Article 12 - Election, Constitution
The Board of Directors consists of one or several members(see endnotes 57,58). The members of the Board of Directors shall, as a rule, be elected by the ordinary Shareholders Meeting in each case for a term of office of one year(see endnote 59). The term of office of a member of the Board of Directors shall, subject to prior resignation and removal, expire upon the day of the next ordinary Shareholders Meeting(see endnote 60). Newly-appointed members shall complete the term of office of their predecessors.
The members of the Board of Directors may be re-elected without limitation.
The Board of Directors shall constitute itself. It appoints its Chairman(see endnote 61) and a Secretary who need not be a member of the Board of Directors.
Article 13 - Ultimate Direction, Delegation
The Board of Directors is entrusted with the ultimate direction of the Corporation as well as the supervision of the management. It represents the Corporation towards third parties and attends to all matters which are not delegated to or reserved for another corporate body of the Corporation by law, the Articles of Association or the by-laws.
The Board of Directors may entrust the management and the representation(see endnote 62) of the Corporation wholly or in part to one or several persons, members of the Board of Directors or third parties who need not be shareholders of the Corporation(see endnote 63). The Board of Directors shall enact the organization by-laws and arrange for the appropriate contractual relationships(see endnote 64).
Article 14 - Duties
The Board of Directors has the following non-transferable and irrevocable duties(see endnote 65):
- to ultimately direct(see endnote 66) the Corporation and issue the necessary directives;
- to determine the organization(see endnote 67);
- to organize the accounting, the financial control, as well as the financial planning(see endnote 68);
- to appoint and recall the persons entrusted with the management and representation(see endnote 69) of the Corporation and to grant signatory power(see endnote 70);
- to ultimately supervise the persons entrusted with the management, in particular with respect to compliance with the law and with the Articles of Association, by-laws and directives;
- to prepare the business report(see endnote 71), as well as the Shareholders Meeting and to implement the latter's resolutions;
- to inform the judge in the event of overindebtedness;
- to pass resolutions regarding the subsequent payment of capital with respect to non-fully paid-in shares;
- to pass resolutions confirming increases in share capital and regarding the amendments to the Articles of Association entailed thereby;
- to examine the professional qualifications of the specially qualified Auditors in the cases in which the law foresees the use of such Auditors(see endnote 72).
Article 15 - Organization, Minutes
The organization of the meetings(see endnote 73), the presence quorum and the passing of resolutions of the Board of Directors shall be in compliance with the organization by-laws(see endnotes 74,75).
The Chairman shall have the casting vote(see endnote 76).
Minutes shall be kept of the deliberations and resolutions of the Board of Directors. The minutes shall be signed by the Chairman and the Secretary of the Board of Directors(see endnote 77).
Article 16 - Compensation
The members of the Board of Directors are entitled to reimbursement of their expenses incurred in the interest of the Corporation and to compensation corresponding to their activities, as determined by the Board of Directors(see endnote 78).
Endnotes
57 Status as a shareholder continues to be a prerequisite for the assumption of office as a member of the Board of Directors pursuant to non amended art. 707 para. 2 CO (qualifying shares). The legal requirement that members of the Board of Directors deposit shares has been deleted. Furthermore, the majority of the members of the Board of Directors must be Swiss citizens residing in Switzerland (art. 708 para 1 CO). Provisions in the Articles of Association foreseeing the replacement of an absent member of the Board of Directors by a substitute are admissible.
58 Art. 709 CO must be taken into consideration: should there be several categories of shares with respect to the voting rights (privileged shares) or to the pecuniary rights, each category of shares must be ensured of the election of at least one representative in the Board of Directors by a provision in the Articles of Association.
59 Should the Articles of Association not foresee a provision to the contrary, a term of office lasts for three years. The maximum term of office which may be foreseen is of six years (art. 710 para. 1 CO).
60 If the term of office is to be for more than one year, then the following wording is recommended: "The term of office of the members of the Board of Directors continues until the Shareholders Meeting has elected new members or confirmed the election of current members.".
61 The election of the Chairman can be entrusted to the Shareholders Meeting by a corresponding provision in the Articles of Association. Contrarily, this is not possible for other offices (cf. art. 712 para. 2 CO and hereinabove footnote 27).
62 See art. 718 para. 2 CO.
63 Without such a clause in the Articles of Association, a delegation of the management of the Corporation to the Management is not admissible (art. 716b para. 1 CO).
64 Organization by-laws are always required when the managerial tasks of the Board of Directors are to be delegated in whole or in part (see art. 716b CO). In addition, the legal relationship between the Corporation and the single members of the Board of Directors or third parties to whom authorities are to be transferred are to be regulated by contract.
65 These tasks must imperatively be carried out by the Board of Directors. Not only a delegation to the management but also basically a "delegation" to the Shareholders Meeting is excluded.
66 Ultimate direction means the determination of the corporate policy, the setting of priorities, the choice of the means to reach goals as well as the supervision of the management with respect thereto.
67 The organization includes the determination of the position and tasks of the single departments, the decision making, the procedure to be followed as well as the form and content of reporting.
68 To the extent that financial planning is necessary to the management of the Corporation (art. 716a para. 1 sec. 3 CO). At least simple financial planning will only seldom be dispensable.
69 Pursuant to the new non-compulsory legal provisions, each member of the Board of Directors is granted the authority to represent the Corporation individually (art. 718 para. 1 CO). Limitations to this principle, in particular, the granting of collective signatory rights by two are to be foreseen in the organization by-laws.
70 It is admissable and the commercial register must record provisions in the articles of Association which limit signatory rights such as, for example regarding who can sign collectively with whom (see art. 641 sec. 8 CO).
71 The business report includes on the one hand the preparation of the yearly accounts with the profit and loss statement, balance sheet and the annex (figure part) and, on the other hand, the drafting of the yearly report (verbal part).
72 With respect thereto, see arts. 727b para. 1, 731a para. 1, 732 para. 2, 745 para. 3, 653f para. 1 and 653i para. 1 CO as well as the Ordinance on the Professional Qualifications of Specially Qualified Auditors dated June 15, 1992 (SR 211.302), in particular art. 3 para. 1 thereof.
73 The organization of the meetings includes in particular the determining of the frequency of the meetings, the convening of such meetings and the preparation of the agenda.
74 Although under the old corporation law, it was usual to regulate these internal issues regarding the Board of Directors directly in the Articles of Association, in view of the principle of equality of the corporate bodies which is clearly implanted in the new law (see beginning of art. 716a CO) it now only appears appropriate to regulate these issues directly in the organization by-laws (regarding the contents of the organization by-laws: Peter Forstmoser, Organisation und Organisationsreglement nach neuem Aktienrecht, Z?rich 1992, Bd. 2 der Schriften zum neuen Aktienrecht, p. 45-62).
75 This provision only has a declarative value. Pursuant to non-compulsory legislation, the Board of Directors passes its resolutions upon the majority of the votes cast and can pass resolutions by means of circulation as long as no member requires an oral discussion.
76 See footnote 53. A withdrawal of the casting vote in the Articles of Association can be recommended for corporations where the shares are held in equal amounts and where a parity situation should exist in the Board of Directors (for example 50:50 joint ventures).
77 Art. 713 para. 3 CO foresees that the minutes of the meetings of the Board of Directors must be signed by the Chairman and by a Secretary. Often the Secretary's duties include the entire administration of the Board of Directors further to the taking of the minutes. With respect to the Shareholder's Meeting (see art. 702) the law also foresees a Secretary; in this case, the Secretary can be the one of the Board of Directors or another Secretary.
78 The compensation is to be charged against the profit and loss statement and is usually independent from the result, contrarily to the bonus payments pursuant to art. 677 CO, which constitute an allocation of profits and is therefore subject to an economic double taxation. Due to such tax consequences and the publicity such bonus payments are no longer common.
A short provision in the Articles of Association regarding bonus payments (see art. 627 sec. 2 CO; optionally necessary content of the Articles of Association) could read as follows:
"The granting of bonus payments to the members of the Board of Directors is only admissible within the limits of art. 677 CO."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.