In Switzerland, all persons entrusted with the management of a company can become liable. This civil liability of managing directors is regulated in article 754 of the Swiss Code of Obligations. The Code of Obligations is thus the most important source for the civil liability of managing directors.
The persons entrusted with the management are:
- the formal officers: persons who are elected to the body, i.e. the board of directors of a public limited company as well as the managing director of a private limited company;
- the material officers: persons to whom the management has been validly delegated (e.g. by statutes or organisational regulations), as well as;
- the de facto officers: persons who factually make decisions reserved for organs or are responsible for the actual management and, thus, have a decisive influence on the formation of the company's will.
For a managing director to be held liable under civil law, the following four conditions must be met cumulatively:
- existence of damage to the company, a shareholder, or a creditor;
- conduct in breach of duty by the responsible person (breach of duty of care): Conduct in breach of duty is any conduct that violates a duty of the responsible person laid down by law or in the articles of association. Omissions may also be in breach of duty if there is a duty to act. The degree of care required is that which a reasonable person would exercise in the same situation. Thus, an objective standard is applied in assessing diligence.
The Swiss Federal Supreme Court has recognised the Business Judgement Rule as a principle of Swiss company law. The essence of this rule is that the courts should exercise restraint in the subsequent assessment of business decisions, provided that the decision was reached in an impeccable decision-making process based on adequate information and free of conflicts of interest; - adequate causal link between the damage and the conduct of the responsible person;
- fault on the part of the responsible person: Anyone who has acted either intentionally or negligently is at fault. Whether a conduct was negligent, is also assessed according to an objective standard. Negligent conduct is deemed to have occurred if the executive body did not act in a manner that could be expected of a competent, prudent person in the specific position and situation. The person entrusted with the management has failed to exercise due care.
If several managing directors are responsible for a damage, they are jointly and severally liable. This is the case insofar as the damage is also personally attributable to them due to their own fault and the circumstances. The plaintiff can sue all participants and demand that the court determines the liability for compensation of each of them. Recourse among several participants is also determined by the court.
In situations where special expertise is required, the management is obliged to call in an expert. If they have complied with the requirements regarding careful selection, instruction and supervision, the managing directors act in accordance with the expertise of the experts and if damage nevertheless occurs, the managing directors are not liable for this.
In addition to the Code of Obligations, further sources on liability can be found in tax law, social security law and environmental law.