Categories: Corporate and commercial, Mergers & Acquisitions, Civil Law Notaries, Restructuring & Insolvency
The new company law, which comes into force on 1 January 2023, brings many changes. In our current blog series, we present these in detail.
Return of benefits
The previous company law already provided the company and its shareholders with the right to sue for the return of unjustified dividends, royalties, other profit shares, interests and other benefits paid by the company.
However, the circle of possible defendants is expanded in the new company law and the requirements for this action are partially lowered (Art. 678 para. 1 revCO), resulting in an overall increase in legal protection.
In addition to shareholders and members of the board of directors as well as persons closely associated with them, the action can now also be directed against individuals involved in the management and members of the advisory board as well as individuals closely associated with them. This extension is intended to also cover de facto executive bodies and to prevent circumvention of the obligation to return benefits.
The catalog of reimbursable benefits has also been revised. In addition to dividends, royalties, other profit shares and interests, remuneration and statutory capital and retained earnings are now also included in the list of examples, but the generic term 'other benefits' has been retained.
However, the prerequisite for a successful claim remains that the corresponding benefits were unjustifiably received.
A distribution is unjustified, for example, if the profit share was paid in violation of the law or the articles of association. In the foreground is a violation of the material requirements on distributions (i.e. capital protection regulations). However, an unjustified distribution also exists in the event of a violation of formal requirements, e.g. if the profit withdrawal is not resolved by the mandatory shareholders' meeting or without an audit report or financial statements approved by the shareholders' meeting. Although interim dividends will be permitted by law in the future, they will of course be unjustified if their requirements are not met. For further information on the subject of interim dividends see our blog of September 19, 2022.
Bad faith on the part of the recipient is no longer required, which in practice had been difficult to prove, since it is an internal, subjective fact. However, during the revision of the law, it was decided not to give the recipient the possibility to escape restitution by proving good faith at the time of receipt.
Refund in the case of disproportion between performance and consideration
A refund can also be claimed insofar as the company acquires assets from the group of individuals mentioned above or concludes other legal transactions with them, and there is an obvious disproportion between performance and consideration (Art. 678 para. 2 revCO; so-called hidden distribution of profits). In contrast to the basic case, this involves an exchange of performance and benefits.
In principle, the agreed legal transaction remains in force. Only that part of the consideration which is manifestly disproportionate to the performance rendered must be refunded.
Under the previous company law, a claim for reimbursement existed only if the company's performance was not only manifestly disproportionate to the consideration, but also manifestly disproportionate to the company's economic situation. Under the revised company law the economic situation of the company is no longer relevant. Even a strong economic situation of the company can therefore never justify an obvious disproportion between performance and consideration at the expense of the company.
The acquisition of assets was not mentioned in the previous Art. 678 CO. Its introduction in Art. 678 para. 2 CO is intended to clearly emphasize that an obviously non-arm's length acquisition to the detriment of the company continues to be inadmissible, even if the statutory provisions on the (intended) acquisition of assets in kind are repealed. On the topic of the (intended) acquisition of assets, see also our blog of August 10, 2022.
Apart from the newly covered agreements on the acquisition of assets, other agreements such as rental or leasing agreements between a shareholder and the company as well as employment agreements between members of the management and the company remain covered by Art. 678 para. 2 revCO.
Discontinuation of enrichment in good faith
However, in all the cases described above, a return of benefits cannot be claimed to the extent that the recipient is no longer enriched at the time of the restitution, unless he/she intentionally renounced enrichment and was not in good faith in doing so or nevertheless had to expect restitution (Art. 678 para. 3 in conjunction with Art. 64 revCO).
Right to sue
Both the company and each shareholder are entitled to bring an action. In all cases, however, the refund must be paid to the company (Art. 678 para. 4 revCO).
Important under the new provisions is also that the shareholders' meeting may decide that the company must bring an action for restitution. This enables shareholders to initiate an action for payment to the company without having to bear the direct risk of legal costs themselves. In order to avoid possible conflicts of interest, the shareholders may entrust the conduct of the proceedings to a representative instead of the board of directors (Art. 678 para. 5 revCO).
In order to establish the facts, shareholders may also exercise their right to receive information and request a special investigation (Art. 697 ff. revCO).
In the event of bankruptcy, the bankruptcy administration is entitled to assert the claims for reimbursement. If the bankruptcy administration waives the assertion of these claims, the creditors may demand to assignment these claims. Otherwise, each shareholder is entitled to file an action (Art. 678 para. 6 in conjunction with Art. 757 revCO and Art. 260 DEBA).
The limitation period
Whereas the obligation to refund previously became time-barred five years after receipt of the payment, this obligation now becomes time-barred three years after the company or the shareholder became aware of it, but in any case ten years after the claim arose. However, during the proceedings for ordering a special investigation and its implementation, the statute of limitations is suspended. If the recipient has committed a criminal offense through his or her conduct, the claim for restitution shall become statute-barred at the earliest on the applicable date under the statute of limitations for criminal law prosecutions (Art. 678a revCO).
If you have any questions, please do not hesitate to contact our team.
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: 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 Company Law: Circular Resolutions of the Board of Directors (no. 19)
- New Corporate Law: Commercial Register Application by an Authorized Third Party (no. 20)
Authors: Thomas Steiner-Krizaj, Peter Kühn, Lukas Züst
