Business Judgement Rule applies in Switzerland
Gepostet am: Sep 18, 2012 8:47:5 AM
The Swiss Federal High Court expressly acknowledges the applicability of the Business Judgment Rule in Switzerland in his recent decision 4A_74/2012 of 18 June 2012 E. 5.1 (published by the end of last week)
The business judgment rule reflects inter alia the fiduciary duty and the duty of care. It was first established in the US. A test was construed[1] as a guideline for satisfaction of the business judgment rule. Directors in a business should:
act in good faith;
act in the best interests of the corporation;
act on an informed basis;
not be wasteful; and
not involve self-interest.
Under the business judgment rule, a US court “will not substitute its own notions of what is or is not sound business judgment”[2] if “the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company”[3]. Therefore, the US courts focus on the process by which a decision is reached, not necessarily the outcome.
Adhering to the formal criteria provided by the business judgment rule as applied by the US, German[4] and now ‑ as very recently decided ‑ the Swiss courts[5] significantly reduces liability risks.[6] The Swiss courts now do apply the business judgment rule and therefore refrain from replacing the BoD’s discretion with their own judgment, i.e. no examination of the corporate usefulness takes place.[7] However, boards must not only focus on formal and procedural requirements but also ensure that they comply with their non-transferable duties in substance.
In the decision 4A_74/2012, the Swiss Federal Court mainly deals with the issue of the parent company granting a loan to its apparently over-indebted subsidiary. The court decided on the responsibility of the chairman of the parent company and only mentioned the business judgment rule as an obiter dictum. You may find further information regarding the main issue of the decision in German in the Blog of N'Jus.
[1] This test was construed in the opinion for Grobow v. Perot, 539 A.2d 180 (Del. 1988).
[2] Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984).
[3] Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971).
[4] In September 2005, the German legislator enacted an amendment to its corporate law, which introduced the business judgment rule in Germany according to the American model (cf. Gesetz zur Unternehmensintegrität und Modernisierung des Anfechtungsrechts (UMAG) vom 22. September 2005, BGBl. I 2802 ff.).
[5] Urteil 4A_74/2012 vom 18. Juni 2012 E. 5.1 (veröffentlicht am 14. September 2012).
[6] Rolf Watter and Katja Roth Pellanda, Executive Risks: A Boardroom Guide 2010/11, Legal developments for directors and officers in Switzerland, 162.
[7] „(…) Das Bundesgericht anerkennt mit der herrschenden Lehre, dass die Gerichte sich bei der nachträglichen Beurteilung von Geschäftsentscheiden Zurückhaltung aufzuerlegen haben, die in einem einwandfreien, auf einer angemessenen Informationsbasis beruhenden und von Interessenkonflikten freien Entscheidprozess zustande gekommen sind (…).“ Urteil des Bundesgerichts 4A_74/2012 vom 18. Juni 2012 E. 5.1.