: 200
The auditors must report on whether the accounting records and the financial statements, as well as the proposal concerning the appropriation of the available profit, comply with the law and the articles of incorporation. If the auditors, in the course of their examination, find violations either of law or of the articles, they report this in writing to the board of directors and, in important cases, to the general meeting of shareholders. In the event of obvious over-indebtedness, the auditors must notify the judge if the board fails to do so. Auditors are liable to the shareholders and creditors for damage caused by intentional or negligent failure to perform their duties. The auditors are required to attend the general meeting of shareholders.