We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
26 February 2007
Following previous updates discussing the directors' right to information, this update deals with the entitlement of a shareholder to information from the board of directors and the inspection of company records.
According to Article 697 of the Swiss Code of Obligations, at the general meeting of shareholders any shareholder is entitled to request information from the board of directors concerning the affairs of the company, and from the auditors concerning the execution and results of their examination. The information shall be provided to the extent necessary to exercise shareholders' rights. It may be refused if business secrets or other interests of the company worth protecting are jeopardized.
Additionally, the Swiss Code of Obligations states that company books and correspondence may be inspected only with the express authorization of the general meeting of shareholders or by resolution of the board of directors, and subject to the safeguarding of business secrets. If the information or the inspection is unjustifiably refused, the court at the domicile of the company shall order its provision upon request (Articles 697(3) and (4) of the Swiss Code of Obligations).
In a recent Supreme Court decision delivered on November 2 2005, the Supreme
Court stated more precisely the scope and limitations of the shareholders' right
to information and inspection, particularly with regard to a group of companies.
The Supreme Court had to decide whether a shareholder was entitled to inspect
the annual financial statements and audit reports of subsidiaries of the company
in which he had an interest. Prior to the general meeting of shareholders, the
shareholder had requested that the board of directors send him those annual
financial statements and audit reports for inspection. The board of directors
refused to comply with the shareholder's request. However, the board of directors
subsequently interrupted the general meeting of shareholders to enable the
shareholder's representatives to inspect the files. Later, the shareholder filed
an action against the company and requested again to inspect the annual financial
statements and the audit reports of the subsidiaries. The court of first instance
dismissed the shareholder's claim. On appeal, the court of second instance approved
the claim and ordered the company to deliver copies of the annual financial
statements and audit reports to the shareholder. The company appealed to the
Supreme Court of Switzerland and requested dismissal.
The Supreme Court confirmed its previous ruling that the refusal or dismissal of the right to inspection is solely at the discretion of the general meeting of shareholders or the board of directors respectively; therefore, the court can decide only on whether a dismissal was based on reasonable grounds.
According to Article 697(3) of the Swiss Code of Obligations, the inspection
right of a shareholder applies to the company books and correspondence. In
accordance with previous case law and doctrine, the Supreme Court held that
this enumeration of documents is not exhaustive. Both terms are rather to be
construed extensively and encompass all written documents in the possession
of a company that are of importance when exercising shareholders' rights. In
a group of companies the shareholder's right to inspection refers to all written
documents in the possession of the company in which it owns a share. If the
shareholder has an interest in the holding company, this may also include documents
about subsidiaries. Thus, the annual financial statements and audit reports
of subsidiaries are covered by the inspection right of a shareholder of the
In case of dispute it is for the shareholder to prove that the inspection is necessary to enable it to exercise its rights. Any other documents and information to which the shareholder has already had access must be taken into account when considering whether the requested inspection is required. The Supreme Court stated that the value of the shareholder's interest depended on the financial situation of the conglomerate and therefore it was not clearly necessary for the shareholder to know the financial situation of each subsidiary. Thus, the Supreme Court denied the shareholder's request to review the annual financial statements and audit reports of the subsidiaries.
The shareholder had also requested information from the board of directors regarding details set out in the annual financial statements and the audit reports of the subsidiaries. The Supreme Court dismissed the request, as it was brought forward only in the court action and thus did not satisfy the requirement that the information have been requested at the general meeting of shareholders and unjustifiably denied.
For further information on this topic please contact Markus Dörig or Philipp Schaller at Badertscher Dörig Poledna by telephone (+41 44 266 20 66) or by fax (+41 1 266 20 70) or by email (firstname.lastname@example.org or email@example.com).
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.