The case

The new standards in the revised Company Law (Art. 717a CO) as well as the revised Swiss Code of Best Practice provide clear guidelines of how to deal with conflicts of interest of members of the Board of Directors and the Executive Board. Still, in practice there are a number of challenges and important aspects that companies have to consider.

Source: Europa Institute at the University of Zurich

The commentary

The revised company law does not signify a fundamental change in the legal situation, but rather raises awareness of how to deal with conflicts of interest. Directors have already been obliged to take appropriate measures in the event of conflicts of interest by their duty of care and loyalty. What is new, however, is the explicit obligation to disclose and the increased emphasis on the responsibility of the board of directors to actively handle this information.

In practice, companies must take active steps to comply with the new standards. These include:

Developing rules and regulations: Companies should establish clear rules for dealing with conflicts of interest, for example as part of organisational regulations or separate regulations for handling conflicts of interest. These rules must be specific enough to recognise and deal with potential conflicts of interest at an early stage.

Minutes: At meetings of the Board of Directors, the absence of a potential conflict of interest should be explicitly recorded in the minutes in order to ensure transparency and traceability. This practice helps to counteract subsequent accusations and creates transparency.

Training and awareness-raising: Regular training for members of the Board of Directors and the Executive Board is crucial in order to ensure that everyone involved understands the requirements and consequences of conflicts of interest. This is the only way to ensure that the rules are applied consistently and uniformly.

Despite clear rules and regulations, the practical implementation remains challenging. In many cases, conflicts of interest are not clear-cut and require differentiated consideration. In addition to this, disclosure is not always immediate, especially if the members concerned do not recognise the conflict of interest or consider it to be insignificant. Another problem is the subjective assessment: What appears to be a conflict of interest to one person may not be perceived as one to another. Clear communication and an open dialogue within the Board of Directors are therefore crucial.

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