The new company law, which comes into force on January 1, 2023, brings many changes. In our current blog series, we present these in detail.
Resolutions of the Board of Directors (BoD) can now also be adopted in electronic form. The existing rules on written circular resolutions have been amended accordingly.
How does the Board of Directors pass resolutions?
In principle, the BoD should pass its resolutions in an in-person or virtual meeting. This is to ensure that the items on the agenda are dutifully examined and discussed. According to the so-called Business Judgment Rule, the BoD cannot generally be held liable if a decision is justifiable, is based on adequate information and is the result of a flawless decision-making process.
For practical reasons it is not always possible to call a meeting. In such cases, the existing law allows the use of a circular resolution, i.e. consenting in writing to a motion that has been put forward. Such a resolution is only valid if no member requests that it be debated orally. In the case of a circular resolution, the decision-making process is shortened and the information basis restricted as no consultation takes place. Based on the Business Judgment Rule, refraining from oral debate is therefore only appropriate if a decision is clear and a meeting - physical or virtual - is not feasible.
What form does the circular resolution take?
In circular resolutions votes are to be submitted in writing. Under Swiss law, "in-writing" means that the document containing the formulated proposal must be signed in manually and in person by the members of the BoD or signed with a qualified electronic signature. The old company law did not allow for approvals by e-mail. Nevertheless, some resolutions were already passed purely electronically under the old company law but this leads to legal lack of legal certainty as to their validity.
What will change under the New Company Law?
With the New Company Law entering into force on January 1, 2023, it will no longer be mandatory for circular resolutions to be in writing and a signature will no longer be required. Instead, resolutions may also be passed electronically by the BoD, subject to written provisions to the contrary (for example in the organizational rules). This means that all types of board resolutions are now covered by the wording of the law, which increases the scope for action and at the same time improves legal certainty.
In practice, therefore, the BoD will be able to pass its circular resolutions by e‑mail, messenger apps such as WhatsApp or other electronic means from January 1, 2023. A written signature is no longer required. The new regulation increases flexibility and could prove to be particularly advantageous in the case of urgent resolutions.
However, electronic resolutions will continue to be unsuitable when they need to be submitted as supporting documents to the Commercial Register. Such circular resolutions will still need to be signed in writing by all members of the BoD.
What are the risks of an electronic circular resolution?
The new flexibility presents opportunities, but also entails risks. While electronic resolutions will unequivocally be valid, from a practical point of view the question is whether the resolution will be capable of being proven at a later point of time:
- For example, on a messenger app, between the request and the consent, other messages might be sent in the same chat. These may not be in the same context or may modify the original text by adding conditions or amending it. This may make it unclear whether consent has been given at all or to what the consent specifically refers.
- E-mails have a relatively high evidential value because they are a common form of communication in business transactions and are familiar to the courts. Evidence might be more difficult with other electronic forms if their features are novel or unfamiliar and no court practice around them has yet been established. Often, other electronic forms are also difficult to export and archive. Consequently, in the case of certain electronic resolutions, it could be difficult to prove in the event of a dispute whether a circular resolution has been validly made.
Conclusion
The possibility of electronic resolutions facilitates the passing of circular resolutions. Due to the issue of evidentiary practicalities, generally it is advisable that electronic resolutions be adopted via e-mail.
As before, applications for resolutions by e-mail must also be carefully and clearly edited. In particular, they should be clearly recognizable as resolutions and contain the necessary information in the body of the email itself or in an attachment. The response or consent to the resolution should be brief, unambiguous, and contain a waiver of oral deliberation. In particular, the consent should not contain any questions or conditions regarding the resolution. If questions arise or if there is a desire for modification, ideally a meeting of the BoD should be called. If this is not possible, then a modified motion would have to be sent out, which would then have to be approved without reservation.
The BoD may determine the details of how resolutions are passed in the organizational rules. For example, it could restrict the electronic passing of resolutions to e-mails or require circular resolutions to be in the traditional written form.
Commercial register offices continue to require the written form for submissions.
For further questions, as well as for more in-depth advice, your contacts at VISCHER and the Corporate and Commercial Law Team will be happy to assist you.
Other articles in the series:
- New Corporate Law: New Swiss company law to come into force on 1 January 2023 (no. 1)
- New Corporate Law: General meeting under the new company law – what is changing? (no. 2)
- New Corporate Law: The capital band (no. 3)
- New Corporate Law: Loss of capital, over-indebtedness and (in)ability to pay (no. 4)
- New Corporate Law: Important resolutions (no. 5)
- New Corporate Law: Capital increase and capital reduction (no. 6)
- New Corporate Law: The (intended) acquisition of assets (no. 7)
- New Corporate Law: The offsetting contribution (no. 8)
- New Corporate Law: The Interim Dividend (no. 9)
- New Corporate Law: The Return of Benefits (no. 10)
- New Corporate Law: Share capital in foreign currency (no. 11)
- New Corporate Law: Simplified rules on reserves (no. 12)
- New Corporate Law: Representation of the shareholders in the new company law (no. 13)
- New Corporate Law: Relevant changes from a tax perspective (no. 14)
- New Corporate Law: Right to Information & Inspection and Special Investigation (no. 15)
- New Corporate Law: Arbitration Clause in the Articles of Association (no. 16)
- New Corporate Law: Simplification in Signing of Commercial Register Applications (no. 17)
- New Corporate Law: The Board of Directors (no. 18)
- New Corporate Law: Commercial Register Application by an Authorized Third Party (no. 20)
Authors: Dr. Benedict F. Christ, Dr. Carina Fröhli
