With the vast majority of Annual shareholders\u2019 meetings being held in June in accordance with the requirements of art. 699 para. 2 of the Swiss Code of Obligations (CO), the question arises whether the traditional discharge should be granted to the members of the Board of Directors.<\/p>\n\n\n\n
In fact, according to art. 698 para. 2 no. 7 CO<\/a>, the shareholders\u2019 meeting has the non-transferable right to grant discharge to members of the Board of Directors.<\/p>\n\n\n\n
But (1) what exactly is meant by discharge, (2) what are the concrete effects of a discharge, and (3) can a discharge also be granted in part? In this article, I will attempt to answer these three questions in a concise manner, focusing on the example of the public limited company<\/a>, however without claiming to be exhaustive.<\/p>\n\n\n\n\n
Discharge is a decision by the shareholders’ meeting whereby the shareholders waive their right to take legal action against the company’s governing bodies. It therefore has the effect of extinguishing any claims for damages the company might have against the persons or bodies to whom the discharge has been granted.<\/p>\n\n\n\n
Contrary to the wording of Art. 698 para. 2 no. 7 CO<\/a>, a discharge may be granted not only to members of the Board of Directors, but also to the company’s directors and other corporate bodies.<\/p>\n\n\n\n
It should be pointed out that the discharge only concerns damage caused to the company, and not damage caused directly to shareholders. Pursuant to Art. 758 para. 1 CO<\/a>, shareholders who have accepted a discharge lose their right to take legal action against the company as soon as the decision has been taken. The discharge is therefore often described as a negative acknowledgement of debt (\u201cnegative Schuldanerkennung\u201d<\/em>).<\/p>\n\n\n\n
Discharge is normally granted at the ordinary shareholders\u2019 meeting, but it may also be granted at an extraordinary or universal shareholders\u2019 meeting. In practice, discharge is generally granted by shareholders to the Board of Directors as a whole. However, it is preferable to name the directors to whom discharge is granted individually in the minutes of the shareholders\u2019 meeting.<\/p>\n\n\n\n
It should also be noted that the persons who have been involved in the management of the affairs to which the decision to grant discharge relates to must refrain from taking part in the deliberations and voting procedure. Failure to do so will not automatically render the decision null and void, but will render it voidable, particularly insofar as the participation of such persons in the vote would have influenced the outcome of the vote. Lastly, all the formal rules concerning the convening and holding of the shareholders\u2019 meeting must be complied with.<\/p>\n\n\n\n\n
In practice, the discharge has only a limited scope, as it only impacts the rights of the company and shareholders who have suffered indirect damage. However, the company’s external creditors and shareholders who have suffered direct damage retain their rights to take action against the company. In short, the discharge has no external effect.<\/p>\n\n\n\n