Federal Act on the Amendment of the Swiss Civil Code of March 30, 1911 (Part Five: The Code of Obligations) (as amended up to July 1, 2014)

220 English is not an official language of the Swiss Confederation. This translation is provided for information purposes only and has no legal force.

Federal Act on the Amendment of the Swiss Civil Code (Part Five: The Code of Obligations)

of 30 March 1911 (Status as of 1 July 2014)

The Federal Assembly of the Swiss Confederation, having considered the Dispatches of the Federal Council dated 3 March 1905 and 1 June 19091 decrees:

Code of Obligations Division One: General Provisions Title One: Creation of Obligations Section One: Obligations arising by Contract

Art. 1 A. Conclusion of 1 The conclusion of a contract requires a mutual expression of intent the contract by the parties.I. Mutual expression of 2 The expression of intent may be express or implied.intent 1. In general

Art. 2 2. Secondary 1 Where the parties have agreed on all the essential terms, it is pre- terms sumed that the contract will be binding notwithstanding any reserva-

tion on secondary terms. 2 In the event of failure to reach agreement on such secondary terms, the court must determine them with due regard to the nature of the transaction. 3 The foregoing is subject to the provisions governing the form of contracts.

AS 27 317 and BS 2 199 BBl 1905 II 1, 1909 III 747, 1911 I 695

220 Code of Obligations

II. Offer and acceptance 1. Offer subject to time limit

2. Offer without time limit a. In the parties’ presence

b. In the parties’ absence

3. Implied acceptance

3a. Unsolicited goods

Art. 3 1 A person who offers to enter into a contract with another person and sets a time limit for acceptance is bound by his offer until the time limit expires. 2 He is no longer bound if no acceptance has reached him on expiry of the time limit.

Art. 4 1 Where an offer is made in the offeree’s presence and no time limit for acceptance is set, it is no longer binding on the offeror unless the offeree accepts it immediately. 2 Contracts concluded by telephone are deemed to have been con- cluded in the parties’ presence where they or their agents communi- cated in person.

Art. 5 1 Where an offer is made in the offeree’s absence and no time limit for acceptance is set, it remains binding on the offeror until such time as he might expect a reply sent duly and promptly to reach him. 2 He may assume that his offer has been promptly received. 3 Where an acceptance sent duly and promptly is late in reaching the offeror and he does not wish to be bound by his offer, he must imme- diately inform the offeree.

Art. 6 Where the particular nature of the transaction or the circumstances are such that express acceptance cannot reasonably be expected, the con- tract is deemed to have been concluded if the offer is not rejected within a reasonable time.

Art. 6a2 1 The sending of unsolicited goods does not constitute an offer. 2 The recipient is not obliged to return or keep such goods. 3 Where unsolicited goods have obviously been sent in error, the recipient must inform the sender.

Inserted by No I of the Federal Act of 5 Oct. 1990, in force since 1 July 1991 3 3120 3121; BBl 1993 I 757).((AS 1991 846 848; BBl 1986 II 360).

220Federal Act on the Amendment of the Swiss Civil Code

4. Non-binding offer, an- nouncement of prices, display

5. Publicly promised remuneration

6. Withdrawal of offer and acceptance

III. Entry into effect of a contract concluded in the parties’ absence

B. Form of contracts I. Formal requirements and significance in general

Art. 7 1 An offeror is not bound by his offer if he has made express declara- tion to that effect or such a reservation arises from the circumstances or from the particular nature of the transaction. 2 The sending of tariffs, price lists and the like does not constitute an offer. 3 By contrast, the display of merchandise with an indication of its price does generally constitute an offer.

Art. 8 1 A person who publicly promises remuneration or a reward in ex- change for the performance of an act must pay in accordance with his promise. 2 If he withdraws his promise before performance has been made, he must reimburse any person incurring expenditure in good faith on account of the promise up to the maximum amount promised unless he can prove that such person could not have provided the performance in question.

Art. 9 1 An offer is deemed not to have been made if its withdrawal reaches the offeree before or at the same time as the offer itself or, where it arrives subsequently, if it is communicated to the offeree before he becomes aware of the offer. 2 The same applies to a withdrawal of an acceptance.

Art. 10 1 A contract concluded in the parties’ absence takes effect from the time acceptance is sent. 2 Where express acceptance is not required, the contract takes effect from the time the offer is received.

Art. 11 1 The validity of a contract is not subject to compliance with any particular form unless a particular form is prescribed by law. 2 In the absence of any provision to the contrary on the significance and effect of formal requirements prescribed by law, the contract is valid only if such requirements are satisfied.

220 Code of Obligations

II. Written form 1. Form required by law a. Scope

b. Effect

c. Signature

d. Mark in lieu of signature

2. Form stipu- lated by contract

Art. 12 Where the law requires that a contract be done in writing, that provi- sion also applies to any amendment to the contract with the exception of supplementary collateral clauses that do not conflict with the origi- nal document.

Art. 13 1 A contract required by law to be in writing must be signed by all persons on whom it imposes obligations.

32 ...

Art. 14 1 Signatures must be appended by hand by the parties to the contract. 2 A signature reproduced by mechanical means is recognised as suffi- cient only where such reproduction is customarily permitted, and in particular in the case of signatures on large numbers of issued securi- ties. 2bis An authenticated electronic signature based on an authenticated certificate issued by a provider of certification services within the meaning of the Federal Act of 19 December 2003 on Electronic Signa- tures4 is deemed equivalent to a handwritten signature, subject to any statutory or contractual provision to the contrary.5 3 The signature of a blind person is binding only if it has been duly certified or if it is proved that he was aware of the terms of the docu- ment at the time of signing.

Art. 15 Subject to the provisions relating to bills of exchange, any person unable to sign may make a duly certified mark by hand or give a certified declaration in lieu of a signature.

Art. 16 1 Where the parties agree to make a contract subject to formal re- quirements not prescribed by law, it is presumed that the parties do not wish to assume obligations until such time as those requirements are satisfied.

3 Repealed by Annex No 2 to the Federal Act of 19 Dec. 2003 on Electronic Signatures, with effect from 1 Jan. 2005 (SR 943.03).

4 SR 943.03 5 Inserted by Annex No 2 to the Federal Act of 19 Dec. 2003 on Electronic Signatures,

(AS 1993 3120 3121; BBl 1993 I 757).in force since 1 Jan. 2005 (SR 943.03).

220Federal Act on the Amendment of the Swiss Civil Code

C. Cause of obligation

D. Interpretation of contracts, simulation

E. Terms of the contract I. Definition of terms

II. Nullity

III. Unfair advantage

2 Where the parties stipulate a written form without elaborating fur- ther, the provisions governing the written form as required by law apply to satisfaction of that requirement.

Art. 17 An acknowledgment of debt is valid even if it does not state the cause of the obligation.

Art. 18 1 When assessing the form and terms of a contract, the true and com- mon intention of the parties must be ascertained without dwelling on any inexact expressions or designations they may have used either in error or by way of disguising the true nature of the agreement. 2 A debtor may not plead simulation as a defence against a third party who has become his creditor in reliance on a written acknowledgment of debt.

Art. 19 1 The terms of a contract may be freely determined within the limits of the law. 2 Clauses that deviate from those prescribed by law are admissible only where the law does not prescribe mandatory forms of wording or where deviation from the legally prescribed terms would contravene public policy, morality or rights of personal privacy.

Art. 20 1 A contract is void if its terms are impossible, unlawful or immoral. 2 However, where the defect pertains only to certain terms of a con- tract, those terms alone are void unless there is cause to assume that the contract would not have been concluded without them.

Art. 21 1 Where there is a clear discrepancy between performance and consid- eration under a contract concluded as a result of one party’s exploita- tion of the other’s straitened circumstances, inexperience or thought- lessness, the injured party may declare within one year that he will not honour the contract and demand restitution of any performance already made. 2 The one-year period commences on conclusion of the contract.

220 Code of Obligations

IV. Agreement to conclude a contract

F. Defect in consent I. Error 1. Effect

2. Cases of mistake

3. Invoking error contrary to good faith

4. Error by negligence

Art. 22 1 Parties may reach a binding agreement to enter into a contract at a later date. 2 Where in the interests of the parties the law makes the validity of a contract conditional on observance of a particular form, the same applies to the agreement to conclude a contract.

Art. 23 A party labouring under a fundamental error when entering into a contract is not bound by that contract.

Art. 24 1 An error is fundamental in the following cases in particular:

1. where the party acting in error intended to conclude a contract different from that to which he consented;

2. where the party acting in error has concluded a contract relat- ing to a subject matter other than the subject matter he in- tended or, where the contract relates to a specific person, to a person other than the one he intended;

3. where the party acting in error has promised to make a signifi- cantly greater performance or has accepted a promise of a sig- nificantly lesser consideration than he actually intended;

4. where the error relates to specific facts which the party acting in error considered in good faith to be a necessary basis for the contract.

2 However, where the error relates solely to the reason for concluding the contract, it is not fundamental. 3 Calculation errors do not render a contract any less binding, but must be corrected.

Art. 25 1 A person may not invoke error in a manner contrary to good faith. 2 In particular, the party acting in error remains bound by the contract he intended to conclude, provided the other party accepts that contract.

Art. 26 1 A party acting in error and invoking that error to repudiate a contract is liable for any loss or damage arising from the nullity of the agree- ment where the error is attributable to his own negligence, unless the other party knew or should have known of the error.(AS 1993 3120 3121; BBl 1993 I 757).

220Federal Act on the Amendment of the Swiss Civil Code

5. Incorrect intermediation

II. Fraud

III. Duress 1. Consent to contract

2. Definition of duress

IV. Defect of consent negated by ratification of the contract

2 In the interests of equity, the court may award further damages to the injured party.

Art. 27 Where an offer to enter into a contract or the acceptance of that offer has been incorrectly communicated by a messenger or other intermedi- ary, the provisions governing error apply mutatis mutandis.

Art. 28 1 A party induced to enter into a contract by the fraud of the other party is not bound by it even if his error is not fundamental. 2 A party who is the victim of fraud by a third party remains bound by the contract unless the other party knew or should have known of the fraud at the time the contract was concluded.

Art. 29 1 Where a party has entered into a contract under duress from the other party or a third party, he is not bound by that contract. 2 Where the duress originates from a third party and the other party neither knew nor should have known of it, a party under duress who wishes to be released from the contract must pay compensation to the other party where equity so requires.

Art. 30 1 A party is under duress if, in the circumstances, he has good cause to believe that there is imminent and substantial risk to his own life, limb, reputation or property or to those of a person close to him. 2 The fear that another person might enforce a legitimate claim is taken into consideration only where the straitened circumstances of the party under duress have been exploited in order to extort excessive benefits from him.

Art. 31 1 Where the party acting under error, fraud or duress neither declares to the other party that he intends not to honour the contract nor seeks restitution for the performance made within one year, the contract is deemed to have been ratified. 2 The one-year period runs from the time that the error or the fraud was discovered or from the time that the duress ended. 3 The ratification of a contract made voidable by duress or fraud does not automatically exclude the right to claim damages.

220 Code of Obligations

G. Agency I. With authori- sation 1. In general a. Effect of agency

b. Scope of authority

2. Authority arising from a transaction a. Restriction and revocation

b. Effect of death, incapac- ity, etc.

Art. 32 1 The rights and obligations arising from a contract made by an agent in the name of another person accrue to the person represented, and not to the agent. 2 Where the agent did not make himself known as such when making the contract, the rights and obligations arising therefrom accrue di- rectly to the person represented only if the other party must have inferred the agency relationship from the circumstances or did not care with whom the contract was made. 3 Where this is not the case, the claim must be assigned or the debt assumed in accordance with the principles governing such measures.

Art. 33 1 Where authority to act on behalf of another stems from relationships established under public law, it is governed by the public law provi- sions of the Confederation or the cantons. 2 Where such authority is conferred by means of the transaction itself, its scope is determined by that transaction. 3 Where a principal grants such authority to a third party and informs the latter thereof, the scope of the authority conferred on the third party is determined according to wording of the communication made to him.

Art. 34 1 A principal authorising another to act on his behalf by means of a transaction may restrict or revoke such authority at any time without prejudice to any rights acquired by those involved under existing legal relationships, such as an individual contract of employment, a partner- ship agreement or an agency agreement.6 2 Any advance waiver of this right by the principal is void. 3 Where the represented party has expressly or de facto announced the authority he has conferred, he may not invoke its total or partial revo- cation against a third party acting in good faith unless he has likewise announced such revocation.

Art. 35 1 The authority conferred by means of a transaction is extinguished on the loss of capacity to act, bankruptcy, death, or declaration of pre-

Amended by No II Art. 1 No 1 of the Federal Act of 25 June 1971, in force since 1 Jan. (AS 1993 3120 3121; BBl 1993 I 757).1972 (at the end of this Code, Final and Transitional Provisions of Title X).

220Federal Act on the Amendment of the Swiss Civil Code

c. Return of the instrument conferring authority

d. Time from which end of authority takes effect

II. Without authority 1. Ratification

2. Failure to ratify

sumed death of the principal or the agent, unless the contrary has been agreed or is implied by the nature of the transaction.7 2 The same applies on the dissolution of a legal entity or a company or partnership entered in the commercial register. 3 The mutual personal rights of the parties are unaffected.

Art. 36 1 Where an agent has been issued with an instrument setting out his authority, he must return it or deposit it with the court when that au- thority has ended. 2 Where the principal or his legal successors have omitted to insist on the return of such instrument, they are liable to bona fide third parties for any loss or damage arising from that omission.

Art. 37 1 Until such time as an agent becomes aware that his authority has ended, his actions continue to give rise to rights and obligations on the part of the principal or the latter’s legal successors as if the agent's authority still existed. 2 This does not apply in cases in which the third party is aware that the agent’s authority has ended.

Art. 38 1 Where a person without authority enters into a contract on behalf of a third party, rights and obligations do not accrue to the latter unless he ratifies the contract. 2 The other party has the right to request that the represented party ratify the contract within a reasonable time, failing which he is no longer bound by it.

Art. 39 1 Where ratification is expressly or implicitly refused, action may be brought against the person who acted as agent for compensation in respect of any damage caused by the extinction of the contract unless he can prove that the other party knew or should have known that he lacked the proper authority. 2 Where the agent is at fault, the court may order him to pay further damages on grounds of equity. 3 In all cases, claims for unjust enrichment are reserved.

Amended by Annex No 10 of the Federal Act of 19 Dec. 2008 (Adult Protection, Law of Persons and Law of Children), in force since 1 Jan. 2013 (AS 2011 725; BBl 2006 7001).

220 Code of Obligations

III. Reservation of special provisions

H. Revocation in door-to-door sales and similar contracts I. Scope of application

II. General principle

III. Exceptions

Art. 40 The special provisions governing the authority of agents and govern- ing bodies of companies and partnerships and of registered and other authorised agents are unaffected.

Art. 40a8 1 The following provisions apply to contracts relating to goods and services intended for the customer’s personal or family use where:

a. the supplier of the goods or services acted in a professional or commercial capacity and

b. the consideration from the buyer exceeds 100 francs. 2 These provisions do not apply to insurance policies. 3 In the event of significant change to the purchasing power of the national currency, the Federal Council shall adjust the sum indicated in para. 1 let. b. accordingly.

Art. 40b9

A customer may revoke his offer to enter into a contract or his accep- tance of such an offer if the transaction was proposed:

a. 10 at his place of work, on residential premises or in their imme- diate vicinity;

b. on public transport or on a public thoroughfare; c. during a promotional event held in connection with an excur-

sion or similar event.

Art. 40c11

The customer has no right of revocation: a. if he expressly requested the contractual negotiations; b. if he declared his offer or acceptance at a stand at a market or

trade fair.

8 Inserted by No I of the Federal Act of 5 Oct. 1990, in force since 1 July 1991 (AS 1991 846 848; BBl 1986 II 360).

9 Inserted by No I of the Federal Act of 5 Oct. 1990, in force since 1 July 1991 (AS 1991 846 848; BBl 1986 II 360).

10 Amended by No I of the Federal Act of 18 June 1993, in force since 1 Jan. 1994 (AS 1993 3120 3121; BBl 1993 I 757).

11 Inserted by No I of the Federal Act of 5 Oct. 1990 (AS 1991 846; BBl 1986 II 360). Amended by No I of the Federal Act of 18 June 1993, in force since 1 Jan. 1994 (AS 1993 3120 3121; BBl 1993 I 757).

220Federal Act on the Amendment of the Swiss Civil Code

Art. 40d12 IV. Duty to 1 The supplier must inform the customer in writing of the latter’s right inform of revocation and of the form and time limit to be observed when

exercising such right, and must provide his address. 2 Such information must be dated and permit identification of the contract in question. 3 The information must be furnished in such a manner that the cus- tomer is aware of it when he proposes or accepts the contract.

Art. 40e13 V. Revocation 1 The customer must inform the supplier of his revocation in writing. 1. Form and time limit 2 The limitation period for revocation is seven days and commences as

soon as the customer: a. has proposed or accepted the contract; and b. has become aware of the information stipulated in Art. 40d.

3 The supplier bears the burden of proof regarding the time when the customer became aware of the information stipulated in Art. 40d. 4 The time limit is observed if the notice of revocation is posted on the seventh day.

Art. 40f14 2. Consequences 1 Where the customer has revoked the contract, the parties must pro-

vide restitution for any performance already made. 2 Where the customer has made use of the goods, he owes an appropri- ate rental payment to the supplier. 3 Where the supplier has rendered services to him, the customer must reimburse the supplier for outlays and expenses incurred in accordance with the provisions governing agency (Art. 402). 4 The customer does not owe the supplier any further compensation.

Art. 40g15

12 Inserted by No I of the Federal Act of 5 Oct. 1990 (AS 1991 846; BBl 1986 II 360). Amended by No I of the Federal Act of 18 June 1993, in force since 1 Jan. 1994 (AS 1993 3120 3121; BBl 1993 I 757).

13 Inserted by No I of the Federal Act of 5 October 1990 (AS 1991 846; BBl 1986 II 360). Amended by No I of the Federal Act of 18 June 1993, in force since 1 Jan. 1994 (AS 1993 3120 3121; BBl 1993 I 757).

14 Inserted by No I of the Federal Act of 5 Oct. 1990, in force since 1 July 1991 (AS 1991 846 848; BBl 1986 II 360).

15 Inserted by No I of the Federal Act of 5 Oct. 1990, in force since 1 July 1991 (AS 1991 846 848; BBl 1986 II 360). Repealed by Annex No 5 to the Civil Jurisdiction Act of 24 March 2000 (SR 272).

220 Code of Obligations

A. General principles I. Conditions of liability

II. Determining the loss or damage

III. Determining compensation

IV. Grounds for reducing compensation

Section Two: Obligations in Tort

Art. 41 1 Any person who unlawfully causes loss or damage to another, whether wilfully or negligently, is obliged to provide compensation. 2 A person who wilfully causes loss or damage to another in an im- moral manner is likewise obliged to provide compensation.

Art. 42 1 A person claiming damages must prove that loss or damage occurred. 2 Where the exact value of the loss or damage cannot be quantified, the court shall estimate the value at its discretion in the light of the normal course of events and the steps taken by the injured party. 3 The costs of treating animals kept as pets rather than for investment or commercial purposes may be claimed within appropriate limits as a loss even if they exceed the value of the animal.16

Art. 43 1 The court determines the form and extent of the compensation pro- vided for loss or damage incurred, with due regard to the circum- stances and the degree of culpability. 1bis Where an animal kept as a pet rather than for investment or com- mercial purposes has been injured or killed, the court may take appro- priate account of its sentimental value to its owner or his dependants.17 2 Where damages are awarded in the form of periodic payments, the debtor must at the same time post security.

Art. 44 1 Where the injured party consented to the action which caused the loss or damage or circumstances attributable to him helped give rise to or compound the loss or damage or otherwise exacerbated the position of the party liable for it, the court may reduce the compensation due or even dispense with it entirely. 2 The court may also reduce the compensation award in cases in which the loss or damage was caused neither wilfully nor by gross negligence and where payment of such compensation would leave the liable party in financial hardship.

16 Inserted by No II of the Federal Act of 4 Oct. 2002 (Animals), in force since 1 April 2003 (AS 2003 463 466; BBl 2002 3885 5418).

17 Inserted by No II of the Federal Act of 4 Oct. 2002 (Animals), in force since 1 April 2003 (AS 2003 463 466; BBl 2002 3885 5418).

220Federal Act on the Amendment of the Swiss Civil Code

V. Special cases 1. Homicide and personal injury a. Damages for homicide

b. Damages for personal injury

c. Satisfaction

2. ...

3. Injury to personality rights

Art. 45 1 In the event of homicide, compensation must cover all expenses arising and in particular the funeral costs. 2 Where death did not occur immediately, the compensation must also include the costs of medical treatment and losses arising from inability to work. 3 Where others are deprived of their means of support as a result of homicide, they must also be compensated for that loss.

Art. 46 1 In the event of personal injury, the victim is entitled to reimburse- ment of expenses incurred and to compensation for any total or partial inability to work and for any loss of future earnings. 2 Where the consequences of the personal injury cannot be assessed with sufficient certainty at the time the award is made, the court may reserve the right to amend the award within two years of the date on which it was made.

Art. 47 In cases of homicide or personal injury, the court may award the victim of personal injury or the dependants of the deceased an appro- priate sum by way of satisfaction.

Art. 4818

Art. 4919 1 Any person whose personality rights are unlawfully infringed is entitled to a sum of money by way of satisfaction provided this is justified by the seriousness of the infringement and no other amends have been made. 2 The court may order that satisfaction be provided in another manner instead of or in addition to monetary compensation.

18 Repealed by Art. 21 para. 1 of the Federal Act of 30 Sept. 1943 on Unfair Competition [SR 2 945]

19 Amended by No II 1 of the Federal Act of 16 Dec. 1983, in force since 1 July 1985 (AS 1984 778 782; BBl 1982 II 661).

220 Code of Obligations

VI. Multiple liable parties 1. In tort

2. On different legal grounds

VII. Self- defence, necessity, legitimate use of force

VIII. Relation- ship with criminal law

Art. 50 1 Where two or more persons have together caused damage, whether as instigator, perpetrator or accomplice, they are jointly and severally liable to the injured party. 2 The court determines at its discretion whether and to what extent they have right of recourse against each other. 3 Beneficiaries are liable in damages only to the extent that they re- ceived a share in the gains or caused loss or damage due to their in- volvement.

Art. 51 1 Where two or more persons are liable for the same loss or damage on different legal grounds, whether under tort law, contract law or by statute, the provision governing recourse among persons who have jointly caused damage is applicable mutatis mutandis. 2 As a rule, compensation is provided first by those who are liable in tort and last by those who are deemed liable by statutory provision without being at fault or in breach of contractual obligation.

Art. 52 1 Where a person has acted in self-defence, he is not liable to pay compensation for loss or damage caused to the person or property of the aggressor. 2 A person who damages the property of another in order to protect himself or another person against imminent damage or danger must pay damages at the court’s discretion. 3 A person who uses force to protect his rights is not liable in damages if in the circumstances the assistance of the authorities could not have been obtained in good time and such use of force was the only means of preventing the loss of his rights or a significant impairment of his ability to exercise them.

Art. 53 1 When determining fault or lack of fault and capacity or incapacity to consent, the court is not bound by the provisions governing criminal capacity nor by any acquittal in the criminal court. 2 The civil court is likewise not bound by the verdict in the criminal court when determining fault and assessing compensation.

220Federal Act on the Amendment of the Swiss Civil Code

B. Liability of persons lacking capacity to consent

C. Liability of employers

D. Liability for animals I. Damages

II. Seizure of animals

Art. 54 1 On grounds of equity, the court may also order a person who lacks capacity to consent to provide total or partial compensation for the loss or damage he has caused. 2 A person who has temporarily lost his capacity to consent is liable for any loss or damage caused when in that state unless he can prove that said state arose through no fault of his own.

Art. 55 1 An employer is liable for the loss or damage caused by his employ- ees or ancillary staff in the performance of their work unless he proves that he took all due care to avoid a loss or damage of this type or that the loss or damage would have occurred even if all due care had been taken.20 2 The employer has a right of recourse against the person who caused the loss or damage to the extent that such person is liable in damages.

Art. 56 1 In the event of loss or damage caused by an animal, its keeper is liable unless he proves that in keeping and supervising the animal he took all due care or that the damage would have occurred even if all due care had been taken. 2 He has a right of recourse if the animal was provoked either by another person or by an animal belonging to another person.

213 ...

Art. 57 1 A person in possession of a plot of land is entitled to seize animals belonging to another which cause damage on that land and take them into his custody as security for his claim for compensation or even to kill them, where justified by the circumstances. 2 He nonetheless has an obligation to notify the owner of such animals without delay or, if the owner is not known to him, to take the neces- sary steps to trace the owner.

20 Amended by No II Art. 1 No 2 of the Federal Act of 25 June 1971, in force since 1 Jan. 1972 (at the end of this Code, Final and Transitional Provisions of Title X).

21 Repealed by Art. 27 No 3 of the Federal Act of 20 June 1986 on Hunting (SR 922.0).

220 Code of Obligations

E. Liability of property owners I. Damages

II. Safety measures

F. Liability in respect of electronic signatures

G. Time limits24

Art. 58 1 The owner of a building or any other structure is liable for any dam- age caused by defects in its construction or design or by inadequate maintenance. 2 He has a right of recourse against persons liable to him in this re- gard.

Art. 59 1 A person who is at risk of suffering loss or damage due to a building or structure belonging to another may insist that the owner take the necessary steps to avert the danger. 2 Orders given by the police for the protection of persons and property are unaffected.

Art. 59a22 1 The owner of an authenticated electronic signature is liable to third parties for any loss or damage they have suffered as a result of relying on a valid authenticated certificate issued by a provider of certification services within the meaning of the Federal Act of 19 December 200323 on Electronic Signatures. 2 The owner is absolved of liability if he can satisfy the court that he took all the security precautions that could reasonably be expected in the circumstances to prevent misuse of the electronic signature. 3 The Federal Council defines the security precautions to be taken pursuant to paragraph 2.

Art. 60 1 A claim for damages or satisfaction becomes time-barred one year from the date on which the injured party became aware of the loss or damage and of the identity of the person liable for it but in any event ten years after the date on which the loss or damage was caused. 2 However, if the action for damages is derived from an offence for which criminal law envisages a longer limitation period, that longer period also applies to the civil law claim. 3 Where the tort has given rise to a claim against the injured party, he may refuse to satisfy the claim even if his own claim in tort is time- barred.

22 Inserted by Annex No 2 to the Federal Act of 19 Dec. 2003 on Electronic Signatures, in force since 1 Jan. 2005 (SR 943.03).

23 SR 943.03 24 Amended by Annex No 2 to the Federal Act of 19 Dec. 2003 on Electronic Signatures, in

force since 1 Jan. 2005 (SR 943.03).

220Federal Act on the Amendment of the Swiss Civil Code

H. Liability of civil servants and public officials25

A. Requirement I. In general

II. Payment in satisfaction of a non-existent obligation

B. Scope of restitution I. Obligations of the unjustly enriched party

II. Rights in respect of expenditures

Art. 61 1 The Confederation and the cantons may by way of legislation enact provisions that deviate from those of this Section to govern the liabil- ity of civil servants and public officials to pay damages or satisfaction for any damage they cause in the exercise of their duties. 2 The provisions of this Section may not, however, be modified by cantonal legislation in the case of commercial duties performed by civil servants or public officials.

Section Three: Obligations deriving from Unjust Enrichment

Art. 62 1 A person who has enriched himself without just cause at the expense of another is obliged to make restitution. 2 In particular, restitution is owed for money benefits obtained for no valid reason whatsoever, for a reason that did not transpire or for a reason that subsequently ceased to exist.

Art. 63 1 A person who has voluntarily satisfied a non-existent debt has a right to restitution of the sum paid only if he can prove that he paid it in the erroneous belief that the debt was owed. 2 Restitution is excluded where payment was made in satisfaction of a debt that has become time-barred or of a moral obligation. 3 The provisions of federal debt collection and bankruptcy law gov- erning the right to the restitution of payments made in satisfaction of non-existent claims are unaffected.

Art. 64 There is no right of restitution where the recipient can show that he is no longer enriched at the time the claim for restitution is brought, unless he alienated the money benefits in bad faith or in the certain knowledge that he would be bound to return them.

Art. 65 1 The recipient is entitled to reimbursement of necessary and useful expenditures, although where the unjust enrichment was received in

25 Amended by Annex No 2 to the Federal Act of 19 Dec. 2003 on Electronic Signatures, in force since 1 Jan. 2005 (SR 943.03).

220 Code of Obligations

C. Exclusion of restitution

D. Time limits

A. General principles I. Performance by the obligor in person

II. Object of performance 1. Part payment

2. Indivisible performance

bad faith, the reimbursement of useful expenditures must not exceed the amount of added value as at the time of restitution. 2 He is not entitled to any compensation for other expenditures, but where no such compensation is offered to him, he may, before return- ing the property, remove anything he has added to it provided this is possible without damaging it.

Art. 66 No right to restitution exists in respect of anything given with a view to producing an unlawful or immoral outcome.

Art. 67 1 A claim for restitution for unjust enrichment becomes time-barred one year after the date on which the injured party learned of his claim and in any event ten years after the date on which the claim first arose. 2 Where the unjust enrichment consists of a claim against the injured party, he may refuse to satisfy the claim even if his own claim for restitution is time-barred.

Title Two: Effect of Obligations Section One: Performance of Obligations

Art. 68 An obligor is not obliged to discharge his obligation in person unless so required by the obligee.

Art. 69 1 A creditor may refuse partial payment where the total debt is estab- lished and due. 2 If the creditor wishes to accept part payment, the debtor may not refuse to settle the part of the debt that he acknowledges is due.

Art. 70 1 Where an indivisible performance is owed to several obligees, the obligor must make performance to all of them jointly, and each obligee may demand that performance be rendered to all of them jointly. 2 Where an indivisible performance is owed by several obligors, each of them has an obligation to render performance in full.

220Federal Act on the Amendment of the Swiss Civil Code

3. Debt of generic object

4. Obligations involving choice of performance

5. Interest

B. Place of performance

3 Unless circumstances dictate otherwise, an obligor who has satisfied the obligee may then claim proportionate compensation from the other obligors and to that extent the claim of the satisfied obligee passes to him.

Art. 71 1 If the object owed is defined only in generic terms, the obligor may choose what object is given in repayment unless otherwise stipulated under the legal relationship. 2 However, the obligor must not offer an object of less-than-average quality.

Art. 72 Where an obligation may be discharged by one of several alternative types of performance, the obligor may choose which performance to make unless otherwise stipulated under the legal relationship.

Art. 73 1 Where an obligation involves the payment of interest but the rate is not set by contract, law or custom, interest is payable at the rate of 5% per annum. 2 Public law provisions governing abusive interest charges are not affected.

Art. 74 1 The place of performance is determined by the intention of the par- ties as stated expressly or evident from the circumstances. 2 Except where otherwise stipulated, the following principles apply: 1. pecuniary debts must be paid at the place where the creditor is

resident at the time of performance; 2. where a specific object is owed, it must be delivered at the

place where it was located when the contract was entered into; 3. other obligations must be discharged at the place where the ob-

ligor was resident at the time they arose. 3 Where the obligee may require performance of an obligation at his domicile but this has changed since the obligation arose, thereby significantly hindering performance by the obligor, the latter is entitled to render performance at the original domicile.

220 Code of Obligations

C. Time of performance I. Open-ended obligations

II. Obligations subject to time limit 1. Monthly time limits

2. Other time limits

Art. 75 Where no time of performance is stated in the contract or evident from the nature of the legal relationship, the obligation may be discharged or called in immediately.

Art. 76 1 A time limit expressed as the beginning or end of a month means the first or last day of the month respectively. 2 A time limit expressed as the middle of the month means the fif- teenth day of that month.

Art. 77 1 Where an obligation must be discharged or some other transaction accomplished within a certain time limit subsequent to conclusion of the contract, the time limit is defined as follows:

1. where the time limit is expressed as a number of days, per- formance falls due on the last thereof, not including the date on which the contract was concluded, and where the number stipulated is eight or fifteen days, this means not one or two weeks but a full eight or fifteen days;

2. where the time limit is expressed as a number of weeks, per- formance falls due in the last week of the period on the same day of the week as the one on which the contract was con- cluded;

3. where the time limit is expressed as a number of months or as a period comprising several months (a year, half-year or quar- ter), performance falls due in the last month of the period on the same day of the month as the one on which the contract was concluded or, where the last month of the period contains no such day, on the last day of that month.

The term ‘half-month’ has the same meaning as a time limit of fifteen days; if the time limit is expressed as a period of one or more months plus one half-month, the fifteen days are counted last. 2 Time limits are calculated in the same manner when stipulated as running from a date other than the date on which the contract was concluded. 3 Where an obligation must be discharged before a specified time limit, performance must occur before that time expires.

220Federal Act on the Amendment of the Swiss Civil Code

3. Sundays and public holidays

III. Performance during business hours

IV. Extension of the time limit

V. Early performance

VI. In bilateral contracts 1. Order of performance

2. Allowance for unilateral insolvency

Art. 78 1 Where the time of performance or the last day of a time limit falls on a Sunday or on a day officially recognised as a public holiday26 at the place of performance, the time of performance or the last day of a time limit is deemed to be the next working day. 2 Any agreement to the contrary is unaffected.

Art. 79 Performance of the obligation must be made and accepted during normal business hours on the date stipulated.

Art. 80 Where the agreed time limit for performance is extended, in the ab- sence of an agreement to the contrary, the new time limit runs from the first day following expiry of the previous time limit.

Art. 81 1 Unless the terms or nature of the contract or the circumstances indi- cate that the parties intended otherwise, performance may be rendered before the date on which the time limit expires. 2 However, the obligor is not entitled to apply a discount unless that discount has been agreed or is sanctioned by custom.

Art. 82 A party to a bilateral contract may not demand performance until he has discharged or offered to discharge his own obligation, unless the terms or nature of the contract allow him to do so at a later date.

Art. 83 1 Where one party to a bilateral contract has become insolvent, in particular by virtue of bankruptcy proceedings or execution without satisfaction, and this deterioration in its financial position jeopardises the claim of the other party, the latter may withhold performance until security has been provided for the consideration. 2 He may withdraw from the contract if, on request, no such security is provided within a reasonable time.

26 In relation to the statutory time limits under federal law and the time limits fixed by authorities by virtue of federal law, Saturday is now regarded as equivalent to a public holiday (Art. 1 of the Federal Act of 21 June 1963 on the Application of Limitation Periods to Saturdays – SR 173.110.3).

220 Code of Obligations

D. Payment I. National currency

II. Allocation 1. Of part payments

2. In the case of multiple debts a. At the discretion of debtor or creditor

b. By law

III. Receipt and return of borrower’s note 1. Right of the debtor

Art. 8427 1 Pecuniary debts must be discharged in legal tender of the currency in which the debt was incurred. 2 A debt expressed in a currency other than the national currency of the place of payment may be discharged in that national currency at the rate of exchange that applies on the day it falls due, unless literal performance is required by inclusion in the contract of the expression ‘actual currency’ or words to that effect.

Art. 85 1 A debtor may offset a part payment against the debt principal only if he is not in arrears with interest payments and expenses. 2 Where a creditor has received guarantees, pledges or other security for a portion of his claim, the debtor may not offset a part payment against that portion in preference to less well secured portions of the claim.

Art. 86 1 A debtor with several debts to the same creditor is entitled to state at the time of payment which debt he means to redeem. 2 In the absence of any statement from the debtor, the payment will be allocated to the debt indicated by the creditor in his receipt, unless the debtor objects immediately.

Art. 87 1 Where no valid debt redemption statement has been made and the receipt does not indicate how the payment has been allocated, it is allocated to whichever debt is due or, if several are due, to the debt that first gave rise to enforcement proceedings against the debtor or, in the absence of such proceedings, to the debt that fell due first. 2 Where several debts fell due at the same time, the payment is offset against them proportionately. 3 If none of the debts is yet due, the payment is allocated to the one offering the least security for the creditor.

Art. 88 1 A debtor making a payment is entitled to demand a receipt and, provided the debt is fully redeemed, the return or annulment of the borrower’s note.

27 Amended by Annex No 2 to the Federal Act of 22 Dec. 1999 on Currency and Payment Instruments, in force since 1 May 2000 (SR 941.10).

220Federal Act on the Amendment of the Swiss Civil Code

2. Effect

3. Return of borrower’s note not possible

E. Default of obligee I. Requirement

II. Effect 1. On obligations relating to objects a. Right to deposit object

b. Right to sell

2 If the debt is not completely redeemed or the borrower’s note confers other rights on the creditor, the debtor is entitled to demand only a receipt and that a record of the payment be entered on the borrower’s note.

Art. 89 1 Where interest or other periodic payments are due, a creditor unre- servedly issuing a receipt for a later periodic payment is presumed to have received all previous periodic payments. 2 If he issues a receipt for redemption of the debt principal, he is pre- sumed to have received the interest. 3 The return of the borrower’s note to the debtor gives rise to a pre- sumption that the debt has been redeemed.

Art. 90 1 If the creditor claims to have lost the borrower’s note, on redeeming the debt, the debtor may insist that the creditor declare by public deed or notarised document that the borrower’s note has been annulled and the debt redeemed. 2 The provisions governing annulment of securities are reserved.

Art. 91 The obligee is in default if he refuses without good cause to accept performance properly offered to him or to carry out such preparations as he is obliged to make and without which the obligor cannot render performance.

Art. 92 1 Where the obligee is in default, the obligor is entitled to deposit the object at the expense and risk of the obligee, thereby discharging his obligation. 2 The court decides which place should serve as depositary; however, merchandise may be deposited in a warehouse without need for a court decision.28

Art. 93 1 Where the characteristics of the object or the nature of the business preclude a deposit or the object is perishable or gives rise to mainte- nance costs or substantial storage costs, after having given formal

28 Amended by Annex No 5 to the Civil Jurisdiction Act of 24 March 2000, in force since 1 Jan. 2001 (SR 272).

220 Code of Obligations

c. Right to take back the object

2. On other obligations

F. Performance prevented for other reasons

A. Failure to perform I. Obligor’s duty to compensate 1. In general

warning to the obligee and with the court’s permission, the obligor may dispose of the object by open sale and deposit the sale proceeds. 2 Where the object has a quoted stock exchange or market price or its value is low in proportion to the costs involved, the sale need not be open and the court may authorise it without prior warning.

Art. 94 1 The obligor is entitled to take back the object deposited providing the obligee has not declared that he accepts it or providing the deposit has not had the effect of redeeming a pledge. 2 As soon as the object is taken back, the claim and all accessory rights become effective again.

Art. 95 Where the obligation does not relate to objects and the obligee is in default, the obligor may withdraw from the contract in accordance with the provisions governing default of the obligor.

Art. 96 The obligor is entitled to deposit his performance or to withdraw from the contract, as in the case of default on the part of the obligee, where performance cannot be rendered either to the obligee or to his repre- sentative for some other reason pertaining to the obligee or where through no fault of the obligor there is uncertainty as to the identity of the obligee.

Section Two: The Consequences of Non-Performance of Obligations

Art. 97 1 An obligor who fails to discharge an obligation at all or as required must make amends for the resulting loss or damage unless he can prove that he was not at fault. 2 The procedure for debt enforcement is governed by the provisions of the Federal Act of 11 April 188929 on Debt Collection and Bankruptcy and the Civil Procedure Code of 19 December 200830 (CivPC).31

29 SR 281.1 30 SR 272 31 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since

1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

220Federal Act on the Amendment of the Swiss Civil Code

2. Obligation to act or refrain from action

II. Scope of liability and compensation 1. In general

2. Exclusion of liability

3. Liability for associates

Art. 98 1 Where the obligation is to take certain action, the obligee may with- out prejudice to his claims for damages obtain authority to perform the obligation at the obligor’s expense. 2 Where the obligation is to refrain from taking certain action, any breach of such obligation renders the obligor liable to make amends for the loss or damage caused. 3 In addition, the obligee may request that the situation constituting a breach of the obligation be rectified and may obtain authority to rectify it at the obligor’s expense.

Art. 99 1 The obligor is generally liable for any fault attributable to him. 2 The scope of such liability is determined by the particular nature of the transaction and in particular is judged more leniently where the obligor does not stand to gain from the transaction. 3 In other respects, the provisions governing liability in tort apply mutatis mutandis to a breach of contract.

Art. 100 1 Any agreement purporting to exclude liability for unlawful intent or gross negligence in advance is void. 2 At the discretion of the court, an advance exclusion of liability for minor negligence may be deemed void provided the party excluding liability was in the other party’s service at the time the waiver was made or the liability arises in connection with commercial activities conducted under official licence. 3 The specific provisions governing insurance policies are unaffected.

Art. 101 1 A person who delegates the performance of an obligation or the exercise of a right arising from a contractual obligation to an associate, such as a member of his household or an employee is liable to the other party for any loss or damage the associate causes in carrying out such tasks, even if their delegation was entirely authorised.32 2 This liability may be limited or excluded by prior agreement. 3 If the obligee is in the obligor’s service or if the liability arises in connection with commercial activities conducted under official li-

32 Amended by No II Art. 1 No 3 of the Federal Act of 25 June 1971, in force since 1 Jan. 1972 (at the end of this Code, Final and Transitional Provisions of Title X).

220 Code of Obligations

B. Default of obligor I. Requirement

II. Effect 1. Liability for accidental damage

2. Default interest a. In general

b. Debtor in default on payments of interest, annuities and gifts

cence, any exclusion of liability by agreement may apply at most to minor negligence.

Art. 102 1 Where an obligation is due, the obligor is in default as soon as he receives a formal reminder from the obligee. 2 Where a deadline for performance of the obligation has been set by agreement or as a result of a duly exercised right of termination re- served by one party, the obligor is automatically in default on expiry of the deadline.

Art. 103 1 An obligor in default is liable in damages for late performance and even for accidental loss or damage. 2 He may discharge himself from such liability by proving that his default occurred through no fault of his own or that the object of performance would have suffered the accidental loss or damage to the detriment of the obligee even if performance had taken place promptly.

Art. 104 1 A debtor in default on payment of a pecuniary debt must pay default interest of 5% per annum even where a lower rate of interest was stipulated by contract. 2 Where the contract envisages a rate of interest higher than 5%, whether directly or by agreement of a periodic bank commission, such higher rate of interest may also be applied while the debtor remains in default. 3 In business dealings, where the normal bank discount rate at the place of payment is higher than 5%, default interest may be calculated at the higher rate.

Art. 105 1 A debtor in default on payment of interest, annuities or gifts is liable for default interest only as of the day on which enforcement proceed- ings are initiated or legal action is brought. 2 Any agreement to the contrary is assessed by the court in accordance with the provisions governing penalty clauses. 3 Default interest is never payable on default interest.

220Federal Act on the Amendment of the Swiss Civil Code

3. Excess damage

4. Withdrawal and damages a. Subject to time limit

b. Without time limit

c. Effect of withdrawal

A. Subrogation

Art. 106 1 Where the value of the loss or damage suffered by the creditor ex- ceeds the default interest, the debtor is liable also for this additional loss or damage unless he can prove that he is not at fault. 2 Where the additional damage can be anticipated, the court may award compensation for such damage in its judgment on the main claim.

Art. 107 1 Where the obligor under a bilateral contract is in default, the obligee is entitled to set an appropriate time limit for subsequent performance or to ask the court to set such time limit. 2 If performance has not been rendered by the end of that time limit, the obligee may compel performance in addition to suing for damages in connection with the delay or, provided he makes an immediate declaration to this effect, he may instead forego subsequent perform- ance and either claim damages for non-performance or withdraw from the contract altogether.

Art. 108 No time limit need be set:

1. where it is evident from the conduct of the obligor that a time limit would serve no purpose;

2. where performance has become pointless to the obligee as a result of the obligor’s default;

3. where the contract makes it clear that the parties intended that performance take place at or before a precise point in time.

Art. 109 1 An obligee withdrawing from a contract may refuse the promised consideration and demand the return of any performance already made. 2 In addition he may claim damages for the lapse of the contract, unless the obligor can prove that he was not at fault.

Section Three: Obligations involving Third Parties

Art. 110 A third party who satisfies the creditor is by operation of law subro- gated to his rights:

220 Code of Obligations

B. Guarantee of performance by third party

C. Contracts conferring rights on third parties I. In general

II. In the case of liability insur- ance

A. Extinction of accessory rights

1. if he redeems an object given in pledge for the debt of another and he owns said object or has a limited right in rem in it;

2. if the debtor notifies the creditor that the third party who is paying is to take the creditor’s place.

Art. 111 A person who gives an undertaking to ensure that a third party per- forms an obligation is liable in damages for non-performance by said third party.

Art. 112 1 A person who, acting in his own name, has entered into a contract whereby performance is due to a third party is entitled to compel performance for the benefit of said third party. 2 The third party or his legal successors have the right to compel performance where that was the intention of the contracting parties or is the customary practice. 3 In this case the obligee may no longer release the obligor from his obligations once the third party has notified the obligor of his intention to exercise that right.

Art. 113 Where an employer has taken out liability insurance and his employee has contributed at least half of the premiums, the employee has sole claim to the policy benefits.

Title Three: Extinction of Obligations

Art. 114 1 Where a claim ceases to exist by virtue of being satisfied or in some other manner, all accessory rights such as guarantees and charges are likewise extinguished. 2 Interest that has accrued may be reclaimed only if that right is con- ferred on the obligee by the contract or is evident from the circum- stances. 3 The specific provisions governing charges on immovable property, securities and composition agreements are unaffected.

220Federal Act on the Amendment of the Swiss Civil Code

B. Extinction by agreement

C. Novation I. In general

II. In relation to current accounts

D. Merger

E. Performance becomes impossible

Art. 115 No particular form is required for the extinction of a claim by agree- ment even where the obligation itself could not be assumed without satisfying certain formal requirements required by law or elected by the parties.

Art. 116 1 Where a new debt relationship is contracted, there is no presumption of novation in respect of an old one. 2 In particular, in the absence of agreement to the contrary, novation does not result from signature of a bill of exchange in respect of an existing debt or from the issue of a new borrower’s note or contract of surety.

Art. 117 1 The mere posting of individual entries in a current account does not result in novation. 2 However, there is a presumption of novation if the balance on the account has been drawn and acknowledged. 3 Where special security exists for one of the account entries, unless otherwise agreed, such security is retained even if the balance on the account is drawn and acknowledged.

Art. 118 1 An obligation is deemed extinguished by merger where the capacities of creditor and debtor are united in the same entity. 2 In the event of de-merger, the obligation is revived. 3 The specific provisions governing charges on immovable property and securities are unaffected.

Art. 119 1 An obligation is deemed extinguished where its performance is made impossible by circumstances not attributable to the obligor. 2 In a bilateral contract, the obligor thus released is liable for the consideration already received pursuant to the provisions on unjust enrichment and loses his counter-claim to the extent it has not yet been satisfied. 3 This does not apply to cases in which, by law or contractual agree- ment, the risk passes to the obligee prior to performance.

220 Code of Obligations

F. Set-off I. Requirement 1. In general

2. Under surety

3. In contracts conferring rights on third parties

4. Where the debtor is bankrupt

II. Effect of set- off

III. Exceptions

Art. 120 1 Where two persons owe each other sums of money or performance of identical obligations, and provided that both claims have fallen due, each party may set off his debt against his claim. 2 The debtor may assert his right of set-off even if the countervailing claim is contested. 3 A time-barred claim may be set off provided that it was not time- barred at the time it became eligible for set-off.

Art. 121 A surety may refuse to satisfy the creditor to the extent that the princi- pal debtor has a right of set-off.

Art. 122 A person who has undertaken an obligation in favour of a third party may not set off that obligation against his own claims against said party.

Art. 123 1 Where the debtor is bankrupt, his creditors may set off their claims, even if they are not due, against the claims that the adjudicated bank- rupt holds against them. 2 The exclusion or challenge of set-off in the event of the debtor’s bankruptcy is governed by the provisions of debt collection and bank- ruptcy law.

Art. 124 1 A set-off takes place only if the debtor notifies the creditor of his intention to exercise his right of set-off. 2 Once this has occurred, to the extent that they cancel each other out, the claim and countervailing claim are deemed to have been satisfied as of the time they first became susceptible to set-off. 3 The special customs relating to commercial current accounts are unaffected.

Art. 125 The following obligations may not be discharged by set-off except with the creditor’s consent:

1. obligations to restore or replace objects that have been depos- ited, unlawfully removed or retained in bad faith;

220Federal Act on the Amendment of the Swiss Civil Code

IV. Waiver

G. Time limits I. Time limits 1. Ten years

2. Five years

3. Mandatory limitation periods

4. Start of limitation period a. In general

2. obligations that by their very nature require actual performance to be rendered to the creditor, such as maintenance claims and salary payments that are absolutely necessary for the upkeep of the creditor and his family;

3. obligations under public law in favour of the state authorities.

Art. 126 The debtor may waive his right of set-off in advance.

Art. 127 All claims become time-barred after ten years unless otherwise pro- vided by federal civil law.

Art. 128 The following become time-barred after five years:

1. claims for agricultural and commercial rent and other rent, in- terest on capital and all other periodic payments;

2. claims in connection with delivery of foodstuffs, payments for board and lodging and hotel expenses;

3.33 claims in connection with work carried out by tradesmen and craftsmen, purchases of retail goods, medical treatment, pro- fessional services provided by advocates, solicitors, legal rep- resentatives and notaries, and work performed by employees for their employers.

Art. 129 The limitation periods laid down under this Title may not be altered by contract.

Art. 130 1 The limitation period commences as soon as the debt is due. 2 Where a debt falls due on notification, the limitation period com- mences on the first date on which such notice is admissible.

33 Amended by No II Art. 1 No 4 of the Federal Act of 25 June 1971, in force since 1 Jan. 1972 (at the end of this Code, Final and Transitional Provisions of Title X).

220 Code of Obligations

b. For periodic obligations

5. Computation of limitation periods

II. Effect on accessory claims

III. Prevention and suspension of the limitation period

Art. 131 1 In the case of life annuities and similar periodic obligations, the limitation period for the principal claim commences on the date on which the first instalment in arrears was due. 2 When the principal claim becomes time-barred, so too do all claims in respect of individual payments.

Art. 132 1 When computing limitation periods, the date on which the limitation period commences is not included and the period is not deemed to have expired until the end of its last day. 2 In other respects the provisions governing computation of time limits for performance also apply to the time limits.

Art. 133 When the principal claim becomes time-barred, so too do all claims for interest and other accessory claims.

Art. 134 1 The limitation period does not commence and, if it has begun, is suspended:

1.34 in respect of the claims of children against their parents, for the duration of parental custody;

2.35 in respect of the claim of person lacking capacity of judgement against his or her carer, for the duration of the advance care di- rective;

3. in respect of the claims of spouses against each other, for the duration of the marriage;

3bis.36 in respect of the claims of registered partners against each other, for the duration of the registered partnership;

4.37 in respect of the claim of an employee against his employer with whom he shares a household, for the duration of the em- ployment relationship;

5. for as long as the debtor has the usufruct of the claim;

34 Amended by Annex No 2 to the Federal Act of 26 June 1998, in force since 1 Jan. 2000 (AS 1999 1118 1142; BBl 1996 I 1).

35 Amended by Annex No 10 of the Federal Act of 19 Dec. 2008 (Adult Protection, Law of Persons and Law of Children), in force since 1 Jan. 2013 (AS 2011 725; BBl 2006 7001).

36 Inserted by Annex No 11 to the Same-Sex Partnership Act of 18 June 2004, in force since 1 Jan. 2007 (SR 211.231).

37 Amended by No II Art. 1 No 5 of the Federal Act of 25 June 1971, in force since 1 Jan. 1972 (at the end of this Code, Final and Transitional Provisions of Title X).

220Federal Act on the Amendment of the Swiss Civil Code

IV. Interruption of limitation period 1. Grounds for interruption

2. Effect of interruption on or-obligors

3. Start of new limitation period a. In the event of acknowledgment or judgment

b. By action of the creditor

6. for as long as the claim cannot be brought before a Swiss court.

2 The limitation period begins or resumes at the end of the day on which the cause of prevention or suspension ceases to obtain. 3 The specific provisions of debt collection and bankruptcy law are unaffected.

Art. 135 The limitation period is interrupted:

1. if the debtor acknowledges the claim and in particular if he makes interest payments or part payments, gives an item in pledge or provides surety;

2.38 by debt enforcement proceedings, an application for concilia- tion, submission of a statement of claim or defence to a court or arbitral tribunal, or a petition for bankruptcy.

Art. 136 1 Where the limitation period for one person who is jointly and sever- ally liable for a debt or jointly liable in respect of an indivisible per- formance is interrupted, it is likewise interrupted for all other or- obligors. 2 Where the limitation period for the principal debtor is interrupted, it is likewise interrupted for the surety. 3 However, where the limitation period for the guarantor is inter- rupted, it is not interrupted for the principal debtor.

Art. 137 1 A new limitation period commences as of the date of the interruption. 2 If the claim has been acknowledged by public deed or confirmed by court judgment, the new limitation period is always ten years.

Art. 138 1 Where the limitation period has been interrupted by an application for conciliation, or the submission of a statement of claim or defence, a new limitation period commences when the dispute is settled before the relevant court.39

38 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

39 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

220 Code of Obligations

V. ...

VI. Limitation of liens on chattels

VII. Waiver of time limits

VIII. Assertion

A. Joint and several debtors I. Requirement

2 Where the limitation period has been interrupted by debt enforce- ment proceedings, a new limitation period commences as of each step taken in the proceedings. 3 Where the limitation period has been interrupted by a petition for bankruptcy, a new limitation period commences as of the time speci- fied by bankruptcy law at which it once again becomes possible to assert the claim.

Art. 13940

Art. 140 The existence of a charge on chattels does not prevent a claim from becoming time-barred, although the fact of its becoming time-barred does not prevent the creditor from asserting his right under the charge.

Art. 141 1 The time limits may not be waived in advance. 2 A waiver of the time limits by one jointly and severally liable debtor may not be invoked against the others. 3 The same applies to or-obligors of an indivisible debt and to the surety in the event of waiver by the principal debtor.

Art. 142 The court may not consider the time limits of its own accord.

Title Four: Special Relationships relating to Obligations Section One: Joint and Several Obligations

Art. 143 1 Debtors become jointly and severally liable for a debt by stating that each of them wishes to be individually liable for performance of the entire obligation. 2 Without such a statement of intent, debtors are joint and severally liable only in the cases specified by law.

40 Repealed by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, with effect from 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

220Federal Act on the Amendment of the Swiss Civil Code

II. Relationship between creditor and debtor 1. Effect a. Liability of the debtors

b. Objections by the debtors

c. Action taken by individual debtors

2. Extinction of the joint and several obliga- tion

III. Relationship between joint and several debtors 1. Participation

2. Subrogation

Art. 144 1 A creditor may at his discretion request partial performance of the obligation from each joint and several debtor or else full performance from any one of them. 2 All the debtors remain under the obligation until the entire claim has been redeemed.

Art. 145 1 A joint and several debtor may raise against the creditor only those objections that are based either on his personal relationship with the creditor or on the nature of or collective reason for the joint and sev- eral obligation. 2 Each joint and several debtor is liable to the others if he fails to raise the objections which all of them are entitled to raise.

Art. 146 Unless otherwise provided, a joint and several debtor must not take any action which might impair the position of his fellows.

Art. 147 1 Where one joint and several debtor satisfies the creditor by payment or set-off, the others are discharged to that extent. 2 Where one joint and several debtor is released from liability without satisfaction of the creditor, such release does not benefit the others save to the extent justified by the circumstances or the nature of the obligation.

Art. 148 1 Unless the legal relationship between the joint and several debtors indicates otherwise, each of them assumes an equal share of the pay- ment made to the creditor. 2 A joint and several debtor who pays more than his fair share has recourse against the others for the excess. 3 Amounts that cannot be recovered from one joint and several debtor must be borne in equal shares by the others.

Art. 149 1 A joint and several debtor with right of recourse against his fellow debtors is subrogated to the rights of the creditor to the extent the latter has been satisfied.

220 Code of Obligations

B. Joint and several creditors

A. Condition precedent I. In general

II. Before the condition occurs

III. Benefits enjoyed in the interim

2 The creditor is liable if he favours the legal position of one joint and several debtor to the detriment of the others.

Art. 150 1 Multiple creditors become joint and several creditors where the debtor states that he wishes to grant each of them the right to receive full performance of the debt and in the cases prescribed by law. 2 Performance made to one joint and several creditor discharges the debtor as against all of them. 3 The debtor may choose which joint and several creditor he makes the payment to, provided none of them has initiated legal proceedings against him.

Section Two: Conditional Obligations

Art. 151 1 A contract is conditional if its binding nature is made dependent on the occurrence of an event that is not certain to happen. 2 The contract takes effect as soon as this condition precedent occurs, unless the parties clearly intended otherwise.

Art. 152 1 Until such time as the condition precedent occurs, the conditional obligor must refrain from any act which might prevent the due per- formance of his obligation. 2 A conditional obligee whose rights are jeopardised is entitled to apply for the same protective measures as if his claim were uncondi- tional. 3 On fulfilment of the condition precedent, dispositions made before it occurred are void to the extent that they impair the effect of the condi- tion precedent.

Art. 153 1 A creditor into whose possession a promised object has been deliv- ered before the condition precedent occurred may, on fulfilment of the condition precedent, keep any benefits obtained from it in the interim. 2 If the condition precedent fails to occur, he is obliged to return such benefits.

220Federal Act on the Amendment of the Swiss Civil Code

B. Condition subsequent

C. Joint provi- sions I. Fulfilment of the condition

II. Prevention in bad faith

III. Inadmissible conditions

A. Earnest and forfeit money

B. ...

Art. 154 1 A contract whose termination is made dependent on the occurrence of an event that is not certain to happen lapses as soon as that condi- tion is fulfilled. 2 As a rule, there is no retroactive effect.

Art. 155 If the condition consists of an act by one of the parties and that act need not be carried out in person, it may also be carried out by the party’s heirs.

Art. 156 A condition is deemed fulfilled where one of the parties has prevented its fulfilment by acting in bad faith.

Art. 157 Where a condition is attached with the intention of encouraging an unlawful or immoral act or omission, the conditional claim is void.

Section Three: Earnest Money, Forfeit Money, Salary Deductions and Contractual Penalties

Art. 158 1 Earnest money paid on entering into a contract is deemed a mark of the party’s intention to honour the contract rather than a forfeit. 2 Unless otherwise stipulated by agreement or local custom, the ear- nest money is retained by the recipient without being deducted from his claim. 3 Where a sum of forfeit money has been agreed, the party that paid the sum may withdraw from the contract by relinquishing it and the party that received it by returning twice the amount.

Art. 15941

41 Repealed by No II Art. 6 No 1 of the Federal Act of 25 June 1971 (at the end of this Code, Final and Transitional Provisions of Title X).

220 Code of Obligations

C. Contractual penalty I. Rights of the creditor 1. Relation between penalty and contractual performance

2. Relation between penalty and damage

3. Forfeiture of part payments

II. Amount, nullity and reduction of the penalty

Art. 160 1 Where a penalty is promised for non-performance or defective per- formance of a contract, unless otherwise agreed, the creditor may only compel performance or claim the penalty. 2 Where the penalty is promised for failure to comply with the stipu- lated time or place of performance, the creditor may claim the penalty in addition to performance provided he has not expressly waived such right or accepted performance without reservation. 3 The foregoing does not apply if the debtor can prove that he has the right to withdraw from the contract by paying the penalty.

Art. 161 1 The penalty is payable even if the creditor has not suffered any loss or damage. 2 Where the loss or damage suffered exceeds the penalty amount, the creditor may claim further compensation only if he can prove that the debtor was at fault.

Art. 162 1 Any agreement that part payments are forfeited to the creditor in the event the contract is terminated shall be determined in accordance with the provisions governing contractual penalties.

422 ...

Art. 163 1 The parties are free to determine the amount of the contractual pen- alty. 2 The penalty may not be claimed where its purpose is to reinforce an unlawful or immoral undertaking or, unless otherwise agreed, where performance has been prevented by circumstances beyond the debtor’s control. 3 At its discretion, the court may reduce penalties that it considers excessive.

42 Repealed by Annex 2 No II 1 to the Federal Act of 23 March 2001 on Consumer Credit (SR 221.214.1).

220Federal Act on the Amendment of the Swiss Civil Code

A. Assignment of claims I. Requirements 1. Voluntary assignment a. Admissibility

b. Form of the contract

2. Assignment by law or court order

II. Effect of assignment 1. Position of the debtor a. Payment made in good faith

b. Refusal of payment and deposit

Title Five: Assignment of Claims and Assumption of Debt

Art. 164 1 A creditor may assign a claim to which he is entitled to a third party without the debtor’s consent unless the assignment is forbidden by law or contract or prevented by the nature of the legal relationship. 2 The debtor may not object to the assignment on the grounds that it was excluded by agreement against any third party who acquires the claim in reliance on a written acknowledgement of debt in which there is no mention of any prohibition of assignment.

Art. 165 1 An assignment is valid only if done in writing. 2 No particular form is required for an undertaking to enter into an assignment agreement.

Art. 166 Where legal provisions or a court judgment require a claim to be assigned to another person, the assignment is effective towards third parties without need for any particular form or even for a statement of intent by the former creditor.

Art. 167 Where, before the assignment has been brought to his attention by the assignor or the assignee, the debtor makes payment in good faith to his former creditor or, in the case of multiple assignments, to a subsequent assignee who acquired the claim, he is validly released from his obli- gation.

Art. 168 1 In the event of dispute as to entitlement, the debtor may refuse pay- ment and discharge his obligation by depositing the payment with the court. 2 He makes payment at his own risk if he does so with knowledge of the dispute. 3 Where legal action is pending and the debt is due, each party may require the debtor to deposit the payment with the court.

220 Code of Obligations

c. Objections raised by the debtor

2. Transfer of preferential and accessory rights, documents and evidence

3. Warranty a. In general

b. In the case of assignment by way of satisfac- tion

c. Scope of liability

III. Special provisions

Art. 169 1 Any objection that could have been made to the assignor’s claim may also be made to the assignee if it applied at the time the debtor first learned of the assignment. 2 If the debtor held a countervailing claim that was not yet due at that time, he may nonetheless set it off against the assigned claim provided it did not fall due any later than the assigned claim.

Art. 170 1 The assignment of a claim includes all preferential and accessory rights except those that are inseparable from the person of the assignor. 2 The assignor is bound to surrender to the assignee the legal docu- ment pertaining to the debt together with all available evidence thereof and to furnish him with all information necessary to assert the claim. 3 Arrears of interest are presumed assigned with the main debt.

Art. 171 1 Where assignment is made for valuable consideration, the assignor warrants that the claim exists at the time of assignment. 2 However, he does not warrant that the debtor is solvent unless he has undertaken to do so. 3 Where there is no valuable consideration for the assignment, the assignor does not even warrant that the claim exists.

Art. 172 Where a creditor has assigned his claim in payment without fixing the amount at which the claim should be credited, the assignee need credit only the amount that he actually receives from the debtor or would have been able to obtain by exercising all due diligence.

Art. 173 1 The assignor is liable under warranty only for the valuable considera- tion received plus interest and in addition for the costs of the assign- ment and of any unsuccessful proceedings against the debtor. 2 Where a claim is assigned by operation of law, the previous creditor warrants neither the existence of the claim nor the solvency of the debtor.

Art. 174 Where the law envisages special provisions governing the assignment of claims, these are unaffected.

220Federal Act on the Amendment of the Swiss Civil Code

B. Assumption of debt I. Debtor and debt acquirer

II. Contract between debt acquirer and creditor 1. Offer and acceptance

2. Lapse of offer

III. Effect of change of debtor 1. Accessory rights

Art. 175 1 A person who promises to answer for the debt of another assumes an obligation to release the debtor from his obligation either by satisfying the creditor or by taking the debtor’s place with the consent of the creditor. 2 The debtor may not compel performance of the obligation by the party assuming the debt until the debtor has discharged his obligations under the debt assumption contract. 3 If the previous debtor is not released from his debt, he may request that the new debtor furnish security.

Art. 176 1 The accession of the debt acquirer to the debt relationship in lieu of and with the release of the previous debtor is effected by means of a contract between the debt acquirer and the creditor. 2 An offer to enter into the contract may consist of notification of the creditor that the debt is to be assumed. Notification must be made either by the debt acquirer or, on his authority, by the previous debtor. 3 The creditor’s acceptance may be express or implied by the circum- stances and is presumed once the creditor unreservedly takes receipt of a payment from the debt acquirer or consents to some other act per- formed by him in the capacity of debtor.

Art. 177 1 The creditor may declare his acceptance at any time, but the debt acquirer and the former debtor may set the creditor a time limit for acceptance and where this expires without communication from the creditor, he is deemed to have refused the offer. 2 If the creditor agrees some other debt assumption arrangement before the offer has been accepted and the new prospective debt ac- quirer has also made an offer to the creditor, the party that made the previous offer is no longer bound thereby.

Art. 178 1 The rights that are accessory to the debt remain unaffected by the change of debtor save to the extent that they are inseparable from the person of the previous debtor. 2 However, pledges and sureties provided by third parties remain in place in favour of the creditor only provided the pledgor or surety has consented to the assumption of the debt.

220 Code of Obligations

2. Objections

IV. Failure of debt assumption contract

V. Assignment of assets or a business with assets and liabilities

Art. 179 1 Any defences arising from the debt relationship are available to the new debtor as they were to the former. 2 The new debtor may not invoke the defences personally available to the old debtor against the creditor, unless otherwise provided in the contract with the creditor. 3 Where the debt acquirer has defences arising against the debtor from the legal relationship underlying the assumption of debt, these may not be invoked against the creditor.

Art. 180 1 In the event of the failure of the debt assumption contract, the previ- ous debtor’s obligation is revived with all accessory rights, subject to the rights of bona fide third parties. 2 The creditor may also claim damages from the would-be debt ac- quirer for any damage suffered as a result of the loss of security previ- ously obtained or for similar reasons, unless the would-be debt ac- quirer can prove that he was in no way to blame for the failure of the debt assumption contract or the damage caused to the creditor.

Art. 181 1 A person to whom assets or a business with assets and liabilities are assigned automatically becomes liable to the creditors of the debts encumbering such assets or business on notification of the assignment to the creditors by him or by publication in official journals. 2 However, the previous debtor remains jointly and severally liable with the new debtor for three years, commencing on the date of notifi- cation or publication in the case of claims already due and on the maturity date in the case of claims falling due subsequently.43 3 In other respects, an assumption of debt of this kind has the same effect as the assumption of an individual debt. 4 The takeover by assignment of assets or businesses of commercial enterprises, cooperatives, associations, foundations or sole proprietor- ships registered in the commercial register is governed by the provi- sions of the Mergers Act of 3 October 200344.45

43 Amended by Annex No 2 to the Mergers Act of 3 Oct. 2003, in force since 1 July 2004 (SR 221.301).

44 SR 221.301 45 Inserted by Annex No 2 to the Mergers Act of 3 Oct. 2003, in force since 1 July 2004

(SR 221.301).

220Federal Act on the Amendment of the Swiss Civil Code

VI. ...

VII. In relation to division of estate and land purchase

A. Rights and obligations of the parties in general

B. Benefits and risks

C. Reservation of cantonal law

Art. 18246

Art. 183 The special provisions governing assumption of debt when dividing estates or disposing of pledged immovable property are unaffected.

Division Two: Types of Contractual Relationship Title Six: Sale and Exchange Section One: General Provisions

Art. 184 1 A contract of sale is a contract whereby the seller undertakes to deliver the item sold and transfer ownership of it to the buyer in return for the sale price, which the buyer undertakes to pay to the seller. 2 Unless otherwise provided by agreement or custom, the seller and the buyer are obliged to discharge their obligations simultaneously quid pro quo. 3 The price is deemed sufficiently determined where it can be deter- mined from the circumstances.

Art. 185 1 The benefit and risk of the object pass to the buyer on conclusion of the contract, except where otherwise agreed or dictated by special circumstance. 2 Where the object sold is defined only in generic terms, the seller must select the particular item to be delivered and, if it is to be shipped, must hand it over for dispatch. 3 In a contract subject to a condition precedent, benefit and risk of the object do not pass to the buyer until the condition has been fulfilled.

Art. 186 Cantonal law may limit or exclude the right to bring claims in connec- tion with retail sales of alcoholic beverages, including hotel bills.

46 Repealed by Annex No 2 to the Mergers Act of 3 Oct. 2003, with effect from 1 July 2004 (SR 221.301).

220 Code of Obligations

A. Object

B. Seller’s obligations I. Transfer 1. Transfer costs

2. Transport costs

3. Delivery default a. Withdrawal from commercial transactions

b. Liability for and computation of damages

Section Two: The Chattel Sale

Art. 187 1 Any sale in which the object is not land, property or a right in rem entered in the land register is a chattel sale. 2 Where constituent parts of land, such as crops, architectural salvage materials or quarry products, are separated therefrom for transfer to the acquirer, their sale constitutes a chattel sale.

Art. 188 Unless otherwise provided by agreement or custom, the seller bears the costs of transfer and in particular those of measuring and weighing, while the buyer bears those of documentation and receipt.

Art. 189 1 Unless otherwise provided by agreement or custom, if the object sold must be transported to a place other than the place of performance, the buyer bears the costs of such transport. 2 The seller is presumed to have borne the transport costs where free delivery has been agreed. 3 Where delivery free of shipping costs and duties has been agreed, the seller is deemed to have assumed the export, transit and import duties payable during transport but not the consumer tax levied on receipt of the object.

Art. 190 1 Where in commercial transactions the contract specifies a time limit for delivery and the seller is in default, the presumption is that the buyer will forego delivery and claim damages for non-performance. 2 However, if the buyer prefers to demand delivery, he must inform the seller without delay on expiry of the time limit.

Art. 191 1 A seller who fails to discharge his contractual obligation is liable for the resultant loss or damage to the buyer. 2 The buyer in a commercial transaction is entitled to compensation of the difference between the sale price and the price he has paid in good faith to replace the object that was not delivered to him. 3 In the case of goods with a market or stock exchange price, the buyer need not buy the replacement object but is entitled to claim as damages

220Federal Act on the Amendment of the Swiss Civil Code

II. Warranty of title 1. Warranty obligation

2. Procedure a. Third-party notice

b. Surrender of object without court decision

3. Rights of the buyer a. Full disposses- sion

the difference between the contractual sale price and the market price at the time of performance.

Art. 192 1 The seller is obliged to transfer the purchased goods to the buyer free from any rights enforceable by third parties against the buyer that already exist at the time the contract is concluded. 2 Where on conclusion of the contract the buyer was aware of the existence of such rights, the seller is not bound unless by any express warranty given. 3 Any agreement to exclude or limit the warranty obligation is void if the seller has intentionally omitted to mention the right of a third party.

Art. 19347 1 The requirements for and effects of the third-party notice are gov- erned by the CivPC48. 2 In the event of failure to serve the third-party notice for reasons not attributable to the seller, he is released from his warranty obligation to the extent that he can prove that the outcome would have been more favourable had the third-party notice been served promptly.

Art. 194 1 The seller remains subject to the warranty obligation even if the buyer has in good faith acknowledged the right of a third party without waiting for a court decision or if he has agreed to submit to arbitration, provided that the seller was warned of the arbitration proceedings in good time but declined an invitation to engage therein. 2 The same applies if the buyer proves that he was compelled to sur- render the object.

Art. 195 1 In the case of full dispossession, the contract of sale is deemed ter- minated and the buyer has the right to claim:

1. restitution of the price paid, with interest, less the value of any fruits the buyer has obtained or neglected to obtain from the object and other benefits derived therefrom;

47 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

48 SR 272

220 Code of Obligations

b. Partial dispossession

c. Objects of cultural heritage

III. Warranty of quality and fitness 1. Object of the warranty a. In general

2. reimbursement of his expenditures on the object, to the extent this cannot be obtained from the third party with the superior right;

3. reimbursement of all judicial and extrajudicial costs arising from the proceedings, apart from those he would have avoided by serving third-party notice on the seller;

4. compensation for all other damage directly caused by the dis- possession.

2 The seller is also obliged to make good any further loss suffered by the buyer unless the seller can prove that he is not at fault.

Art. 196 1 Where the buyer is dispossessed of only part of the purchased object or it is encumbered with a charge in rem for which the seller is guaran- tor, the buyer may not seek termination of the contract of sale but may only claim damages for being thus dispossessed. 2 However, where in the circumstances there is cause to presume that he would not have entered into the contract if he had foreseen such a partial dispossession, he has the right to request its termination. 3 In this case, he must return to the seller that part of the item of which he has not been dispossessed together with the benefits he obtained from it in the interim.

Art. 196a49

In the case of objects of cultural heritage within the meaning of Article 2 paragraph 1 of the Cultural Property Transfer Act of 20 June 200350, actions for breach of warranty of title become time-barred one year after the buyer discovered the defect of title but in any event 30 years after the contract was concluded.

Art. 197 1The seller is liable to the buyer for any breach of warranty of quality and for any defects that would materially or legally negate or substan- tially reduce the value of the object or its fitness for the designated purpose. 2 He is liable even if he was not aware of the defects.

49 Inserted by Art. 32 No 2 of the Cultural Property Transfer Act of 20 June 2003, in force since 1 June 2005 (SR 444.1).

50 SR 444.1

220Federal Act on the Amendment of the Swiss Civil Code

b. In livestock trading

2. Exclusion of warranty

3. Defects known to the buyer

4. Notice of defects a. In general

b. In livestock trading

Art. 198 There is no warranty obligation in sales of livestock (horses, donkeys, mules, cattle, sheep, goats or pigs) unless the seller has given express warranty in writing to the buyer or has intentionally misled the buyer.

Art. 199 Any agreement to exclude or limit the warranty obligation is void if the seller has fraudulently concealed the failure to comply with war- ranty from the buyer.

Art. 200 1 The seller is not liable for defects known to the buyer at the time of purchase. 2 He is not liable for defects that any normally attentive buyer should have discovered unless he assured the buyer that they do not exist.

Art. 201 1 The buyer must inspect the condition of the purchased object as soon as feasible in the normal course of business and, if he discovers defects for which the seller is liable under warranty, must notify him without delay. 2 Should he fail to do so, the purchased object is deemed accepted except in the case of defects that would not be revealed by the custom- ary inspection. 3 Where such defects come to light subsequently, the seller must be notified immediately, failing which the object will be deemed accepted even in respect of such defects.

Art. 202 1 Where in a sale of livestock a written assurance includes no time limit and does not warrant that an animal is pregnant, the seller is not liable to the buyer unless a defect is discovered and notified within nine days of delivery or of the notice of default in taking delivery and an application is made to the competent authority within the same time limit to have the animal examined by experts. 2 The court evaluates the experts’ report at its discretion. 3 In other respects the procedure is governed by regulations enacted by the Federal Council.

220 Code of Obligations

5. Intentional deceit

6. Remote sale and purchase

7. Types of action a. Rescission or reduction

b. Substitute performance

Art. 203 Where the seller has wilfully misled the buyer, liability for breach of warranty is not limited by any failure on the buyer’s part to give prompt notice of defects.

Art. 204 1 A buyer who complains that an object sent from another place is defective is obliged to place it in temporary storage, provided the seller has no representative in the place in which it was received, and cannot simply return it to the seller. 2 The buyer is obliged to have the condition of the object duly and promptly witnessed, failing which he will bear the burden of proving that the alleged defects already existed when he took receipt of the object. 3 Where there is a risk that the object will rapidly deteriorate, the buyer has the right and, should the interests of the seller so require, the obligation to arrange its sale with the assistance of the competent authority of the place where the object is located, but must notify the seller of such sale as soon as possible to avoid rendering himself liable in damages.

Art. 205 1 In claims for breach of warranty of quality and fitness, the buyer may sue either to rescind the contract of sale for breach of warranty or to have the sale price reduced by way of compensation for the decrease in the object’s value. 2 Even where the buyer has brought action for rescission the court is free to order a reduction in the price of the object if it does not con- sider rescission justified by the circumstances. 3 If the decrease in the object’s value is equal to the sale price, the buyer may only sue for rescission.

Art. 206 1 Where the contract of sale is for delivery of a specified quantity of fungibles, the buyer may choose to bring action either for rescission or for a reduction in the sale price or to request other acceptable goods of the same kind. 2 Where the purchased objects have not been sent from another place, the seller may discharge his obligation to the buyer by immediately delivering acceptable items of the same kind and making good any loss or damage the buyer has suffered.

220Federal Act on the Amendment of the Swiss Civil Code

c. Rescission when the object is destroyed

8. Rescission of the contract of sale a. In general

b. For sales of batches or sets of objects

9. Time limits

Art. 207 1 Action for rescission of the contract of sale may be brought if the object has been destroyed as a result of its defects or by accident. 2 In such cases the buyer must return only that which remains of the object. 3 If the object is destroyed through the fault of the buyer or has been sold on or transformed by him, his only claim is for compensation for the decrease in value.

Art. 208 1 In the event of rescission of the contract of sale the buyer must return the object to the seller together with any benefits derived from it in the interim. 2 The seller must reimburse to the buyer the sale price paid together with interest and, in accordance with the provisions governing full dispossession, compensation for litigation costs, expenses and the loss or damage incurred by the buyer as a result of the delivery of defective goods. 3 The seller is obliged to compensate the buyer for any further loss or damage unless he can prove that no fault is attributable to him.

Art. 209 1 Where the sale involves a batch or set of objects of which only some are defective, action for rescission may be brought only in respect of the defective items. 2 However, where the defective items cannot be separated from the unflawed items without substantial prejudice to the buyer or the seller, rescission of the contract of sale must extend to the entire batch or set. 3 Rescission in respect of the main sale object necessarily involves rescission in respect of all accessory objects even if they are priced separately, whereas rescission in respect of accessory objects does not extend to the main object.

Art. 21051 1 An action for breach of warranty of quality and fitness becomes time-barred two years after delivery of the object to the buyer, even if he does not discover the defects until later, unless the seller has as- sumed liability under warranty for a longer period.

51 Amended by No I of the Federal Act of 16 March 2012 (Limitation Periods for Guarantee Claims. Extension and Coordination), in force since 1 Jan. 2013 (AS 2012 5415; BBl 2011 2889 3903).

220 Code of Obligations

C. Obligations of the buyer I. Payment of the sale price and acceptance of the object

II. Fixing the price

2 The period amounts to five years where defects in an object that has been incorporated in an immovable work in a manner consistent with its nature and purpose have caused the work to be defective. 3 In the case of cultural property within the meaning of Article 2 paragraph 1 of the Cultural Property Transfer Act of 20 June 200352, actions for breach of warranty of quality and fitness become time- barred one year after the buyer discovered the defect but in any event 30 years after the contract was concluded. 4 An agreement to reduce the limitation period is null and void if:

a. the limitation period is reduced to less than two years, or less than one year in the case of second-hand goods;

b. the object is intended to be used by the buyer or his or her fam- ily; and

c. the seller is acting in the course of his or her professional or commercial activities.

5 The defence of defective goods remains available to the buyer pro- vided he has notified the seller within the limitation period. 6 The seller may not invoke the limitation period if it is proved that he wilfully misled the buyer. The foregoing does not apply to the 30-year period under paragraph 3.

Art. 211 1 The buyer has an obligation to pay the price in accordance with the terms of the contract and to accept the sale object provided it is offered to him by the seller as contractually agreed. 2 Unless otherwise provided by agreement or custom, such acceptance must take place immediately.

Art. 212 1 Where the buyer places a firm order without indicating the sale price, the price is presumed to be the average current market price at the place of performance. 2 Where the price is based on the weight of the goods, the weight of the packaging (tare) is deducted. 3 The foregoing does not apply to special commercial customs whereby the gross weight of certain resale merchandise is reduced by a set amount or percentage or the price is based on the gross weight including packaging.

SR 444.1

220Federal Act on the Amendment of the Swiss Civil Code

III. Time when price falls due, interest

IV. Buyer in default 1. Seller’s right of with- drawal

2. Liability for and computation of damages

A. Formal requirements

Art. 213 1 The price falls due as soon as the property passes into the buyer’s possession, unless some other juncture is agreed. 2 Regardless of the provision governing default on expiry of a speci- fied time limit, interest accrues on the sale price even if no reminder is issued where such practice is customary or the buyer may derive fruits or other benefits from the purchased object.

Art. 214 1 Where the property is to be delivered against advance payment of the price in full or in instalments and the buyer is in default on such pay- ment, the seller is entitled to withdraw from the contract without further formality. 2 However, if he intends to exercise this right he must notify the buyer immediately. 3 Where the purchased object has passed into the buyer’s possession prior to payment, the seller may withdraw from the contract on the grounds that the buyer is in default and demand the return of the object only if he has expressly reserved the right to do so.

Art. 215 1 Where the buyer in a commercial transaction fails to discharge his payment obligation, the seller is entitled to compensation for the difference between the sale price and the price at which he has subse- quently sold the object in good faith. 2 In the case of goods with a market or stock exchange price, the buyer is entitled to claim as damages the difference between the contractual sale price and the market price at the time of performance without needing to sell the object on.

Section Three: Sale of Immovable Property

Art. 216 1 A contract for the sale of immovable property is valid only if done as a public deed. 2 A preliminary contract and an agreement conferring a right of pre- emption, purchase or repurchase in relation to immovable property is valid only if done as a public deed.53

53 Amended by No II of the Federal Act of 4 Oct. 1991, in force since 1 Jan. 1994 (AS 1993 1404 1409; BBl 1988 III 889).

220 Code of Obligations

Abis. Duration and priority notice

Ater. Inheritance and assignment

Aquater. Rights of pre-emption I. Pre-emption events

II. Effect of pre- emption, conditions

3 An agreement conferring a right of pre-emption without fixing a price is valid if done in writing.54

Art. 216a55

Rights of pre-emption or repurchase may be agreed for a maximum duration of 25 years and rights of purchase for a maximum of 10 years, and they may be entered under priority notice in the land register.

Art. 216b56 1 Unless otherwise agreed, contractual rights of pre-emption, purchase and repurchase may be inherited but not assigned. 2 Where assignment is permitted by contractual agreement, it is sub- ject to the same formal requirements as apply to the establishment of the right.

Art. 216c57 1 A right of pre-emption may be exercised on the sale of the immov- able property or any other legal transaction economically equivalent to a sale (pre-emption event). 2 In particular, the following are not pre-emption events: allocation to an heir in the division of an estate, forced sale, or acquisition in per- formance of public duties.

Art. 216d58 1 The seller must inform persons with a right of pre-emption of the conclusion and content of any contract of sale entered into. 2 Where the contract of sale is terminated after the right of pre-emption has been exercised or if necessary permission is refused for reasons pertaining to the person of the buyer, such termination or refusal has no effect on the person to whom the right of pre-emption accrues. 3 Unless the pre-emption agreement provides otherwise, the person with the right of pre-emption may purchase the property on the condi- tions agreed by the seller with the third party.

54 Amended by No II of the Federal Act of 4 Oct. 1991, in force since 1 Jan. 1994 (AS 1993 1404 1409; BBl 1988 III 889).

55 Inserted by No II of the Federal Act of 4 Oct. 1991, in force since 1 Jan. 1994 (AS 1993 1404 1409; BBl 1988 III 889).

56 Inserted by No II of the Federal Act of 4 Oct. 1991, in force since 1 Jan. 1994 (AS 1993 1404 1409; BBl 1988 III 889).

57 Inserted by No II of the Federal Act of 4 Oct. 1991, in force since 1 Jan. 1994 (AS 1993 1404 1409; BBl 1988 III 889).

58 Inserted by No II of the Federal Act of 4 Oct. 1991, in force since 1 Jan. 1994 (AS 1993 1404 1409; BBl 1988 III 889).

220Federal Act on the Amendment of the Swiss Civil Code

Art. 216e59 III. Exercise, A person wishing to exercise his right of pre-emption must give notice forfeiture of his intention within three months to the seller or, if it is entered in

the land register, to the owner. This time limit commences on the day on which the person with the right of pre-emption became aware of the conclusion and content of the contract of sale.

Art. 217 B. Conditional 1 Conditional purchases of immovable property are not entered in the purchase and reservation of land register until the condition has been fulfilled. ownership 2 A reservation of ownership may not be entered in the land register.

Art. 21860 C. Agricultural The Federal Act of 4 October 199161 on Rural Land Rights applies to properties the sale of agricultural properties.

Art. 219 D. Warranty 1 Unless otherwise agreed, the seller of a property must compensate

the buyer if it is not of the size indicated in the contract of sale. 2 Where the property is not of the size entered in the land register based on an official survey, the seller must compensate the buyer only where he gave express warranty to that effect. 3 The warranty obligation in respect of defects in a building becomes time-barred five years after ownership is acquired.

Art. 220 E. Benefits and Where the agreement stipulates a date on which the buyer is to take risks possession of the property, the presumption is that the associated

benefits and risks do not pass to the buyer until that date.

Art. 221 F. Reference to In other respects the provisions governing chattel sale apply mutatis chattel sale mutandis to the sale and purchase of land.

59 Inserted by No II of the Federal Act of 4 Oct. 1991, in force since 1 Jan. 1994 (AS 1993 1404 1409; BBl 1988 III 889).

60 Amended by Art. 92 No 2 of the Federal Act of 4 Oct. 1991 on Rural Land Rights, in force since 1 Jan. 1994 (SR 211.412.11).

61 (AS 2006 979 994; BBl 2004 5523 6187).SR 211.412.11

220 Code of Obligations

A. Sale by sample

B. Sale on approval or inspection I. Effect

II. Inspection on the seller’s premises

III. Inspection on the buyer’s premises

Section Four: Special Types of Sale

Art. 222 1 In a sale by sample, the person to whom the sample was entrusted is not obliged to prove that the sample he presented is identical with the one received; his personal assurance to the court is sufficient, even where the sample presented has altered in form since delivery, pro- vided that such alteration was a necessary consequence of the exami- nation made of the sample. 2 In any event the other party is entitled to prove that the sample is not the same one. 3 If the sample has been spoiled or been destroyed while in the posses- sion of the buyer, even if he was not at fault, the onus is not on the seller to prove that the object conforms with the sample, but on the buyer to prove the contrary.

Art. 223 1 In a sale on approval or inspection, the buyer is free to accept or refuse the object. 2 Until it is accepted, the seller remains its owner even if it has passed into the buyer’s possession.

Art. 224 1 Where the object is to be inspected on the premises of the seller, he is released from his obligation if the buyer fails to accept the object within the agreed or customary time limit. 2 In the absence of any such time limit the seller may, after an appro- priate interval, call on the buyer to declare whether he accepts the object, and the seller is released from his obligation if the buyer fails to make such declaration immediately on request.

Art. 225 1 Where the object has been delivered to the buyer prior to inspection, the sale is deemed to have been approved if the buyer neither declares that he rejects the object nor returns it within the agreed or customary time limit or, in the absence of any such time limit, immediately on demand by the seller. 2 The sale is similarly treated as completed, if the buyer pays the whole or part of the price without reservation or if he deals with the property otherwise than was necessary for its inspection.

220Federal Act on the Amendment of the Swiss Civil Code

Art. 22662

Art. 226a-226d63 C. Hire purchase I. ...

Art. 226e64

Art. 226f-226k65

Art. 226l66

Art. 226m67

Art. 22768

Art. 227a–227i69

Art. 22870

Art. 229 D. Auctions 1 At a compulsory auction, a contract of sale is concluded when the I. Conclusion of official auctioneer knocks the object down to the highest bidder.the purchase

62 Repealed by No I of the Federal Act of 23 March 1962 (AS 1962 1082; BBl 1960 I 537). 63 Inserted by No I of the Federal Act of 23 March 1962 (AS 1962 1082; BBl 1960 I 537).

Repealed by Annex 2 No II 1 to the Federal Act of 23 March 2001 on Consumer Credit (SR 221.214.1).

64 Inserted by No I of the Federal Act of 23 March 1962 (AS 1962 1082; BBl 1960 I 537). Repealed by No I of the Federal Act of 14 Dec. 1990 (AS 1991 974; BBl 1989 III 1189, 1990 I 108).

65 Inserted by No I of the Federal Act of 23 March 1962 (AS 1962 1082; BBl 1960 I 537). Repealed by Annex 2 No II 1 to the Federal Act of 23 March 2001 on Consumer Credit (SR 221.214.1).

66 Inserted by No I of the Federal Act of 23 March 1962, in force since 1 Jan. 1963 (AS 1962 1082; BBl 1960 I 537). Repealed by Annex No 5 to the Civil Jurisdiction Act of 24 March 2000 (SR 272).

67 Inserted by No I of the Federal Act of 23 March 1962, in force since 1 Jan. 1963 (AS 1962 1082; BBl 1960 I 537). Repealed by Annex 2 No II 1 to the Federal Act of 23 March 2001 on Consumer Credit (SR 221.214.1).

68 Repealed by No I of the Federal Act of 23 March 1962 (AS 1962 1082; BBl 1960 I 537). 69 Inserted by No I of the Federal Act of 23 March 1962 (AS 1962 1047; BBl 1960 I 523).

Repealed by No I of the Federal Act of 13 Dec. 2013 (Repeal of the Provisions on Advance Payment Agreements), with effect from 1 July 2014 (AS 2014 869; BBl 2013 4631 5793).

70 Repealed by No I of the Federal Act of 13 Dec. 2013 (Repeal of the Provisions on Advance Payment Agreements), with effect from 1 July 2014 (AS 2014 869; (AS 06 979 994; BBl 2004 5523 6187).BBl 2013 4631 5793).

220 Code of Obligations

II. Avoidance

III. Binding nature of bids at auction 1. In general

2. Immovable property

IV. Cash payment

V. Warranty

2 In the case of a voluntary auction that has been publicly announced and is open to all bidders, a contract of sale is concluded when the seller accepts the bid of the highest bidder. 3 Unless the seller has expressed some other intention, the auctioneer is deemed to have the authority to knock the object down to the high- est bidder.

Art. 230 1 Any interested party may within ten days bring a claim for avoidance in respect of an auction whose outcome has been influenced by unlaw- ful or immoral means. 2 In the case of a compulsory auction, the avoidance claim must be brought before the supervisory authority, and in all other cases before the court.

Art. 231 1 A bidder is bound by his offer according to the auction terms and conditions. 2 Unless these provide otherwise, he is released from his obligation if a higher bid is made or if his own bid is not accepted immediately after the usual call has been made.

Art. 232 1 In the case immovable property, the highest bid must be accepted or refused at the auction itself. 2 Any condition whereby the bidder is bound to maintain his bid after the auction is void, other than in the case of compulsory auctions or sales of land or buildings that require official approval.

Art. 233 1 The successful bidder must pay in cash unless the auction terms and conditions provide otherwise. 2 The seller may immediately withdraw from the transaction if pay- ment is not tendered in cash or in accordance with the auction terms and conditions.

Art. 234 1 Sale at compulsory auction is without warranty, apart from special assurances given or where the bidders are intentionally deceived.

220Federal Act on the Amendment of the Swiss Civil Code

VI. Transfer of ownership

VII. Cantonal provisions

A. Reference to provisions governing purchase

B. Warranty

2 The successful bidder acquires the object in the condition and with the attendant rights and encumbrances indicated in the public registers or the lot description and/or those that exist by operation of law. 3 In sales at voluntary public auction, the seller has the same liability as in any other sale, but in the lot description he may disclaim any warranty obligation with the exception of liability for intentional deceit.

Art. 235 1 The successful bidder for a chattel acquires title to it as soon as it is knocked down to him, whereas ownership of immovable property is not transferred until the entry is made in the land register. 2 The official auctioneers immediately notify the land registry of the sale at auction by reference to the formal auction record. 3 The provisions governing acquisition of ownership at compulsory auction are reserved.

Art. 236 The cantons may enact other provisions governing sale at public auction within the bounds of federal law.

Section Five: The Contract of Exchange

Art. 237 The rules governing contracts of sale also apply to contracts of ex- change in the sense that each party to the exchange is treated as seller in respect of the object promised by him and as buyer in respect of the object promised to him.

Art. 238 A party to the exchange who is dispossessed of the object received or has returned it as defective may either claim for damages or for the return of the object that he delivered.

Title Seven: Gifts

Art. 239 1 A gift is any inter vivos disposition in which a person uses his assets to enrich another without receiving an equivalent consideration.

A. Definition

(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

B. Personal capacity I. Of the donor

II. Of the recipient

C. Establishing the gift I. From hand to hand

II. Promise of a gift

III. Effect of acceptance

2 Waiving a right before having acquired it or renouncing an inheri- tance does not constitute a gift. 3 The performance of a moral duty is not considered to be a gift.

Art. 240 1 A person with capacity to act may make gifts of his assets within the bounds imposed by matrimonial property law and inheritance law. 2 The assets of a person who lacks capacity to act may be used only to make customary occasional gifts. The liability of the legal representa- tive is reserved.71 3 ...72

Art. 241 1 A person who lacks capacity to act may accept and legally acquire title to a gift provided he has capacity to consent. 2 However, the gift is not acquired or is annulled where his legal representative forbids him to accept it or instructs him to return it.

Art. 242 1 A gift from hand to hand is made when the donor presents the object to the recipient. 2 Gifts of title or rights in rem to immovable property are not effective until an entry is made in the land register. 3 The entry presupposes a valid promise to give.

Art. 243 1 The promise of a gift is valid only if done in writing. 2 A promise to give title or rights in rem to immovable property is valid only if done as a public deed. 3 On fulfilment of the promise to give, the relationship is treated as a gift from hand to hand.

Art. 244

71 Amended by Annex No 10 of the Federal Act of 19 Dec. 2008 (Adult Protection, Law of Persons and Law of Children), in force since 1 Jan. 2013 (AS 2011 725; BBl 2006 7001).

72 Repealed by Annex No 10 of the Federal Act of 19 Dec. 2008 (Adult Protection, Law of Persons and Law of Children), with effect from 1 Jan. 2013 (AS 2011 725; BBl 2006 7001).

220Federal Act on the Amendment of the Swiss Civil Code

D. Conditions and provisos I. In general

II. Fulfilment of provisos

III. Reversion clause

E. Liability of the donor

F. Annulment of gifts I. Claim for return of gift

A person who bestows an object on another person by way of a gift may reverse the bestowal at any time before the recipient has accepted it, even where he has effectively separated it from his assets.

Art. 245 1 Conditions or provisos may be attached to a gift. 2 A gift whose occurrence is made contingent on the donor’s death is subject to the provisions governing testamentary dispositions.

Art. 246 1 The donor may bring action for fulfilment of a proviso that has been accepted by the recipient. 2 Where fulfilment of the proviso is in the public interest, the compe- tent authority may compel fulfilment after the death of the donor. 3 The recipient may refuse to fulfil the proviso if the value of the gift does not cover the expenses occasioned by the proviso and he is not reimbursed for the shortfall.

Art. 247 1 The donor may provide that the object given shall revert to him in the event that the recipient dies before he does. 2 A reversionary right attached to a gift of title or rights in rem to immovable property may be entered under priority notice in the land register.

Art. 248 1 The donor is liable for loss or damage caused by the gift to the re- cipient only in the event of wilful injury or gross negligence. 2 He need give only such warranty as he has promised in respect of the object given or the claim assigned.

Art. 249 Where a gift has been made from hand to hand or a promise to give has been fulfilled, the donor may revoke the gift and claim return of the object given, provided the recipient is still enriched thereby:

1.73 if the recipient has committed a serious criminal offence against the donor or a person close to him;

73 Amended by Annex No 2 to the Federal Act of 26 June 1998, in force since 1 Jan. 2000 2006 979 994; BBl 2004 5523 6187).((AS 1999 1118 1142; BBl 1996 I 1).

220 Code of Obligations

II. Revocation and invalidation of a promise to give

III. Time limits and heirs’ right of action

IV. Death of the donor

2. if the recipient has grossly neglected his duties under family law towards the donor or any of the latter’s dependants;

3. if the recipient has failed without good cause to fulfil the pro- visos attached to the gift.

Art. 250 1 The donor who has made a promise to give may revoke the promise and refuse to fulfil it:

1. on the same grounds as justify a claim for return of the object given in the case of a gift from hand to hand;

2. where since the promise was made the donor’s financial situa- tion has altered to such an extent that making the gift would cause serious hardship;

3. where since the promise was made the donor has acquired du- ties under family law that previously did not exist or were sig- nificantly less onerous.

2 All promises to give are annulled when a certificate of loss is issued against the donor or he is declared bankrupt.

Art. 251 1 Revocation may take place at any time in the year commencing on the day on which the grounds for revocation came to the donor’s attention. 2 If the donor dies before the end of this one-year period, his right of action passes to his heirs for the remainder of the period. 3 The donor’s heirs may revoke the gift if the recipient wilfully and unlawfully caused the donor’s death or prevented him from exercising his right of revocation.

Art. 252 Unless otherwise provided, where the donor has undertaken to make periodic payments or performance, his obligation is extinguished on his death.

220Federal Act on the Amendment of the Swiss Civil Code

A. Definition and scope of application I. Definition

II. Scope of application 1. Residential and commercial premises

2. Provisions on protection against unfair rents

B. Tie-in transactions

C. Duration

Title Eight:74 The Lease Section One: General Provisions

Art. 253 Leases are contracts in which a landlord or lessor grants a tenant or lessee the use of an object in exchange for rent.

Art. 253a 1 The provisions governing the leasing of residential and commercial premises are also applicable to objects on such premises of which the tenant has use. 2 They are not applicable to holiday homes hired for three months or less. 3 The Federal Council issues the provisions for implementation.

Art. 253b 1 The provisions governing protection against unfair rents (Art. 269 et seq.) apply mutatis mutandis to non-agricultural leases and to other contracts whose essential purpose is to regulate the transfer of the use of residential or commercial premises against valuable consideration. 2 They do not apply to the lease of luxury apartments and single- occupancy residential units with six or more bedrooms and reception rooms (not including the kitchen). 3 The provisions governing challenges to unfair rents do not apply to residential premises made available with public sector support for which rent levels are set by a public authority.

Art. 254 A tie-in transaction linked to a lease of residential or commercial premises is void where the conclusion or continuation of the lease is made conditional on such transaction and, under its terms, the tenant assumes an obligation towards the landlord or a third party which is not directly connected with the use of the leased premises.

Art. 255 1 Leases may be concluded for a limited or indefinite duration.

74 Amended by No I of the Federal Act of 15 Dec. 1989, in force since 1 July 1990 (AS 1990 802 834; BBl 1985 I 1369). See also the financial provisions of Titles VIII and (AS 2006 979 994; BBl 2004 5523 6187).VIIIbis Art. 5, at the end of this Code.

220 Code of Obligations

D. Obligations of the landlord I. In general

II. Duty of disclosure

III. Charges and taxes

E. Obligations of the tenant or lessee I. Payment of rent and accessory charges 1. Rent

2. Accessory charges a. In general

2 Where the intention is that they should end without notice on expiry of the agreed duration, they have a limited duration. 3 Other leases are deemed to be of indefinite duration.

Art. 256 1 The landlord or lessor is required to make the object available on the agreed date in a condition fit for its designated use and to maintain it in that condition. 2 Clauses to the contrary to the detriment of the tenant or lessee are void if they are set out:

a. in previously formulated general terms and conditions; b. in leases for residential or commercial premises.

Art. 256a 1 If a report was drawn up on the return of the object at the end of the previous lease, the landlord or lessor must on request make this docu- ment available for perusal by the new tenant or lessee when the object is handed over to him. 2 Similarly, the new tenant or lessee has the right to be informed of the amount of rent paid under the previous lease.

Art. 256b The landlord or lessor bears all taxes and charges in connection with the leased object.

Art. 257 The rent is the consideration owed by the tenant or lessee to the land- lord or lessor for the transfer of the use of the object.

Art. 257a 1 Accessory charges are the consideration due for services provided by the landlord or lessor or a third party in connection with the use of the property. 2 They are payable by the tenant or lessee only where this has been specifically agreed with the landlord or lessor.

220Federal Act on the Amendment of the Swiss Civil Code

b. Residential and commercial premises

3. Payment deadlines

4. Tenant in arrears

II. Security furnished by the tenant

III. Care and consideration

Art. 257b 1 Accessory charges for residential and commercial premises are the actual outlays made by the landlord for services connected with the use of the property, such as heating, hot water and other operating costs, as well as public taxes arising from the use of the property. 2 The landlord must allow the tenant on his request to inspect the documentation for such outlays.

Art. 257c The tenant or lessee must pay the rent and, where applicable, the accessory charges at the end of each month and at the latest on expiry of the lease, unless otherwise agreed or required by local custom.

Art. 257d 1 Where, having accepted the property, the tenant or lessee is in arrears with payments of rent or accessory charges, the landlord or lessor may set a time limit for payment and notify him that in the event of non- payment the landlord or lessor will terminate the lease on expiry of that time limit. The minimum time limit is ten days, and 30 days for leases of residential or commercial premises. 2 In the event of non-payment within the time limit the landlord or lessor may terminate the contract with immediate effect or, for leases of residential and commercial premises, subject to at least 30 days’ notice ending on the last day of a calendar month.

Art. 257e 1 Where the tenant of residential or commercial premises furnishes security in the form of cash or negotiable securities, the landlord must deposit it in a bank savings or deposit account in the tenant’s name. 2 In residential leases, the landlord is not entitled to ask for more than three months’ rent by way of security. 3 The bank may release such security only with the consent of both parties or in compliance with a final payment order or final decision of the court. On expiry of one year following the end of the lease, the tenant or lessee may request that the security be returned to him by the bank if no claim has been brought against him by the landlord or lessor. 4 The cantons may enact further provisions.

Art. 257f 1 The tenant or lessee must use the object with all due care.

(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

IV. Duty of notification

V. Duty of tolerance

F. Non- performance or defective performance when object handed over

2 Where the lease relates to immovable property, the tenant must show due consideration for others who share the building and for neighbours. 3 If, despite written warning from the landlord or lessor, the tenant or lessee continues to act in breach of his duty of care and consideration such that continuation of the lease becomes unconscionable for the landlord or lessor or other persons sharing the building, the landlord or lessor may terminate the contract with immediate effect or, for leases of residential and commercial premises, subject to at least 30 days’ notice ending on the last day of a calendar month. 4 However, leases of residential and commercial premises may be terminated with immediate effect if the tenant intentionally causes serious damage to the property.

Art. 257g 1 On learning of defects which he himself is not obliged to remedy, the tenant or lessee must inform the landlord or lessor. 2 Failure to notify renders the tenant or lessee liable for any loss or damage incurred by the landlord or lessor as a result.

Art. 257h 1 The tenant or lessee must tolerate works intended to remedy defects in the object or to repair or prevent damage. 2 The tenant or lessee must permit the landlord or lessor to inspect the object to the extent required for maintenance, sale or future leasing. 3 The landlord or lessor must inform the tenant or lessee of works and inspections in good time and take all due account of the latter’s inter- ests when they are carried out; all claims of the tenant or lessee for reduction of the rent (Art. 259d) and for damages (Art. 259e) are reserved.

Art. 258 1 Where the landlord or lessor fails to hand over the property on the agreed date or hands it over with defects rendering it wholly or partly unfit for its designated use, the tenant or lessee may sue for non- performance of contractual obligations pursuant to Articles 107–109 above. 2 Where the tenant or lessee accepts the object despite such defects but insists that the contract be duly performed, he may make only such claims as would have accrued to him had the defects arisen during the lease (Art. 259a–259i).

220Federal Act on the Amendment of the Swiss Civil Code

G. Defects during the contract I. Obligation of tenant to carry out minor cleaning and repairs

II. Rights of the tenant 1. In general

2. Remedy of defects a. General principle

b. Exception

3 The tenant or lessee may bring the claims pursuant to Articles 259a– 259i below even if, when handed over to him, the object has defects:

a. which render the object less fit for its designated use, albeit not substantially so;

b. which the tenant or lessee would have to remedy at his own expense during the lease (Art. 259).

Art. 259 The tenant or lessee must remedy defects which can be dealt with by minor cleaning or repairs as part of regular maintenance and, depend- ing on local custom, must do so at his own expense.

Art. 259a 1 Where defects arise in the object which are not attributable to the tenant or lessee and which he is not obliged to remedy at his own expense, or where he is prevented from using the object as contractu- ally agreed, he may require that the landlord or lessor:

a. repair the object; b. reduce the rent proportionately; c. pay damages; d. assume responsibility for litigation against a third party.

2 In addition, a tenant of immovable property may pay rent on deposit rather than to the landlord.

Art. 259b Where the landlord is aware of a defect and fails to remedy it within a reasonable time, the tenant may:

a. terminate the contract with immediate effect if the defect ren- ders the leased property unfit or significantly less fit for its designated use or renders a chattel less fit for purpose;

b. arrange for the defect to be remedied at the landlord’s or les- sor’s expense if it renders the object less fit for its designated use, albeit not substantially so.

Art. 259c The tenant or lessee is not entitled to rectification of the defect where the landlord or lessor provides full compensation for the defective object within a reasonable time.

(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

3. Reduction of rent

4. Damages

5. Assumption of litigation

6. Deposit of rent a. General principle

b. Release of deposited rent

c. Procedure

Art. 259d Where the object is rendered unfit or less fit for its designated use, the tenant or lessee may require the landlord or lessor to reduce the rent proportionately from the time when the landlord or lessor became aware of the defect until the defect is remedied.

Art. 259e Where the defect has caused damage to the tenant or lessee, the land- lord or lessor is liable in damages unless he can prove that he was not at fault.

Art. 259f Where a third party claims a right over the object that is incompatible with the rights of the tenant or lessee, on notification by the latter the landlord or lessor is obliged to assume responsibility for the litigation.

Art. 259g 1 A tenant of immovable property requesting that a defect be remedied must, in writing, set the landlord a reasonable time limit within which to comply with such request and may warn him that, in the event of failure to comply, on expiry of the time limit the tenant will deposit his future rent payments with an office designated by the canton. He must notify the landlord in writing of his intention to pay rent on deposit. 2 Rent paid on deposit is deemed duly paid.

Art. 259h 1 The landlord becomes entitled to the rent paid on deposit if the tenant or lessee does not bring claims against him before the conciliation authority within 30 days of the due date for the first rent payment paid into deposit. 2 On being notified by the tenant that he intends to pay rent on deposit as it falls due, the landlord may apply to the conciliation authority for release of rent unjustly paid on deposit.

Art. 259i75

The procedure is governed by the CivPO76.

75 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

76 SR 272

220Federal Act on the Amendment of the Swiss Civil Code

H. Renovations and modifica- tions I. By the landlord

II. By the tenant

J. Change of ownership I. Alienation of the object

II. Conferral of limited rights in rem

Art. 260 1 The landlord or lessor may renovate or modify the object only where conscionable for the tenant or lessee and the lease has not been termi- nated. 2 In carrying out such works, the landlord or lessor must give due consideration to the tenant or lessee’s interests; all claims of the tenant or lessee for reduction of the rent (Art. 259d) and for damages (Art. 259e) are reserved.

Art. 260a 1 The tenant or lessee may renovate or modify the object only with the written consent of the landlord or lessor. 2 Once such consent has been given, the landlord or lessor may require the restoration of the object to its previous condition only if this has been agreed in writing. 3 Where at the end of the lease the object has appreciated significantly in value as a result of renovations or modifications to which the land- lord or lessor consented, the tenant or lessee may claim appropriate compensation for such appreciation, subject to any written agreements providing for higher levels of compensation.

Art. 261 1 Where after concluding the contract the landlord alienates the object or is dispossessed of it in debt collection or bankruptcy proceedings, the lease passes to the acquirer together with ownership of the object. 2 However, the new owner may:

a. serve notice to terminate a lease on residential or commercial premises as of the next legally admissible termination date if he claims an urgent need of such premises for himself, his close relatives or in-laws;

b. serve notice to terminate a rental agreement in respect of other objects as of the next legally admissible termination date unless the contract allows for earlier termination.

3 If the new owner terminates sooner than is permitted under the contract with the existing landlord or lessor, the latter is liable for all resultant losses. 4 The provisions governing compulsory purchase are unaffected.

Art. 261a

(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

III. Entry under priority notice in the land register

K. Sub-letting

L. Transfer of lease to a third party

M. Early return of the object

Where the landlord or lessor grants a third party a limited right in rem and this is tantamount to a change of ownership, the provisions gov- erning alienation of the object are applicable mutatis mutandis.

Art. 261b 1 The parties to a lease may agree to have it entered under priority notice in the land register. 2 The effect of such entry is that every future owner must allow the property to be used in accordance with the lease.

Art. 262 1 A tenant may sub-let all or part of the property with the landlord’s consent. 2 The landlord may refuse his consent only if:

a. the tenant refuses to inform him of the terms of the sub-lease; b. the terms and conditions of the sub-lease are unfair in com-

parison with those of the principal lease; c. the sub-letting gives rise to major disadvantages for the land-

lord. 3 The tenant is liable to the landlord for ensuring that the sub-tenant uses the property only in the manner permitted to the tenant himself. To this end the landlord may issue reminders directly to the sub-tenant.

Art. 263 1 The tenant of commercial premises may transfer his lease to a third party with the landlord’s written consent. 2 The landlord may withhold consent only for good cause. 3 Once the landlord gives his consent, the third party is subrogated to the rights and obligations of the tenant under the lease. 4 The tenant is released from his obligations towards the landlord. However, he remains jointly and severally liable with the third party until such time as the lease ends or may be terminated under the con- tract or by law, but in any event for no more than two years.

Art. 264 1 Where the tenant or lessee returns the object without observing the notice period or the deadline for termination, he is released from his obligations towards the landlord or lessor only if he proposes a new tenant or lessee who is acceptable to the landlord or lessor, solvent and willing to take on the lease or rental agreement under the same terms and conditions.

220Federal Act on the Amendment of the Swiss Civil Code

N. Set-off

O. End of lease I. Expiry of agreed duration

II. Notice of termination and termination dates 1. In general

2. Immovable and movable structures

3. Residential premises

2 Otherwise, the tenant or lessee must continue to pay the rent until such time as the lease ends or may be terminated under the contract or by law. 3 Against the rent owing to him, the landlord or lessor must permit account to be taken of:

a. any expenses he has saved, and b. any earnings which he has obtained, or intentionally failed to

obtain, from putting the object to some other use.

Art. 265 The landlord or lessor and the tenant or lessee may not waive in ad- vance their right to set off claims arising from the lease.

Art. 266 1 Where the parties have expressly or tacitly agreed to a limited dura- tion, the lease comes to an end on expiry thereof without any need for notice to be given. 2 If the lease is tacitly continued, its duration becomes indefinite.

Art. 266a 1 The parties may give notice to terminate a lease of indefinite duration by observing the legally prescribed notice periods and termination dates, except where they have agreed a longer notice period or a dif- ferent termination date. 2 Where the prescribed notice period or termination date is not ob- served, termination will be effective as of the next termination date.

Art. 266b A party may terminate a lease of immovable property or a movable structure by giving three months’ notice expiring on a date fixed by local custom or, in the absence of such custom, at the end of a six- month period of the lease.

Art. 266c A party may terminate a lease of residential premises by giving three months’ notice expiring on a date fixed by local custom or, in the absence of such custom, at the end of a three-month period of the lease.

Art. 266d 4. Commercial(AS 2006 979 994; BBl 2004 5523 6187).premises

220 Code of Obligations

5. Furnished rooms and parking spaces

6. Chattels

III. Extraordi- nary notice 1. Good cause

2. Bankruptcy of the tenant or lessee

3. Death of the tenant or lessee

4. Chattels

A party may terminate the lease of a commercial property by giving six months’ notice expiring on a date fixed by local custom or, in the absence of such custom, at the end of a three-month period of the lease.

Art. 266e A party may terminate the lease of furnished rooms, a separately rented parking space or other comparable facility by giving two weeks’ notice expiring at the end of a one-month period of the lease.

Art. 266f A party may terminate a lease of chattels by giving three days’ notice expiring at any time.

Art. 266g 1 Where performance of the contract becomes unconscionable for the parties for good cause, they may terminate the lease by giving the legally prescribed notice expiring at any time. 2 The court determines the financial consequences of early termination, taking due account of all the circumstances.

Art. 266h 1 Where the tenant or lessee becomes bankrupt after taking possession of the property, the landlord or lessor may call for security for future rent payments. He must grant the tenant or lessee and the bankruptcy administrators an appropriate time limit in which to furnish it. 2 Where no such security is furnished to the landlord or lessor, he may terminate the contract with immediate effect.

Art. 266i In the event of the death of the tenant or lessee, his heirs may termi- nate the contract by giving the legally prescribed notice expiring on the next admissible termination date.

Art. 266k A lessee of a chattel hired for his own private use and leased to him on a commercial basis by the lessor may terminate the lease by giving at least 30 days’ notice expiring at the end of a three-month period of the lease. The lessor has no claim for compensation.

220Federal Act on the Amendment of the Swiss Civil Code

IV. Required form of notice for residential and commercial premises 1. In general

2. Family residence a. Notice given by the tenant

b. Notice given by the landlord

3. Void notice

P. Return of the object I. In general

II. Inspection of object and notification of tenant or lessee

Art. 266l 1 Notice to terminate leases of residential and commercial premises must be given in writing. 2 The landlord must give notice of termination using a form approved by the canton which informs the tenant how he must proceed if he wishes to contest the termination or apply for an extension of the lease.

Art. 266m 1 Where the leased property serves as the family residence, one spouse may not terminate the lease without the express consent of the other. 2 If the spouse cannot obtain such consent or it is withheld without good cause, he or she may apply to the court. 3 The same provisions apply mutatis mutandis to registered partners.77

Art. 266n78

Notice of termination given by the landlord and any notification of a time limit for payment accompanied by a warning of termination in the event of non-payment (Art. 257d) must be served separately on the tenant and on his spouse or registered partner.

Art. 266o Notice of termination is void if it does not conform with Articles 266l– 266n.

Art. 267 1 At the end of the lease, the tenant or lessee must return the object in a condition that accords with its contractually designated use. 2 Any clause whereby the tenant or lessee undertakes to pay compen- sation upon termination of the lease is void except insofar as such compensation relates to possible damage.

Art. 267a 1 When the object is returned, the landlord or lessor must inspect its condition and immediately inform the tenant or lessee of any defects for which he is answerable. 2 Should the landlord or lessor fail to do so, he forfeits his claims save in respect of defects not detectable upon customary inspection.

77 Inserted by Annex No 11 to the Same-Sex Partnership Act of 18 June 2004, in force since 1 Jan. 2007 (SR 211.231).

78 Amended by Annex No 11 to the Same-Sex Partnership Act of 18 June 2004, in force (AS 2006 979 994; BBl 2004 5523 6187).since 1 Jan. 2007 (SR 211.231).

220 Code of Obligations

Q. Landlord’s special lien I. Scope

II. Objects belonging to third parties

III. Exercise of lien

A. Unfair rent I. General rule

3 Where the landlord or lessor discovers such defects subsequently, he must inform the tenant or lessee immediately.

Art. 268 1 As security for rent for the past year and the current six-month pe- riod, a landlord of commercial premises has a special lien on chattels located on the leased premises and either used as fixtures or required for the use of the premises. 2 The landlord’s special lien also extends to property brought onto the premises by a sub-tenant to the extent that he has not paid his rent. 3 Goods not subject to attachment by creditors of the tenant are not subject to the lien.

Art. 268a 1 The rights of third parties to objects which the landlord knew or should have known do not belong to the tenant and to stolen, lost, missing or otherwise mislaid objects take precedence over the land- lord’s special lien. 2 Where the landlord learns only during the lease that objects brought onto the premises by the tenant are not the latter’s property, his lien on them is extinguished unless he terminates the lease as of the next admissible termination date.

Art. 268b 1 Where the tenant wishes to vacate the premises or intends to remove the objects located thereon, the landlord may, with the assistance of the competent authority, retain such objects as are required to secure his claim. 2 Items removed secretly or by force may, with police assistance, be brought back onto the premises within ten days of their removal.

Section Two: Protection against Unfair Rents or other Unfair Claims by the Landlord in respect of Leases of Residential and Commercial Premises

Art. 269 Rents are unfair where they permit the landlord to derive excessive income from the leased property or where they are based on a clearly excessive sale price.

220Federal Act on the Amendment of the Swiss Civil Code

II. Exceptions

B. Index-linked rent

C. Stepped rent

D. Rent in- creases and other unilateral amendments by the landlord

Art. 269a In particular, rents are not generally held to be unfair if:

a. they fall within the range of rents customary in the locality or district;

b. they are justified by increases in costs or by additional services provided by the landlord;

c. in the case of a recently constructed property, they do not ex- ceed the range of gross pre-tax yield required to cover costs;

d. they serve merely to balance out a rent decrease previously granted as part of a reallocation of funding costs at prevailing market rates and they are set out in a payment plan made known to the tenant in advance;

e. they serve merely to balance out the inflation on the risk capi- tal;

f. they do not exceed the levels recommended in master agree- ments drawn up by landlords’ and tenants’ associations or or- ganisations representing similar interests.

Art. 269b An agreement to link rent to an index is valid only where the lease is contracted for at least five years and the benchmark is the Swiss con- sumer prices index.

Art. 269c An agreement to increase the rent periodically by fixed amounts is valid only where:

a. the lease is contracted for at least five years; b. the rent is increased no more than once a year; and c. the amount by which it is increased is fixed in francs.

Art. 269d 1 The landlord may at any time increase the rent with effect from the next termination date. He must give notice of and reasons for the rent increase at least ten days before the beginning of the notice period for termination using a form approved by the canton. 2 The rent increase is void where:

a. it is not communicated using the prescribed form; b. no reasons are given;

(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

E. Challenge to rent I. Request for rent reduction 1. Initial rent

2. During the lease

II. Challenge to rent increases and other unilateral amendments by the landlord

c. notification of the increase is accompanied by notice to termi- nate or a threat of termination.

3 Paragraphs 1 and 2 also apply where the landlord intends to make other unilateral amendments to the lease to the detriment of the tenant, for example by reducing the services provided or adding new acces- sory charges.

Art. 270 1 Within 30 days of taking possession of the property, the tenant may challenge the initial rent as unfair within the meaning of Articles 269 and 269a before the conciliation authority and request said authority to order a reduction of the rent:

a. if the tenant felt compelled to conclude the lease agreement on account of personal or family hardship or by reason of the conditions prevailing on the local market for residential and commercial premises; or

b. if the initial rent required by the landlord is significantly higher than the previous rent for the same property.

2 In the event of a housing shortage, the cantons may make it obliga- tory in all or part of their territory to use the form stipulated in Article 269d when contracting any new lease.

Art. 270a 1 The tenant may challenge the rent as unfair and request its reduction as of the next termination date where he has good cause to suppose that, because of significant changes to the calculation basis and most notably a reduction in costs, the return derived by the landlord from the leased property is now excessive within the meaning of Articles 269 and 269a. 2 The tenant must present his request for a rent reduction in writing to the landlord, who has 30 days in which to respond. Where the landlord does not accede to the request in full or in part or does not respond in good time, the tenant may apply to the conciliation authority within 30 days. 3 Paragraph 2 does not apply if the tenant is simultaneously challeng- ing a rent increase and requesting a rent reduction.

Art. 270b 1 Within 30 days of receiving notice of a rent increase, the tenant may challenge it before the conciliation authority as unfair within the meaning of Articles 269 and 269a.

220Federal Act on the Amendment of the Swiss Civil Code

III. Challenge to index-linked rent

IV. Challenge to stepped rent

F. Continued validity of lease during challenge proceedings

A. Notice open to challenge I. In general

II. Notice served by the landlord

2 Paragraph 1 also applies where the landlord makes other unilateral amendments to the lease to the detriment of the tenant, in particular by reducing the services provided or adding new accessory charges.

Art. 270c Without prejudice to the right to challenge the initial rent, a party may argue before the conciliation authority only that the rent increase or reduction requested by the other party is not justified by a correspond- ing change in the index.

Art. 270d Without prejudice to the right to challenge the initial rent, the tenant may not challenge stepped rent.

Art. 270e The existing lease remains in force without change:

a. during conciliation proceedings, where the parties fail to reach agreement;

b. during court proceedings, subject to provisional measures or- dered by the court.

Section Three: Protection against Termination of Leases of Residential and Commercial Premises

Art. 271 1 Notice of termination may be challenged where it contravenes the principle of good faith. 2 On request, reasons for giving notice must be stated.

Art. 271a 1 Notice of termination served by the landlord may be challenged in particular where it is given:

a. because the tenant is asserting claims arising under the lease in good faith;

b. because the landlord wishes to impose a unilateral amendment of the lease to the tenant’s detriment or to change the rent;

c. for the sole purpose of inducing the tenant to purchase the leased premises;

(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

B. Extension of the lease I. Tenant’s entitlement

d. during conciliation or court proceedings in connection with the lease, unless the tenant initiated such proceedings in bad faith;

e. within three years of the conclusion of conciliation or court proceedings in connection with the lease in which the landlord: 1. was largely unsuccessful; 2. withdrew or considerably reduced his claim or action; 3. declined to bring the matter before the court; 4. reached a settlement or some other compromise with the

tenant; f. because of changes in the tenant’s family circumstances which

do not give rise to any significant disadvantage to the landlord. 2 Paragraph 1 let. e. is also applicable where the tenant can produce documents showing that he reached a settlement with the landlord concerning a claim in connection with the lease outside conciliation or court proceedings. 3 Paragraph 1 let. d. and e. are not applicable where notice of termina- tion is given:

a. because the landlord urgently needs the property for his own use or that of family members or in-laws;

b. because the tenant is in default on his payments (Art. 257d); c. because the tenant is in serious breach of his duty of care and

consideration (Art. 257f para. 3 and 4); d. as a result of alienation of the leased premises (Art. 261); e. for good cause (Art. 266g); f. because the tenant is bankrupt (Art. 266h).

Art. 272 1 The tenant may request the extension of a fixed-term or open-ended lease where termination of the lease would cause a degree of hardship for him or his family that cannot be justified by the interests of the landlord. 2 When weighing the respective interests, the competent authority has particular regard to:

a. the circumstances in which the lease was contracted and the terms of the lease;

b. the duration of the lease; c. the personal, family and financial circumstances of the parties,

as well as their conduct;

220Federal Act on the Amendment of the Swiss Civil Code

II. Exclusion of extension

III. Length of extension

IV. Continued validity of lease

V. Notice given during extension

d. any need that the landlord might have to use the premises for himself, his family members or his in-laws and the urgency of such need;

e. the conditions prevailing on the local market for residential and commercial premises.

3 Where the tenant requests a second extension, the competent author- ity must also consider whether the tenant has done everything that might reasonably be expected of him to mitigate the hardship caused by the notice of termination.

Art. 272a 1 No extension is granted where notice of termination is given:

a. because the tenant is in default on his payments (Art. 257d); b. because the tenant is in serious breach of his duty of care and

consideration (Art. 257f para. 3 and 4); c. because the tenant is bankrupt (Art. 266h); d. in respect of a lease expressly concluded for a limited period

until refurbishment or demolition works begin or the requisite planning permission is obtained.

2 As a general rule, no extension is granted where the landlord offers the tenant equivalent residential or commercial premises.

Art. 272b 1 A lease may be extended by up to four years in the case of residential premises and by up to six years for commercial premises. Within these overall limits, one or two extensions may be granted. 2 Where the parties agree to an extension of the lease, they are not bound by a maximum duration and the tenant may waive a second extension.

Art. 272c 1 Either party may ask the court to modify the lease in line with changed circumstances when deciding on the lease extension. 2 Where the lease is not varied in the decision on the lease extension, it remains in force during the extension period, subject to other means of variation envisaged by law.

Art. 272d Unless the decision on extension or the extension agreement stipulates otherwise, the tenant may terminate the lease:

(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

a. by giving one month’s notice expiring at the end of a calendar month in cases where the extension does not exceed one year;

b. by giving three months’ notice expiring on an admissible ter- mination date in cases where the extension exceeds one year.

Art. 273 C. Time limits 1 A party wishing to challenge termination must bring the matter and procedure79 before the conciliation authority within 30 days of receiving the notice

of termination. 2 A tenant wishing to apply for a lease extension must submit his request to the conciliation authority:

a. within 30 days of receiving the notice of termination, where the lease is open-ended;

b. not later than 60 days before expiry of the lease, where it is of limited duration.

3 A tenant requesting a second extension must submit his request to the conciliation authority not later than 60 days before expiry of the first extension. 4 The procedure before the conciliation authority is governed by the CivPO80.81 5 Where the competent authority rejects a request made by the tenant relating to challenging termination, it must examine ex officio whether the lease may be extended.82

Art. 273a D. Family 1 Where the leased property serves as the family residence, the tenant’s residence spouse is likewise entitled to challenge the termination, request a lease

extension and exercise the other rights accruing to the tenant in the event that notice of termination is served. 2 Agreements providing for an extension of the lease are valid only if concluded with both spouses. 3 The same provisions apply mutatis mutandis to registered partners.83

79 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

80 SR 272 81 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since

1 Jan. 2011 (AS 2010 1739; BBl 2006 7221). 82 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since

1 Jan. 2011 (AS 2010 1739; BBl 2006 7221). 83 Inserted by Annex No 11 to the Same-Sex Partnership Act of 18 June 2004, in force since

1 Jan. 2007 (SR 211.231).

220Federal Act on the Amendment of the Swiss Civil Code

E. Sub-letting

F. Mandatory provisions

A. Definition and scope of application I. Definition

II. Scope of application 1. Residential and commercial premises

2. Agricultural lease

Art. 273b 1 The provisions of this Chapter apply to sub-leases provided the principal lease has not been terminated. A sub-lease may be extended only within the duration of the principal lease. 2 Where the main purpose of the sub-lease is to circumvent the provi- sions governing protection against termination, the sub-tenant is granted such protection without regard to the principal lease. If the principal lease is terminated, the landlord is subrogated to the rights of the tenant in his contract with the sub-tenant.

Art. 273c 1 The tenant may waive the rights conferred upon him by the provi- sions of this Chapter only where this is expressly envisaged. 2 All agreements to the contrary are void.

Section Four:84…

Art. 274–274g

Title Eightbis:85 The Usufructuary Lease

Art. 275 The usufructuary lease is a contract whereby the lessor undertakes to grant the lessee the use of a productive object or right and the benefit of its fruits or proceeds in exchange for rent.

Art. 276 The provisions governing usufructuary leases of residential and com- mercial premises also apply to objects made available together with such premises for the use and enjoyment of the tenant.

Art. 276a 1 Usufructuary leases relating to agricultural enterprises or to agricul- tural land and buildings are governed by the Federal Act of 4 October 198586 on Agricultural Leases, insofar as it contains special provisions.

84 Repealed by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, with effect from 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

85 Inserted by No I of the Federal Act of 15 Dec. 1989, in force since 1 July 1990 (AS 1990 802 834; BBl 1985 I 1369). See also the Final Provisions of Titles VIII and (AS 2006 979 994; BBl 2004 5523 6187).VIIIbis Art. 5 at the end of this Code.

220 Code of Obligations

B. Inventory

C. Obligations of the lessor I. Hand-over of object

II. Major repairs

III. Charges and taxes

D. Obligations of the lessee I. Payment of rent and accessory charges 1. In general

2. Lessee in arrears

2 In other respects the Code of Obligations applies with the exception of the provisions governing leases of residential and commercial premises.87

Art. 277 Where machinery, livestock or supplies are included in the lease, each party must furnish the other with a precise, signed inventory and take part in a joint valuation thereof.

Art. 278 1 The lessor is required to make the object available on the agreed date in a condition fit for its designated use and operation. 2 If a report was drawn up on the return of the object at the end of the previous lease, on request the lessor must make this document avail- able for inspection by the new lessee when the object is handed over to him. 3 Similarly, the new lessee has the right to be informed of the amount of rent paid under the previous lease.

Art. 279 The lessor is obliged to carry out major repairs to the object that be- come necessary during the lease at his own expense and as soon as the lessee has informed him of the need for such repairs.

Art. 280 The lessor bears all taxes and charges in connection with the object.

Art. 281 1 The lessee must pay the rent and, where applicable, the accessory charges at the end of each year of the lease but not later than when the lease expires, save where another payment date is stipulated by agree- ment or local custom. 2 Article 257a applies to accessory charges.

Art. 282 1 Where, having accepted the property, the lessee is in arrears with payments of rent or accessory charges, the lessor may set a time limit

86 SR 221.213.2 87 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since

1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

220Federal Act on the Amendment of the Swiss Civil Code

II. Care, consideration and maintenance 1. Care and consideration

2. Normal maintenance

3. Breach of duty by the lessee

III. Duty of notification

of at least 60 days for payment and notify him that in the event of non- payment the lessor will terminate the lease on expiry of that time limit. 2 In the event of non-payment within the time limit the lessor may terminate the usufructuary lease with immediate effect or, for leases of residential and commercial premises, subject to at least 30 days’ notice ending on the last day of a calendar month.

Art. 283 1 The lessee must use the leased object with due care in accordance with its intended use and in particular must ensure that its long-term productivity is sustained. 2 Where the usufructuary lease relates to immovable property, the tenant must show due consideration for others who share the building and for neighbours.

Art. 284 1 The lessee must carry out the normal maintenance of the leased object. 2 In accordance with local custom, he must carry out minor repairs and replace inexpensive equipment and tools which have become useless as a result of age or wear and tear.

Art. 285 1 If, despite written warning from the lessor, the lessee continues to act in breach of his duty of care, consideration or maintenance such that continuation of the usufructuary lease becomes unconscionable for the lessor or other persons sharing the building, the lessor may terminate the lease with immediate effect or, for leases of residential and com- mercial premises, subject to at least 30 days’ notice ending on the last day of a calendar month. 2 However, leases of residential and commercial premises may be terminated with immediate effect if the tenant intentionally causes serious damage to the property.

Art. 286 1 If major repairs become necessary or a third party makes claims against the object of the usufructuary lease, the lessee must inform the lessor immediately. 2 Failure to notify renders the lessee liable for any damage incurred by the lessor as a result.

(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

IV. Duty of tolerance

E. Rights of the lessee on non- performance or defective performance

F. Renovations and modifica- tions I. By the lessor

II. By the lessee

Art. 287 1 The lessee must tolerate major repairs intended to remedy defects in the object or to repair or prevent damage. 2 The lessee must permit the lessor to inspect the object to the extent required for maintenance, sale or future leasing. 3 The lessor must inform the lessee of works and inspections in good time and take all due account of the latter’s interests when they are carried out; the provisions on leases in Title 8 (Art. 259d and 259e) apply mutatis mutandis to all claims of the lessee for reduction of the rent and for damages.

Art. 288 1 The provisions on leases in Title 8 (Art. 258 and 259a–259i) apply mutatis mutandis:

a. where the lessor fails to hand over the property on the agreed date or hands it over in a defective condition;

b. where defects arise in the object which are not attributable to the lessee and which he is not obliged to remedy at his own expense, or where he is prevented from using the object as contractually agreed.

2 Clauses to the contrary to the detriment of the lessee are void if they are set out:

a. in previously formulated general terms and conditions; b. in usufructuary leases for residential or commercial premises.

Art. 289 1 The lessor may renovate or modify the object only where conscion- able for the lessee and the usufructuary lease has not been terminated. 2 In carrying out such works, the lessor must give due consideration to the lessee’s interests; the provisions on leases in Title 8 (Art. 259d and Art. 259e) apply mutatis mutandis to any claims of the lessee for reduction of the rent and for damages.

Art. 289a 1 The lessee requires the lessor’s written consent in order to:

a. alter the manner in which the object has traditionally been managed in ways which will have lasting significance beyond the duration of the lease;

b. carry out renovations or modifications to the object above and beyond the remit of normal maintenance.

220Federal Act on the Amendment of the Swiss Civil Code

G. Change of ownership

H. Sub-letting

J. Transfer of usufructuary lease to a third party

K. Early return of the object

2 Once such consent has been given, the lessor may require the restora- tion of the object to its previous condition only if this has been agreed in writing. 3 Where the lessor has not given his written consent to an alteration within the meaning of paragraph 1 let. a. and the lessee has failed to reverse such alteration within an appropriate time, the lessor may terminate the contract with immediate effect or, for leases of residen- tial and commercial premises, subject to at least 30 days’ notice expir- ing on the last day of a calendar month.

Art. 290 The provisions on leases in Title 8 (Art. 261–261b) apply mutatis mutandis:

a. where the leased object is alienated; b. where limited rights in rem are established on the leased ob-

ject; c. where the lease is entered under priority notice in the land reg-

ister.

Art. 291 1 The lessee may sub-let all or part of the leased object with the les- sor’s consent. 2 The lessor may refuse his consent to the sub-letting of premises which form part of a leased property only if:

a. the lessee refuses to inform him of the terms of the sub-lease; b. the terms and conditions of the sub-lease are unfair in com-

parison with those of the usufructuary lease; c. the sub-letting gives rise to major disadvantages for the lessor.

3 The lessee is liable to the lessor for ensuring that the sub-tenant or sub-lessee uses the object only in the manner permitted to the lessee himself. To this end the lessor may issue reminders directly to the sub- tenant or sub-lessee.

Art. 292 Article 263 applies mutatis mutandis to the transfer of a usufructuary lease of commercial premises to a third party.

Art. 293 1 Where the lessee returns the object without observing the notice period or the deadline for termination, he is released from his obliga- tions towards the lessor only if he proposes a new lessee who is ac-(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

L. Set-off

M. End of usufructuary lease I. Expiry of agreed duration

II. Notice of termination and termination dates

III. Extraordi- nary notice 1. Good cause

ceptable to the lessor, solvent and willing to take on the lease on the same terms and conditions. 2 Otherwise, the lessee must continue to pay the rent until such time as the lease ends or may be terminated under the contract or by law. 3 Against the rent owing to him the lessor must permit the following to be brought into account:

a. any expenses he has saved, and b. any earnings which he has obtained, or intentionally failed to

obtain, from putting the object to some other use.

Art. 294 Article 265 applies mutatis mutandis to the set-off of claims arising from a usufructuary lease.

Art. 295 1 Where the parties have expressly or tacitly agreed to a limited dura- tion, the usufructuary lease comes to an end on expiry thereof without any need for notice to be given. 2 If the usufructuary lease is tacitly continued, it is deemed to have been extended on the same terms and conditions for a further year unless otherwise agreed. 3 A party may terminate the extended usufructuary lease by giving the legally prescribed period of notice expiring at the end of a lease year.

Art. 296 1 The parties may terminate an open-ended usufructuary lease by giving six months’ notice expiring on any date of their choosing unless otherwise stipulated by agreement or local custom and unless the nature of the leased object implies that the parties intended otherwise. 2 The parties may terminate an open-ended usufructuary lease of residential or commercial premises by giving at least six months’ notice expiring on a date fixed by local custom or, absent in the ab- sence of such custom, at the end of a three-month lease period. The parties may agree a longer notice period or another termination date. 3 Where the prescribed notice period or termination date is not ob- served, termination will be effective as of the next termination date.

Art. 297 1 Where performance of the contract becomes unconscionable for the parties for good cause, they may terminate the usufructuary lease by giving the legally prescribed notice expiring at any time.

220Federal Act on the Amendment of the Swiss Civil Code

2. Bankruptcy of the lessee

3. Death of the lessee

IV. Required form of notice for residential and commercial premises

N. Return of the object I. In general

2 The court determines the financial consequences of early termination, taking due account of all the circumstances.

Art. 297a 1 Where the lessee becomes bankrupt after taking possession of the property, the lease ends on commencement of bankruptcy proceedings. 2 However, where the lessor has received sufficient security for the current year’s rent and the inventory, he must continue the lease until the end of the lease year.

Art. 297b In the event of the death of the lessee, his heirs and the lessor may terminate the contract by giving the legally prescribed notice expiring on the next admissible termination date.

Art. 298 1 Notice to terminate usufructuary leases of residential or commercial premises must be given in writing. 2 The lessor must give notice of termination using a form approved by the canton which informs the lessee how he must proceed if he wishes to contest the termination or apply for an extension of the lease. 3 Notice to terminate is void if it does not fulfil the above require- ments.

Art. 299 1 At the end of the usufructuary lease, the lessee must return the object together with all items listed in the inventory in the condition they are in at that time. 2 He is entitled to compensation for improvements which result:

a. from endeavours exceeding the normal degree of diligence due in managing the object;

b. for renovations or modifications to which the lessor gave his written consent.

3 He must compensate the lessor for any deterioration that could have been prevented by diligent management of the object. 4 Any agreement whereby the lessee undertakes to pay compensation upon termination of the lease is void except insofar as such compensa- tion relates to possible damage.

(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

II. Inspection of object and notification of lessee

III. Replacement of inventory items

O. Lessor’s lien

P. Protection against termina- tion of usufruc- tuary leases of residential and commercial premises

Q. Procedure

Art. 299a 1 When the object is returned, the lessor must inspect its condition and immediately inform the lessee of any defects for which he is answer- able. 2 Should the lessor fail to do so, he forfeits his claims save in respect of defects not detectable upon customary inspection. 3 Where the lessor discovers such defects subsequently, he must in- form the lessee immediately.

Art. 299b 1 Where items listed in the inventory were valued when the object was originally handed over to the lessee, he must return an inventory of items of the same type and estimated value or pay compensation for any reduction in value. 2 The lessee is not obliged to pay compensation for missing items if he can prove that they were lost through the fault of the lessor or force majeure. 3 The lessee is entitled to compensation for added value resulting from his outlays and his labour.

Art. 299c The lessor of commercial premises has the same right of lien in respect of the rent for the past year and the current year of a usufructuary lease as the landlord under the provisions governing leases and rental agreements (Art. 268 et seq.).

Art. 300 1 The provisions on leases in Title 8 (Art. 271–273c) apply mutatis mutandis to protection against termination of usufructuary leases of residential or commercial premises. 2 The provisions governing the family residence (Art. 273a) are not applicable.

Art. 30188

The procedure is governed by the CivPO89.

88 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

89 SR 272

220Federal Act on the Amendment of the Swiss Civil Code

R. Livestock lease I. Rights and obligations of the tenant farmer

II. Liability

III. Termination

A. Definition

B. Effect I. Borrower’s right of use

Art. 302 1 In respect of a lease of livestock which is not part of an agricultural tenancy, all benefits arising from leased livestock belong to the tenant farmer unless otherwise provided by agreement or local custom. 2 The tenant farmer feeds and cares for the livestock and pays rent to the lessor in the form of either money or a share in the benefits in kind.

Art. 303 1 Unless otherwise provided by agreement or local custom, the tenant farmer is liable for damage to the leased livestock unless he can prove that such damage could not have been avoided even with all due care and attention. 2 The tenant farmer is entitled to have any extraordinary costs of caring for the livestock reimbursed by the lessor unless the tenant farmer was at fault in incurring such costs. 3 The tenant farmer must inform the lessor as soon as possible of serious accidents or illness.

Art. 304 1 Where the lease is open-ended, either party may terminate it as of any date of their choosing, unless otherwise provided by agreement or local custom. 2 However, such termination must take place in good faith and not at an inopportune juncture.

Title Nine: The Loan Section One: The Loan for Use

Art. 305 A loan for use is a contract whereby the lender undertakes to make an object available free of charge to the borrower for the latter’s use and the borrower undertakes to return it to him after having made use of it.

Art. 306 1 The borrower may make use of the loaned object only for the pur- pose stipulated in the contract or, in the absence of any stipulation, for its normal purpose or the purpose dictated by its nature. 2 He is not entitled to grant use of the object to a third party.

(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

II. Maintenance costs

III. Liability of joint borrowers

C. Termination I. Loan for designated use

II. Loan for non- designated use

III. Death of the borrower

A. Definition

3 A borrower acting in breach of these provisions is liable even for accidental damage unless he can prove that the object would have been affected in any event.

Art. 307 1 The borrower bears the ordinary costs of maintenance and, in the case of loaned animals, in particular the costs of feeding them. 2 He is entitled to reimbursement of extraordinary expenses he has been obliged to incur for the lender’s benefit.

Art. 308 Persons who have jointly borrowed a single object are jointly and severally liable for it.

Art. 309 1 Where the loan for use is open-ended, it ends as soon as the borrower has made use of the object as agreed or on expiry of the period in which such use could have been made of it. 2 The lender is entitled to reclaim the object before that time if the borrower uses it for a purpose contrary to the agreement, if he dam- ages it, if he permits a third party to use it or if unforeseen develop- ments occur which leave the lender in urgent need of the object.

Art. 310 Where the contract stipulates neither the purpose nor the duration of the loan, the lender may reclaim the loaned object whenever he sees fit.

Art. 311 The loan for use ends on the death of the borrower.

Section Two: The Fixed-Term Loan

Art. 312 A fixed-term loan is a contract whereby the lender undertakes to transfer the ownership of a sum of money or of other fungible goods to the borrower, who in return undertakes to return objects of the same quantity and quality to him.

220Federal Act on the Amendment of the Swiss Civil Code

B. Effect I. Interest 1. Liability for interest

2. Rules governing interest

II. Limitation period for claims for delivery and acceptance

III. Insolvency of the borrower

C. Goods in lieu of money

D. Timing of repayment

Art. 313 1 In normal dealings, interest is payable on a fixed-term loan only where this has specifically been agreed. 2 In commercial transactions, interest is payable on fixed-term loans even where this has not been expressly agreed.

Art. 314 1 Where the interest rate is not stipulated in the contract, it is presumed to be the customary rate for loans of the same type at the time and place that the fixed-term loan was received. 2 Unless otherwise agreed, the promised interest is payable annually. 3 Any prior agreement that interest will be added to the loan principal and become subject to further interest is void, subject to standard business practices and in particular those of savings banks for calculat- ing interest on current accounts and similar commercial instruments under which the calculation of compound interest is customary.

Art. 315 The borrower’s claim for delivery and the lender’s claim for accep- tance of the fixed-term loan become time-barred six months after the date on which the other party defaults.

Art. 316 1 The lender may refuse to hand over the fixed-term loan if the bor- rower becomes insolvent after entering into the contract. 2 The lender has the right to refuse delivery even if insolvency oc- curred before the contract was concluded but he only subsequently became aware of it.

Art. 317 1 Where the borrower receives securities or goods rather than the agreed sum of money, the amount of the fixed-term loan is deemed to be the current or market price of the securities or goods concerned at the time and place of delivery. 2 Any agreement to the contrary is void.

Art. 318 Where a fixed-term loan contract does not stipulate the repayment date or the period of notice to terminate the contract or the expiry of the contract at any time on first request, the borrower must repay the loan within six weeks of the first request by the lender.

(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

A. Definition and conclusion I. Definition

II. Creation

B. Obligations of the employee I. Duty to work in person

II. Duty of care and loyalty

Title Ten:90The Employment Contract Section One: The Individual Employment Contract

Art. 319 1 By means of an individual employment contract, the employee undertakes to work in the service of the employer for a limited or unlimited period and the employer undertakes to pay him a salary based on the amount of time he works (time wage) or the tasks he performs (piece work). 2 A contract whereby an employee undertakes to work regularly in the employer’s service by hours, half-days or days (part-time work) is likewise deemed to be an individual employment contract.

Art. 320 1 Except where the law provides otherwise, the individual employment contract is not subject to any specific formal requirement. 2 It is deemed to have been concluded where the employer accepts the performance of work over a certain period in his service which in the circumstances could reasonably be expected only in exchange for salary. 3 Where an employee performs work in good faith for the employer under a contract which is subsequently found to be invalid, both par- ties must discharge their obligations under the employment relation- ship as if the contract had been valid until such time as one party terminates the relationship on grounds of the invalidity of the contract.

Art. 321 The employee must carry out the contractually assumed tasks in per- son, unless otherwise required by agreement or the circumstances.

Art. 321a 1 The employee must carry out the work assigned to him with due care and loyally safeguard the employer’s legitimate interests. 2 He must use the employer’s machinery, work tools, technical equip- ment, installations and vehicles in the appropriate manner and treat them and all materials placed at his disposal for the performance of his work with due care.

90 Amended by No I of the Federal Act of 25 June 1971, in force since 1 Jan. 1972 (AS 1971 1461 1503; BBl 1967 II 249). See also the Transitional and Final Provisions of Title X Art. 7 at the end of this Code.

220Federal Act on the Amendment of the Swiss Civil Code

III. Disclosure and hand-over of benefits received and work produced

IV. Overtime

V. Compliance with general directives and instructions

3 For the duration of the employment relationship the employee must not perform any paid work for third parties in breach of his duty of loyalty, in particular if such work is in competition with his employer. 4 For the duration of the employment relationship the employee must not exploit or reveal confidential information obtained while in the employer’s service, such as manufacturing or trade secrets; he remains bound by such duty of confidentiality even after the end of the em- ployment relationship to the extent required to safeguard the em- ployer’s legitimate interests.

Art. 321b 1 The employee is accountable to his employer for everything, and in particular sums of money, he receives from third parties in the per- formance of his contractual activities and must hand it over to the employer immediately. 2 He must likewise immediately hand over to the employer all work produced in the course of his contractual activities.

Art. 321c 1 If more hours of work are required than envisaged under the em- ployment contract or provided for by custom, standard employment contract or collective employment contract, the employee is obliged to perform such overtime to the extent that he is able and may conscion- ably be expected to do so. 2 In consultation with the employee, the employer may compensate him within an appropriate period for the overtime worked by granting him time off in lieu of at least equal length. 3 Where the overtime is not compensated by time off in lieu and unless otherwise agreed in writing or under a standard employment contract or collective employment contract, the employer must compensate the employee for the overtime worked by paying him his normal salary and a supplement of at least one-quarter thereof.

Art. 321d 1 The employer is entitled to issue general directives and specific instructions regarding the performance of the work and the conduct of employees in his business or household. 2 The employee must comply in good faith with the employer’s gen- eral directives and specific instructions.

Art. 321e VI. Employee’s liability(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

C. Obligations of the employer I. Salary 1. Type and amount in general

2. Share in the business results

3. Commission a. Entitlement

1 The employee is liable for any loss or damage he causes to the em- ployer whether wilfully or by negligence. 2 The extent of the duty of care owed by the employee is determined by the individual employment contract, taking due account of the occupational risk, level of training and technical knowledge associated with the work as well as the employee’s aptitudes and skills of which the employer was or should have been aware.

Art. 322 1 The employer must pay the agreed or customary salary or the salary that is fixed by standard employment contract or collective employ- ment contract. 2 Where the employee lives in the employer’s household, his board and lodgings are part of the salary unless agreement or custom provide otherwise.

Art. 322a 1 Where the employee is by contract entitled to a share in the profits, the turnover or the results of the business expressed in some other manner, such share is calculated on the basis of the results for the financial year as defined by statutory provision and generally recog- nised commercial principles. 2 The employer must furnish all the necessary information to the employee or, in his stead, to an expert designated by both employer and employee or appointed by the court and must grant the employee or the expert such access to the accounts as is required for verification of the business results. 3 In addition, where a share in the profits of the business has been agreed, a copy of the profit and loss account must be made available to the employee on request.91

Art. 322b 1 Where the employee is by contract entitled to commission on particu- lar transactions, his entitlement is established as soon as the transac- tion with the third party enters into force. 2 In the case of transactions involving performance in instalments and insurance policies, it may be agreed in writing that such entitlement arises as each instalment falls due or is performed. 3 The entitlement to commission lapses subsequently if through no fault of his the employer fails to carry out the transaction or the third

91 Amended by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

220Federal Act on the Amendment of the Swiss Civil Code

b. Statement

4. Bonuses

II. Payment of salary 1. Payment terms and periods

party fails to fulfil his obligations; in the event of only partial perform- ance, the commission is reduced proportionately.

Art. 322c 1 Where the terms of the contract do not require the employee to draw up a statement of commission due to him, on each date on which commission falls due, the employer must provide him with a written statement including a breakdown of the transactions on which it is payable. 2 The employer must furnish all the necessary information to the employee or, in his stead, to an expert designated by both employer and employee or appointed by the court, and must grant the employee or the expert such access to the books of account or supporting docu- ments as is required for verification of the commission statement.

Art. 322d 1 Where the employer pays a bonus over and above the salary on particular occasions, such as at Christmas or the end of the financial year, the employee is entitled to such bonus where it is contractually stipulated. 2 If the employment relationship ends prior to the occasion on which the bonus is paid, the employee is entitled to a pro rata bonus where the contract so provides.

Art. 323 1 Unless shorter periods or other payment terms have been agreed or are customary and unless otherwise provided by standard employment contract or collective employment contract, the salary is paid to the employee at the end of each month. 2 Unless a shorter payment period has been agreed or is customary, commission is paid at the end of each month; however, where execu- tion of a transaction takes more than half a year, the due date of the commission payable on it may be deferred by written agreement. 3 Shares in business results are payable as soon as the results are determined, but not later than six months after the end of the financial year. 4 If an employee is in hardship and requests an advance against salary due for work already performed, the employer must advance such sum as may equitably be expected of him.

Art. 323a 2. Withholding of salary(AS 2006 979 994; BBl 2004 5523 6187).

220 Code of Obligations

3. Salary protection

III. Salary in the event work is not possible 1. Failure by employer to accept perform- ance

2. Employee prevented from working a. General principle

1 To the extent provided for by individual agreement, custom, standard employment contract or collective employment contract, the employer may withhold part of the salary. 2 The amount withheld on any given payment date must not exceed one-tenth of the salary due and the cumulative amount withheld must not exceed the salary due for one week’s work; however, a higher amount may be withheld under the terms of a standard employment contract or collective employment contract. 3 Unless otherwise provided by individual agreement, custom, stan- dard employment contract or collective employment contract, the salary withheld is deemed to be security for the employer’s claims arising from the employment relationship rather than a contractual penalty.

Art. 323b 1 Unless otherwise provided by agreement or custom, the salary must be paid to the employee in legal tender during working hours; a written salary statement must be provided to the employee. 2 Where the employer holds claims against the employee, he may set them off against the employee’s salary claim only to the extent that such salary claim is subject to attachment, although claims for com- pensation of intentional damage may be set off without restriction. 3 Any agreement whereby the salary must be used for the employer’s benefit is void.

Art. 324 1 Where the employer is at fault in preventing performance of the work or fails to accept its performance for other reasons, he remains obliged to pay the salary but the employee is not obliged to make up the time thus lost. 2 The salary payable in this event is reduced by any amounts that the employee saved as a result of being prevented from working or that he earned by performing other work or would have earned had he not intentionally foregone such work.

Art. 324a 1 Where the employee is prevented from working by personal circum- stances for which he is not at fault, such as illness, accident, legal obligations or public duties, the employer must pay him his salary for a limited time, including fair compensation for lost benefits in kind, provided the employment relationship has lasted or was concluded for longer than three months.

220Federal Act on the Amendment of the Swiss Civil Code

2 Subject to longer periods being fixed by individual agreement, stan- dard employment contract or collective employment contract, the employer must pay three weeks’ salary during the first year of service and thereafter the salary for appropriately longer periods depending on the duration of the employment relationship and the particular circum- stances. 3 The employer has the same obligation in the event that an employee becomes pregnant.92 4 A written agreement, standard employment contract or collective employment contract may derogate from the above provisions pro- vided it gives the employee terms of at least equivalent benefit.

Art. 324b b. Exceptions 1 If the employee has compulsory insurance prescribed by law against

the financial consequences of being prevented from working by per- sonal circumstances for which he is not at fault, the employer is not obliged to pay his salary where the insurance benefits for that limited period cover at least four-fifths of the salary income lost over that period. 2 Where the insurance benefits are less, the employer must pay the difference between them and four-fifths of the salary. 3 Where the insurance benefits are paid only after a waiting period, the employer must pay at least four-fifths of the salary during that pe- riod.93

Art. 32594 IV. Assignment 1 The employee may assign or pledge his future salary claims as secu- and pledge of salary claims rity for maintenance or support obligations under family law only to

the extent that such claims are subject to attachment; at the request of an interested party the debt collection office at the employee’s domi- cile determines the amount that is not subject to attachment in accor- dance with Article 93 of the Federal Act of 11 April 188995 on Debt Collection and Bankruptcy. 2 Any assignment or pledge of future salary claims as security for other obligations is void.

92 Amended by Annex No 1 to the Federal Act of 3 Oct. 2003, in force since 1 July 2005 (AS 2005 1429 1437; BBl 2002 6998, 2003 1032 2595).

93 Inserted by Annex No 12 to the Federal Act of 20 March 1981 on Accident Insurance, in force since 1 Jan. 1984 (SR 832.20, 832.201 Art. 1 para. 1).

94 Amended by No I of the Federal Act of 14 Dec. 1990, in force since 1 July 1991 (AS 1991 974 975; BBl 1989 III 1189, 1990 I 108).

95 (AS 2006 979 994; BBl 2004 5523 6187).SR 281.1

220 Code of Obligations

V. Piece work 1. Work allocation

2. Piece work rates

VI. Work tools, materials and expenses 1. Work tools and materials

2. Expenses a. In general

Art. 326 1 Where by contract the employee carries out piece work for a single employer, the latter must allocate a sufficient quantity of work to him. 2 The employer may allocate time work to the employee where through no fault of his own the employer is unable to allocate piece work as contractually agreed or where time work is temporarily re- quired for operational reasons. 3 If the rate of pay for such time work is not fixed by individual agreement, standard employment contract or collective employment contract, the employer must pay the employee the average salary he previously earned on a piece work basis. 4 An employer who is unable to allocate sufficient piece work or time work remains nonetheless obliged pursuant to the provisions govern- ing failure to accept performance to pay the salary that he would have paid for time work.

Art. 326a 1 Where by contract the employee carries out piece work, the employer must inform him of the applicable rate of pay before the start of each task. 2 Should the employer fail to give such information, he must pay the going rate for identical or comparable work.

Art. 327 1 Unless otherwise provided by agreement or custom, the employer provides the employee with the tools and materials that the work requires. 2 Where the employee himself supplies such tools or materials with the employer’s consent, he is entitled to appropriate compensation unless otherwise provided by agreement or custom.

Art. 327a 1 The employer must reimburse the employee for all expenses neces- sarily incurred in the performance of the work and, in the case of work done off the employer’s premises, for his necessary living expenses. 2 An individual agreement, standard employment contract or collective employment contract may provide that such expenses be reimbursed in the form of a fixed sum, such as a per diem or a weekly or monthly allowance, provided that this covers all necessary expenses. 3 Any agreement whereby the employee must bear all or part of such necessary expenses is void.

220Federal Act on the Amendment of the Swiss Civil Code

b. Motor vehicle

c. Payment dates

VII. Protection of the em- ployee’s personality rights 1. In general

Art. 327b 1 Where with the employer’s consent the employee uses his own motor vehicle or a vehicle supplied by the employer for business purposes, he is entitled to reimbursement of the normal running and maintenance costs incurred in the performance of his work. 2 Where with the employer’s consent the employee uses his own motor vehicle for work purposes, the employee is also entitled to reimburse- ment of the tax on the vehicle and the premiums for third-party liabil- ity insurance as well as appropriate compensation for wear and tear, to the extent that the vehicle is used for business purposes.

963 ...

Art. 327c 1 Expenses are reimbursed when the salary is paid based on the state- ment of expenses submitted by the employee, unless a shorter period has been agreed or is customary. 2 Where an employee regularly incurs expenses in the performance of his contractual obligations, the employer must pay him an advance against such expenses at regular intervals but not less frequently than every month.

Art. 328 1 Within the employment relationship, the employer must acknowl- edge and safeguard the employee’s personality rights, have due regard for his health and ensure that proper moral standards are maintained. In particular, he must ensure that employees are not sexually harassed and that any victim of sexual harassment suffers no further adverse consequences.97 2 In order to safeguard the personal safety, health and integrity of his employees he must take all measures that are shown by experience to be necessary, that are feasible using the latest technology and that are appropriate to the particular circumstances of the workplace or the household, provided such measures may equitably be expected of him in the light of each specific employment relationship and the nature of the work. 98 99

96 Repealed by No 12 of the Annex to the Federal Act of 20 March 1981 on Accident Insurance (SR 832.20).

97 Sentence inserted by Annex No 3 to the Federal Act of 24 March 1995 on Gender Equality, in force since 1 July 1996 (SR 151.1).

98 Revised by the Federal Assembly Drafting Committee [Art. 33 ParlPA – AS 1974 1051]. 99 Amended by Annex No 3 to the Federal Act of 24 March 1995 on Gender Equality, in

(AS 2006 979 994; BBl 2004 5523 6187).force since 1 July 1996 (SR 151.1).

220 Code of Obligations

2. Shared household

3. When handling personal data

VIII. Days off work, holidays, leave for youth work, maternity leave 1. Days off work102

2. Holidays a. Annual entitlement

Art. 328a 1 Where the employee lives in the employer’s household, the employer must provide adequate board and appropriate lodgings. 2 If the employee is prevented from working through no fault of his own by sickness or accident, the employer must provide care and medical assistance for a limited period, this being three weeks within the first year of service and thereafter for appropriately longer periods depending on the duration of the employment relationship and the particular circumstances. 3 The employer has the same obligations in the event that an employee is pregnant or gives birth.

Art. 328b100

The employer may handle data concerning the employee only to the extent that such data concern the employee’s suitability for his job or are necessary for the performance of the employment contract. In all other respects, the provisions of the Federal Act of 19 June 1992101 on Data Protection apply.

Art. 329 1 The employer must allow the employee one day off per week, gener- ally Sunday or, where circumstances do not permit this, a full weekday instead. 2 In special circumstances, he may allow the employee several days off together or two half-days instead of one full day, provided the em- ployee consents to this. 3 In addition, he must allow the employee the customary hours and days off work and, once notice has been given to terminate the em- ployment relationship, the time required to seek other employment. 4 When determining time off work, due account is to be taken of the interests of both employer and employee.

Art. 329a 1 The employer must allow the employee during each year of service at least four weeks’ holiday and five weeks’ holiday for employees under the age of 20.103

100 Inserted by Annex No 2 to the Federal Act of 19 June 1992 on Data Protection, in force since 1 July 1993 (SR 235.1).

101 SR 235.1 102 Amended by Annex No 12Annex No 1 to the Federal Act of 3 Oct. 2003, in force since

1 July 2005 (AS 2005 1429 1437; BBl 2002 6998, 2003 1032 2595). 103 Amended by No I of the Federal Act of 16 Dec. 1983, in force since 1 July 1984

(AS 1984 580 581; BBl 1982 III 177).

220Federal Act on the Amendment of the Swiss Civil Code

1042 ... 3 Where an employee has not yet completed one year’s service, his holiday entitlement is fixed pro rata.

Art. 329b b. Reduction 1 Where in a given year of service the employee through his own fault

is prevented from working for more than a month in total, the em- ployer may reduce his holiday entitlement by one-twelfth for each full month of absence.105 2 Where the total absence does not exceed one month in a given year of service and is the result of personal circumstances for which the employee is not at fault, such as illness, accident, legal obligations, public duties or leave for youth work, the employer is not entitled to reduce his holiday entitlement.106 3 The employer may not reduce the holiday entitlement of a female employee who is prevented from working by pregnancy for up to two months or has received maternity benefits within the meaning of the Loss of Earnings Compensation Act of 25 September 1952107.108 4 A standard employment contract or collective employment contract may derogate from paragraphs 2 and 3 provided that, taken as a whole, it gives employees terms of at least equal benefit.109

Art. 329c c. Consecutive 1 The holiday entitlement for a given year of service is generally weeks, timing granted during that year; at least two weeks of holiday must be taken

consecutively.110 2 The employer determines the timing of holidays taking due account of the employee’s wishes to the extent these are compatible with the interests of the business or household.

Art. 329d d. Salary

104 Repealed by No I of the Federal Act of 16 Dec. 1983 (AS 1984 580; BBl 1982 III 177). 105 Amended by Art. 117 of the Federal Act of 25 June 1982 on Unemployment Insurance, in

force since 1 Jan. 1984 (SR 837.0, 837.01). 106 Amended by Art. 13 of the Federal Act of 6 Oct. 1989 on Youth Work, in force since

1 Jan. 1991 (SR 446.1). 107 SR 834.1 108 Amended by Annex No 12Annex No 1 to the Federal Act of 3 Oct. 2003, in force since

1 July 2005 (AS 2005 1429 1437; BBl 2002 6998, 2003 1032 2595). 109 Inserted by No I of the Federal Act of 16 Dec. 1983, in force since 1 July 1984

(AS 1984 580 581; BBl 1982 III 177). 110 Amended by No I of the Federal Act of 16 Dec. 1983, in force since 1 July 1984

(AS 1984 580 581; BBl 1982 III 177).

220 Code of Obligations

3. Leave for extracurricular youth work

4. Maternity leave

IX. Other duties 1. Security

1 The employer must pay the employee the full salary due for the holiday entitlement and fair compensation for any lost benefits in kind. 2 During the employment relationship, the holiday entitlement may not be replaced by monetary payments or other benefits. 3 If while on holiday, the employee carries out paid work for a third party which harms the employer’s legitimate interests, the employer may refuse to pay the salary due for the holidays concerned and may reclaim any salary already paid.

Art. 329e111 1 During each year of service the employer must grant employees under the age of 30 leave of up to one working week for the purpose of carrying out unpaid leadership, care or advisory activities in connec- tion with extracurricular youth work for cultural or social organisa- tions and for related initial and ongoing training. 2 The employee has no salary entitlement during such leave for youth work. An individual agreement, standard employment contract or collective employment contract may provide otherwise to the em- ployee’s benefit. 3 The employer and employee should agree on the timing and duration of leave for youth work, having due regard for each other’s interests. Where they cannot reach agreement, such leave must be granted on condition that the employee gives two months’ advance notice of his intention to exercise his right. Any leave for youth work not taken by the end of the calendar year is forfeited. 4 At the employer’s request, the employee must furnish proof of the activities and functions he has carried out in relation to youth work.

Art. 329f112

After having given birth, a female employee is entitled to maternity leave of at least 14 weeks.

Art. 330 1 Where the employee furnishes security for performance of his obli- gations under the employment contract, the employer must keep it separate from his own assets and guarantee its safekeeping.

111 Inserted by Art. 13 of the Federal Act of 6 Oct. 1989 on Youth Work, in force since 1 Jan. 1991 (SR 446.1).

112 Inserted by Annex No 1 to the Federal Act of 3 Oct. 2003, in force since 1 July 2005 (AS 2005 1429 1437; BBl 2002 6998, 2003 1032 2595).

100

220Federal Act on the Amendment of the Swiss Civil Code

2 The employer returns such security at the latest at the end of the employment relationship unless the date of its return has been deferred by written agreement. 3 Where the employer asserts claims arising from the employment relationship and these are contested, he may retain the security until they are resolved but must at the employee’s request deposit any retained security with the court. 4 In the event of the employer’s bankruptcy the employee may demand the return of the security kept separate from the employer’s own assets, subject to any claims of the latter arising from the employment relationship.

Art. 330a 2. Reference 1 The employee may at any time request from the employer a reference

concerning the nature and the duration of the employment relationship, the quality of his work and his conduct. 2 At the employee’s express request the reference must be limited to the nature and duration of the employment relationship.

Art. 330b113 3. Duty of 1 Where the employment contract has been concluded for an indefinite information duration or for longer than one month, within one month of the begin-

ning of the employment relationship, the employer must inform the employee in writing of:

a. the names of the contracting parties; b. the date of the beginning of the employment relationship; c. the employee’s function; d. the salary and any additional benefits; e. the length of the working week.

2 In the event of changes to the contractual elements that are subject to the duty of information pursuant to paragraph 1 during the employ- ment relationship, the employee must be informed of such changes in writing within one month of their entry into force.

113 Inserted by Art. 2 No 2 of the Federal Act of 17 Dec. 2004 approving and implementing the Protocol relating to the extension of the Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons to new EU member states and approving the revision of the accompanying measures on the free movement of persons, in force since 1 April 2006 (AS 2006 979 994; BBl 2004 5523 6187).

101

220 Code of Obligations

D. Employee benefits provi- sion I. Obligations of the employer114

Art. 331 1 Where the employer contributes to a employee benefits scheme115 or the employees make their own contributions, the employer must trans- fer these contributions to a foundation, a cooperative or a public law institution. 2 Where the employer’s contributions and any made by the employee are used to take out health insurance, personal accident insurance, life assurance, disability insurance or whole life assurance in favour of the employee with a regulated insurance company or a recognised health insurance fund, the employer is not obliged to transfer the contribu- tions as stipulated in the previous paragraph if an independent claim against the insurer would accrue to the employee on the occurrence of the event insured against. 3 Where the employee is obliged to make contributions to a benefits scheme, the employer must simultaneously contribute an amount at least equal to the total contributions of all his employees; he must finance his contributions from his own funds or from contribution reserves held by the fund which have previously been accumulated by the employer for this purpose and are shown separately in the fund’s accounts. The employer must transfer the contribution deducted from the employee’s salary together with his own contribution to the bene- fits scheme not later than at the end of the first month following the calendar year or insurance year for which the contributions are due.116 4 The employer must furnish the employee with the necessary informa- tion regarding his rights and entitlements against a benefits scheme or an insurer.117 5 At the request of the central office for ‘Pillar 2’ (occupational pen- sion) insurance, the employer must supply any information available to him that might facilitate the location of persons entitled to dormant assets or of the institutions that manage such assets.118

114 Amended by Annex No 2 of the Vested Benefits Act of 17 Dec. 1993, in force since 1 Jan. 1995 (SR 831.42).

115 Term in accordance with Annex No 2 of the Vested Benefits Act of 17 Dec. 1993, in force since 1 Jan. 1995 (SR 831.42).

116 Amended by Annex No 2 to the Federal Act of 3 Oct. 2003 (OPA Revision I), in force since 1 Jan. 2005 (AS 2004 1677 1700; BBl 2000 2495).

117 Amended by Annex No 2 to the Federal Act of 17 Dec. 1993 on the Vesting of Occupational Old Age, Survivors' and Invalidity Benefits, in force since 1 Jan. 1995 (SR 831.42).

118 Inserted by No II 2 of the Federal Act of 18 Dec. 1998, in force since 1 May 1999 (AS 1999 1384 1387; BBl 1998 4873).

102

220Federal Act on the Amendment of the Swiss Civil Code

Art. 331a119 II. Beginning 1 Benefits cover commences on the date on which the employment and end of insurance cover relationship begins and ends on the date on which the employee leaves

the benefits scheme. 2 However, he continues to enjoy life assurance and invalidity cover until he joins a new occupational benefits scheme, subject to a maxi- mum period of one month. 3 The benefits scheme may require the insured to pay premiums for pension insurance maintained after the end of the occupational benefits

Art. 331b120 III. Assignment Claims for future benefits may not be validly assigned or pledged and pledge before they fall due.

Art. 331c121 IV. Reservations Occupational benefits schemes may make reservations on medical on medical grounds grounds in relation to invalidity and life policies. Such reservations

may be made for a maximum of five years.

Art. 331d122 V. Promotion of 1 At any time up to three years before becoming entitled to draw home ownership retirement benefits, the employee may pledge his entitlement to occu-1. Pledge

pational benefits or an amount up to the limit of his transferable bene- fits for the purpose of acquiring a property for his own personal use. 2 The pledge is also permitted for the purpose of acquiring shares in a housing cooperative or similar participatory venture provided a resi- dential unit jointly financed in this manner is for the employee’s own personal use. 3 The pledge is valid only if notified in writing to the benefits scheme. 4 The amount pledged by employees aged 50 or older must not exceed the transferable benefit entitlement they would have had at 50 or one-

119 Amended by Annex No 2 to the Federal Act of 17 Dec. 1993 on the Vesting of Occupational Old Age, Survivors' and Invalidity Benefits, in force since 1 Jan. 1995 (SR 831.42).

120 Amended by Annex No 2 to the Federal Act of 17 Dec. 1993 on the Vesting of Occupational Old Age, Survivors' and Invalidity Benefits, in force since 1 Jan. 1995 (SR 831.42).

121 Amended by Annex No 2 to the Federal Act of 17 Dec. 1993 on the Vesting of Occupational Old Age, Survivors' and Invalidity Benefits, in force since 1 Jan. 1995 (SR 831.42).

122 Inserted by No II of the Federal Act of 17 Dec. 1993 on the Promotion of Home Ownership using Occupational Pension Benefits, in force since 1 Jan. 1995 (AS 1994 2372 2378; BBl 1992 VI 229).

103

220 Code of Obligations

half of their transferable benefit entitlement at the time the pledge is given. 5 Married employees may pledge benefits only with the written con- sent of their spouse. Where such consent cannot be obtained or is withheld, the employee may apply to the courts. The same applies to registered partnerships.123 6 Where the pledge is realised before the benefits fall due or the cash payment is made, Articles 30d–30f and Article 83a of the Federal Act of 25 June 1982124 on Occupational Old Age, Survivors' and Invalidity Pension Provision are applicable. 7 The Federal Council determines:

a. the purposes for which the pledge is permissible and the defi- nition of ‘own personal use’;

b. the conditions to be fulfilled for the pledging of entitlements to acquire shares in a housing cooperative or similar participatory venture.

Art. 331e125 2. Early with- 1 At any time up to three years before becoming entitled to draw drawal retirement benefits, the employee may claim an amount from his

benefits scheme for the purpose of acquiring a property for his own personal use. 2 Employees under the age of 50 may withdraw an amount up to the limit of their transferable benefits. Employees aged 50 or older are entitled to withdraw no more than the transferable benefit entitlement they would have had at 50 or one-half of their transferable benefit entitlement at the time of the early withdrawal. 3 The employee may also use such amount for the purpose of acquiring shares in a housing cooperative or similar participatory venture pro- vided a residential unit jointly financed in this manner is for the em- ployee’s own personal use. 4 The early withdrawal brings about an immediate reduction in occu- pational benefit entitlements in accordance with the benefits scheme regulations and the actuarial basis employed by the benefits scheme. In order to avoid a shortfall in benefits cover resulting from this reduction in benefits in the event of death or disability, the benefits scheme

123 Amended by Annex No 11 to the Same-Sex Partnership Act of 18 June 2004, in force since 1 Jan. 2007 (SR 211.231).

124 SR 831.40 125 Inserted by No II of the Federal Act of 17 Dec. 1993 on the Promotion of Home

Ownership using Occupational Pension Benefits, in force since 1 Jan. 1995 (AS 1994 2372 2378; BBl 1992 VI 229).

104

220Federal Act on the Amendment of the Swiss Civil Code

offers supplementary insurance either directly or as broker for a third- party insurer. 5 Married employees may make such an early withdrawal only with the written consent of their spouse. Where such consent cannot be obtained or is withheld, the employee may apply to the courts. The same applies to registered partnerships.126 6 Where married persons divorce before the benefits fall due, the early withdrawal is deemed a transferable benefit and is divided in accor- dance with Articles 122, 123 of the Civil Code127, Article 280 CivPO128 and Article 22 of the Vested Benefits Act of 17 December 1993129. The same applies in the event of judicial dissolution of a registered partnership.130 7 If the early withdrawal or pledge of entitlements jeopardises the liquidity of the benefits scheme, the fund may defer execution of the requests concerned. The benefits scheme must lay down in its regula- tions the order of priority in which early withdrawals or pledges of entitlements will be deferred in such an event. The Federal Council regulates the details. 8 In other respects Articles 30d–30f and Article 83a of the Federal Act of 25 June 1982131 on Occupational Old Age, Survivors' and Invalidity Pension Provision are applicable.

Art. 331f132 3. Restrictions if 1 The benefits scheme may provide in its regulations that the pledges the benefits scheme has a of assignments, early withdrawals and repayments may be subject to cover deficit time or volume restrictions or even refused while the fund has a cover

deficit. 2 The Federal Council determines the conditions under which the restrictions stipulated in para. 1 are permissible and the scope thereof.

Art. 332133 E. Right to 1 Inventions and designs produced by the employee alone or in col- inventions and designs laboration with others in the course of his work for the employer and

126 Amended by Annex No 11 to the Same-Sex Partnership Act of 18 June 2004, in force since 1 Jan. 2007 (SR 211.231).

127 SR 210 128 SR 272 129 SR 831.42 130 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since

1 Jan. 2011 (AS 2010 1739; BBl 2006 7221). 131 SR 831.40 132 Inserted by Annex No 2 to the Federal Act of 18 June 2004, in force since 1 Jan. 2005

(AS 2004 4635 4638; BBl 2003 5835). 133 Amended by Annex No II to the Federal Act of 5 Oct. 2001 on the Protection of Designs,

in force since 1 July 2002 (SR 232.12).

105

220 Code of Obligations

in performance of his contractual obligations belong to the employer, whether or not they may be protected. 2 By written agreement, the employer may reserve the right to acquire inventions and designs produced by the employee in the course of his work for the employer but not in performance of his contractual obli- gations. 3 An employee who produces an invention or design covered by para- graph 2 must notify the employer thereof in writing; the employer must inform the employee within six months if he wishes to acquire the invention or design or release it to the employee. 4 Where it is not released to the employee, the employer must pay him separate, appropriate remuneration to be determined with due regard to all pertinent circumstances and in particular the economic value of the invention or design, the degree to which the employer contributed, any reliance on other staff and on the employer’s facilities, the expenses incurred by the employee and his position in the company.

Art. 332a134

Art. 333 F. Transfer of 1 Where the employer transfers the company or a part thereof to a third employment relationship party, the employment relationship and all attendant rights and obliga- 1. Effects135 tions pass to the acquirer as of the day of the transfer, unless the em-

ployee refuses such transfer.136 1bis Where the transferred relationship is governed by a collective employment contract, the acquirer is obliged to abide by it for one year unless it expires or is terminated sooner.137 2 In the event that the employee refuses the transfer, the employment relationship ends on expiry of the statutory notice period; until then, the acquirer and the employee are obliged to perform the contract. 3 The former employer and the acquirer are jointly and severally liable for any claims of an employee which fell due prior to the transfer or which fall due between that juncture and the date on which the em- ployment relationship could normally be terminated or is terminated following refusal of the transfer.

134 Repealed by Annex No II to the Federal Act of 5 Oct. 2001 on the Protection of Designs (SR 232.12).

135 Amended by No I of the Federal Act of 17 Dec. 1993, in force since 1 May 1994 (AS 1994 804 807; BBl 1993 I 757).

136 Amended by No I of the Federal Act of 17 Dec. 1993, in force since 1 May 1994 (AS 1994 804 807; BBl 1993 I 757).

137 Inserted by No I of the Federal Act of 17 Dec. 1993, in force since 1 May 1994 (AS 1994 804 807; BBl 1993 I 757).

106

220Federal Act on the Amendment of the Swiss Civil Code

2. Consultation of employees’ organisation

3. Transfer of the company on insolvency

G. End of the employment relationship I. Fixed-term employment relationship

4 Moreover, the employer may not transfer the rights arising from an employment relationship to a third party unless otherwise agreed or dictated by the circumstances.

Art. 333a138 1 Where the employer transfers the company or a part thereof to a third party, he must inform the organisation that represents the employees or, where there is none, the employees themselves in good time before the transfer takes place of:

a. the reason for the transfer; b. its legal, economic and social consequences for the employees.

2 Where measures affecting the employees are envisaged as a result of such transfer, the organisation that represents the employees or, where there is none, the employees themselves must be consulted in good time before the relevant decisions are taken.

Art. 333b139

If the company or part thereof is transferred during a debt restructuring moratorium, in the course of bankruptcy proceedings or under a composition agreement with assignment of assets, the employment relationship with all rights and obligations is transferred to the acquirer is this has been agreed with the acquirer and the employee does not object to the transfer. In addition, Article 333, with the exception of its paragraph 3, and 333a apply mutatis mutandis.

Art. 334140 1 A fixed-term employment relationship ends without notice. 2 A fixed-term employment relationship tacitly extended beyond the agreed duration is deemed to be an open-ended employment relation- ship. 3 After ten years, any employment relationship contracted for a longer duration may be terminated by either party by giving six months’ notice expiring at the end of a month.

138 Inserted by No I of the Federal Act of 17 Dec. 1993, in force since 1 May 1994 (AS 1994 804 807; BBl 1993 I 757).

139 Inserted by the Annex to the Federal Act of 21 June 2013, in force since 1 Jan. 2014 (AS 2013 4111; BBl 2010 6455).

140 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

107

220 Code of Obligations

II. Open-ended employment relationship 1. Notice in general

2. Notice periods a. In general

b. During the probation period

c. After the probation period

Art. 335141 1 An employment relationship for an unlimited period may be termi- nated by either party. 2 The party giving notice of termination must state his reasons in writing if the other party so requests.

Art. 335a142 1 Notice periods must be the same for both parties; where an agree- ment provides for different notice periods, the longer period is appli- cable to both parties. 2 However, where the employer has given notice to terminate the employment relationship or expressed an intention to do so for eco- nomic reasons, the employee may be permitted a shorter notice period by individual agreement, standard employment contract or collective employment contract.

Art. 335b143 1 During the probation period, either party may terminate the contract at any time by giving seven days’ notice; the probation period is con- sidered to be the first month of an employment relationship. 2 Different terms may be envisaged by individual agreement, standard employment contract or collective employment contract; however, the probation period may not exceed three months. 3 Where the period that would normally constitute the probation period is interrupted by illness, accident or performance of a non-voluntary legal obligation, the probation period is extended accordingly.

Art. 335c144 1 The employment relationship may be terminated at one month’s notice during the first year of service, at two months’ notice in the second to ninth years of service and at three months’ notice thereafter, all such notice to expire at the end of a calendar month. 2 These notice periods may be varied by written individual, standard or collective employment contract; however, they may be reduced to less

141 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

142 Inserted by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

143 Inserted by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

144 Inserted by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

108

220Federal Act on the Amendment of the Swiss Civil Code

IIbis. Mass redundancies 1. Definition

2. Scope of application

3. Consultation of employees’ organisation

than one month only by collective employment contract and only for the first year of service.

Art. 335d145

Mass redundancies are notices of termination given by the employer to employees of a business within 30 days of each other for reasons not pertaining personally to the employees and which affect:

1. at least 10 employees in a business normally employing more than 20 and fewer than 100 employees;

2. at least 10% of the employees of a business normally employ- ing at least 100 and fewer than 300 employees;

3. at least 30 employees in a business normally employing at least 300 employees.

Art. 335e146 1 The provisions governing mass redundancies apply equally to fixed- term employment relationships terminated prior to expiry of their agreed duration. 2 They do not apply in the event of cessation of business operations by court order or in the case of mass redundancies due to bankruptcy or under a composition agreement with assignment of assets.147

Art. 335f148 1 An employer intending to make mass redundancies must consult the organisation that represents the employees or, where there is none, the employees themselves. 2 He must give them at least an opportunity to formulate proposals on how to avoid such redundancies or limit their number and how to mitigate their consequences. 3 He must furnish the organisation that represents the employees or, where there is none, the employees themselves with all appropriate information and in any event must inform them in writing of:

a. the reasons for the mass redundancies; b. the number of employees to whom notice has been given;

145 Inserted by No I of the Federal Act of 17 Dec. 1993, in force since 1 May 1994 (AS 1994 804 807; BBl 1993 I 757).

146 Inserted by No I of the Federal Act of 17 Dec. 1993, in force since 1 May 1994 (AS 1994 804 807; BBl 1993 I 757).

147 Amended by Annex to the Federal Act of 21 June 2013, in force since 1 Jan. 2014 (AS 2013 4111; BBl 2010 6455).

148 Inserted by No I of the Federal Act of 17 Dec. 1993, in force since 1 May 1994 (AS 1994 804 807; BBl 1993 I 757).

109

220 Code of Obligations

4. Procedure

5. Social plan a. Definition and principles

b. Duty to negotiate

c. the number of employees normally employed in the business; d. the period in which he plans to issue the notices of termination.

4 He must forward a copy of the information stipulated in paragraph 3 to the cantonal employment office.

Art. 335g149 1 The employer notifies the cantonal employment office in writing of any intended mass redundancies and forwards a copy of such notifica- tion to the organisation that represents the employees or, where there is none, to the employees themselves. 2 Such notification must contain the results of the consultation with the organisation that represents the employees (Art. 335f) and all appro- priate information regarding the intended mass redundancies. 3 The cantonal employment office seeks solutions to the problems created by the intended mass redundancies. The organisation that represents the employees or, where there is none, the employees them- selves may submit their own comments. 4 Where notice to terminate an employment relationship has been given within the context of mass redundancies, the relationship ends 30 days after the date on which the mass redundancies were notified to the cantonal employment office unless such notice of termination takes effect at a later date pursuant to statutory or contractual provisions.

Art. 335h150 1 A social plan is an agreement in which an employer and employees set out measures to avoid redundancies or to reduce their numbers and mitigate their effects. 2 It must not jeopardise the continued existence of the company.

Art. 335i151 1 The employer must hold negotiations with the employees negotia- tions with the aim of preparing a social plan if he:

a. normally employs at least 250 employees; and b. intends to make at least 30 employees redundant within 30

days for reasons that have no connection with their persons.

149 Inserted by No I of the Federal Act of 17 Dec. 1993, in force since 1 May 1994 (AS 1994 804 807; BBl 1993 I 757).

150 Inserted by Annex to the Federal Act of 21 June 2013, in force since 1 Jan. 2014 (AS 2013 4111; BBl 2010 6455).

151 Inserted by Annex to the Federal Act of 21 June 2013, in force since 1 Jan. 2014 (AS 2013 4111; BBl 2010 6455).

110

220Federal Act on the Amendment of the Swiss Civil Code

c. Preparation by an arbitral tribunal

d. During bankruptcy or composition proceedings

III. Protection from termination 1. Wrongful termination a. General principle

2 Redundancies over a longer period of time that are based on the same operational decision are counted together. 3 The employer negotiates:

a. with the employee associations that are party to the collective employment contract if he is a party to this collective employ- ment contract;

b. with the organisation representing the employees; or c. directly with the employees if there is no organisation repre-

senting the employees. 4 The employee associations, the organisation representing the em- ployees or the employees may invite specialist advisers to the negotia- tions. These persons must preserve confidentiality in dealings with persons outside the company.

Art. 335j152 1 If the parties are unable to agree on a social plan, an arbitral tribunal is appointed. 2 The arbitral tribunal issues the social plan in a binding arbitral award auf.

Art. 335k153

The provisions on the social plan (Art. 335h–335j) do not apply to mass redundancies that occur during bankruptcy or composition pro- ceedings that are concluded with a composition agreement.

Art. 336154 1 Notice of termination is unlawful where given by one party:

a. on account of an attribute pertaining to the person of the other party, unless such attribute relates to the employment relation- ship or substantially impairs or-operation within the business;

b. because the other party exercises a constitutional right, unless the exercise of such right breaches an obligation arising from the employment relationship or substantially impairs or- operation within the business;

152 Inserted by Annex to the Federal Act of 21 June 2013, in force since 1 Jan. 2014 (AS 2013 4111; BBl 2010 6455).

153 Inserted by Annex to the Federal Act of 21 June 2013, in force since 1 Jan. 2014 (AS 2013 4111; BBl 2010 6455).

154 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

111

220 Code of Obligations

c. solely in order to prevent claims under the employment rela- tionship from accruing to the other party;

d. because the other party asserts claims under the employment relationship in good faith;

e.155 because the other party is performing Swiss compulsory mili- tary or civil defence service or Swiss alternative civilian ser- vice or a non-voluntary legal obligation.

2 Further, notice of termination given by the employer is unlawful when given:

a. because the employee is or is not a member of an employees’ organisation or because he carries out trade union activities in a lawful manner;

b. while the employee is an elected employee representative on the staff council for the business or on a body linked to the business and the employer cannot cite just cause to terminate his employment;

c.156 in the context of mass redundancies, without his having con- sulted the organisation that represents the employees or, where there is none, the employees themselves (Art. 335f).

3 The protection against termination of employment afforded pursuant to paragraph 2 letter b to an employee representative whose mandate has ended as a result of transfer of the employment relationship (Art. 333) continues until such time as the mandate would have expired had such transfer not taken place.157

Art. 336a158 b. Penalties 1 A party who terminates the employment relationship unlawfully must

pay compensation to the other party. 2 The court determines the compensation taking due account of all the circumstances, though it must not exceed an amount equivalent to six months’ salary for the employee. Claims for damages on other counts are unaffected. 3 Where termination is unlawful pursuant to Article 336 paragraph 2 letter c, compensation may not exceed two months’ salary for the employee.159

155 Amended by Annex No 3 to the Federal Act of 6 Oct. 1995 on Alternative Civilian Service, in force since 1 Oct. 1996 (SR 824.0).

156 Inserted by No I of the Federal Act of 17 Dec. 1993, in force since 1 May 1994 (AS 1994 804 807; BBl 1993 I 757).

157 Inserted by No I of the Federal Act of 17 Dec. 1993, in force since 1 May 1994 (AS 1994 804 807; BBl 1993 I 757).

158 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

112

220Federal Act on the Amendment of the Swiss Civil Code

Art. 336b160 c. Procedure 1 A party seeking compensation pursuant to Articles 336 and 336a

must submit his objection to the notice of termination in writing to the party giving such notice not later than the end of the notice period. 2 Where the objection has been properly submitted and the parties cannot reach agreement on the continuation of the employment rela- tionship, the party on whom notice was served may bring his claim for compensation. The claim becomes time-barred if not brought before the courts within 180 days of the end of the employment relationship.

Art. 336c161 2. Termination at 1 After the probation period has expired, the employer may not termi- an inopportune juncture nate the employment relationship: a. By the a.162 while the other party is performing Swiss compulsory militaryemployer

or civil defence service or Swiss alternative civilian service or, where such service lasts for more than eleven163 days, during the four weeks preceding or following it;

b. while the employee through no fault of his own is partially or entirely prevented from working by illness or accident for up to 30 days in the first year of service, 90 days in the second to fifth years of service and 180 days in the sixth and subsequent years of service;

c. during the pregnancy of an employee and the sixteen weeks following birth;

d. while the employee is participating with the employer’s con- sent in an overseas aid project ordered by the competent fed- eral authority.

2 Any notice of termination given during the proscribed periods stipu- lated in paragraph 1 is void; by contrast, where such notice was given prior to the commencement of a proscribed period but the notice period has not yet expired at that juncture, it is suspended and does not resume until the proscribed period has ended. 3 Where a specific end-point, such as the end of a month or working week, has been set for termination of the employment relationship and

159 Inserted by No I of the Federal Act of 17 Dec. 1993, in force since 1 May 1994 (AS 1994 804 807; BBl 1993 I 757).

160 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

161 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

162 Amended by Annex No 3 to the Federal Act of 6 Oct. 1995 on Alternative Civilian Service, in force since 1 Oct. 1996 (SR 824.0).

163 Revised by the Federal Assembly Drafting Committee [Art. 33 ParlPA – AS 1974 1051].

113

220 Code of Obligations

b. By the employee

IV. Termination with immediate effect 1. Requirements a. For good cause

b. Salary at risk

2. Consequences a. Termination for good cause

such end-point does not coincide with the expiry of the resumed notice period, the latter is extended until the next applicable end-point.

Art. 336d164 1 After the probation period has expired, the employee may not termi- nate the employment relationship if he is required to deputise for a hierarchical superior whose function the employee is capable of as- suming or for the employer himself who is prevented from working by the reasons set out at Article 336c paragraph 1 letter a. 2 Article 336c paragraphs 2 and 3 are applicable mutatis mutandis.

Art. 337 1 Both employer and employee may terminate the employment rela- tionship with immediate effect at any time for good cause; the party doing so must give his reasons in writing at the other party’s re- quest.165 2 In particular, good cause is any circumstance which renders the continuation of the employment relationship in good faith unconscion- able for the party giving notice. 3 The court determines at its discretion whether there is good cause, However, under no circumstances may the court hold that good cause is constituted by an employee being prevented from working through no fault of his own.

Art. 337a In the event of the employer’s insolvency, the employee may terminate the employment relationship with immediate effect unless he is fur- nished with security for his claims under such relationship within an appropriate period.

Art. 337b 1 Where the good cause for terminating the employment relationship with immediate effect consists in breach of contract by one party, he is fully liable in damages with due regard to all claims arising under the employment relationship. 2 In other eventualities the court determines the financial consequences of termination with immediate effect at its discretion, taking due account of all the circumstances.

164 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

165 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

114

220Federal Act on the Amendment of the Swiss Civil Code

b. Termination without just cause

c. Failure to take up post and departure without just cause

V. Death of the employee or employer 1. Death of the employee

Art. 337c166 1 Where the employer dismisses the employee with immediate effect without good cause, the employee is entitled to damages in the amount he would have earned had the employment relationship ended after the required notice period or on expiry of its agreed duration. 2 Such damages are reduced by any amounts that the employee saved as a result of the termination of the employment relationship or that he earned by performing other work or would have earned had he not intentionally foregone such work. 3 The court may order the employer to pay the employee an amount of compensation determined at the court’s discretion taking due account of all circumstances; however, compensation may not exceed the equivalent of six months’ salary for the employee.

Art. 337d 1 Where the employee fails to take up his post or leaves it without notice without good cause, the employer is entitled to compensation equal to one-quarter of the employee’s monthly salary; in addition he is entitled to damages for any further losses. 2 Where the employer has suffered no losses or lower losses than the value of the compensation stipulated in the previous paragraph, the court may reduce the compensation at its discretion. 3 Where the claim for damages is not extinguished by set-off, it must be asserted by means of legal action or debt enforcement proceedings within 30 days of the failure to take up the post or departure from it, failing which it becomes time-barred.167

1684 ...

Art. 338 1 The employment relationship ends on the death of the employee. 2 However, the employer must pay the salary for a further month thereafter or, where the employee had completed more than five years of service, for a further two months, provided the employee is survived by a spouse, a registered partner, children who are minors or, in the absence of such heirs, other persons to whom he had a duty to provide support.169

166 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

167 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989 (AS 1988 1472 1479; BBl 1984 II 574).

168 Repealed by No I of the Federal Act of 18 March 1988 (AS 1988 1472; BBl 1984 II 574). 169 Amended by Annex No 11 to the Same-Sex Partnership Act of 18 June 2004, in force

since 1 Jan. 2007 (SR 211.231).

115

220 Code of Obligations

2. Death of the employer

VI. Conse- quences of termination of the employment relationship 1. Maturity of claims

2. Return

3. Severance allowance a. Requirements

Art. 338a 1 On the death of the employer, the employment relationship passes to his heirs; the provisions governing transfer of employment relation- ships on transfer of a business apply mutatis mutandis. 2 Where an employment relationship was entered into with the em- ployer in person, it ends on his death; however, the employee may claim appropriate compensation for losses incurred as a result of the premature termination of the employment relationship.

Art. 339 1 When the employment relationship ends, all claims arising therefrom fall due. 2 In the case of claims for commission on transactions performed partly or entirely after the end of the employment relationship, the due date may be deferred by written agreement, albeit generally for no more than six months, or for no more than one year in the case of transactions involving performance in instalments, and for no more than two years in the case of insurance policies and transactions whose execution takes more than half a year. 3 The claim for a share of the business results becomes due in accor- dance with Article 323 paragraph 3.

Art. 339a 1 By the time the employment relationship ends, each contracting party must return to the other everything received from him or from third parties for his account during the employment relationship. 2 In particular, the employee must return motor vehicles and travel tickets and repay advances against salary and expenses to the extent that they exceed his claims. 3 The contracting parties’ rights of lien are unaffected.

Art. 339b 1 Where an employment relationship with an employee of at least 50 years of age comes to an end after twenty years or more of service, the employer must pay the employee a severance allowance. 2 If the employee dies during the employment relationship, such al- lowance is paid to the surviving spouse, registered partner or children who are minors or, in the absence of such heirs, other persons to whom he had a duty to provide support.170

170 Amended by Annex No 11 to the Same-Sex Partnership Act of 18 June 2004, in force since 1 Jan. 2007 (SR 211.231).

116

220Federal Act on the Amendment of the Swiss Civil Code

b. Amount and due date

c. Benefits in lieu of allowance

VII. Prohibition of competition 1. Requirements

Art. 339c 1 The amount of the severance allowance may be fixed by written individual agreement, standard employment contract or collective employment contract but may never be less than two months’ salary for the employee. 2 Where the amount of the severance allowance is not fixed, the court has discretion to determine it taking due account of all the circum- stances, although it must not exceed the equivalent of eight months’ salary for the employee. 3 The severance allowance may be reduced or dispensed with if the employee has terminated the employment relationship without good cause or the employer himself has terminated it with immediate effect for good cause or where the payment of such allowance would inflict financial hardship on him. 4 The severance allowance is due on termination of the employment relationship, but the due date may be deferred by written individual agreement, standard employment contract or collective employment contract or by court order.

Art. 339d 1 Where the employee receives benefits from an occupational benefits scheme, these may be deducted from the severance allowance to the extent that they were funded by the employer either directly or through his contributions to the occupational benefits scheme.171 2 The employer is likewise released from his obligation to make a severance allowance to the extent that he gives a binding commitment to make future benefits contributions on the employee’s behalf or has a third party give such a commitment.

Art. 340 1 An employee with capacity to act may give the employer a written undertaking to refrain from engaging in any activity that competes with the employer once the employment relationship has ended and in particular to refrain from running a rival business for his own account or from working for or participating in such a business. 2 The prohibition of competition is binding only where the employ- ment relationship allows the employee to have knowledge of the employer’s clientele or manufacturing and trade secrets and where the use of such knowledge might cause the employer substantial harm.

171 Amended by Annex No 2 to the Federal Act of 25 June 1982 on Occupational Old Age, Survivors' and Invalidity Pension Provision , in force since 1 Jan. 1985 (SR 831.40, 831.401 Art. 1 para. 1).

117

220 Code of Obligations

2. Restrictions

3. Consequences of infringement

4. Extinction

H. No right of waiver; time limits

Art. 340a 1 The prohibition must be appropriately restricted with regard to place, time and scope such that it does not unfairly compromise the em- ployee’s future economic activity; it may exceed three years only in special circumstances. 2 The court may at its discretion impose restrictions on an excessive prohibition of competition, taking due account of all the circum- stances; in particular it will have due regard to any consideration made by the employer.

Art. 340b 1 An employee who infringes the prohibition of competition must provide compensation for the resultant damage to the employer. 2 Where an employee who infringes the prohibition is liable to pay a contractual penalty, unless otherwise agreed he may exempt himself from the prohibition by paying it; however, he remains liable in dam- ages for any further damage. 3 Where expressly so agreed in writing, in addition to the agreed contractual penalty and any further damages, the employer may insist that the situation that breaches the contract be rectified to the extent justified by the injury or threat to the employer’s interests and by the conduct of the employee.

Art. 340c 1 The prohibition of competition is extinguished once the employer demonstrably no longer has a substantial interest in its continuation. 2 The prohibition is likewise extinguished if the employer terminates the employment relationship without the employee having given him any good cause to do so, or if the employee terminates it for good cause attributable to the employer.

Art. 341 1 For the period of the employment relationship and for one month after its end, the employee may not waive claims arising from manda- tory provisions of law or the mandatory provisions of a collective employment contract. 2 General provisions governing limitation periods are applicable to claims under the employment relationship.

118

220Federal Act on the Amendment of the Swiss Civil Code

I. Reservation of public law and effects under civil law

I. Definition and conclusion 1. Definition

2. Conclusion and content

Art. 342 1 The following are reserved:

a.172 the provisions of the Confederation, cantons and communes regarding employment relationships under public law, except in respect of Article 331 paragraph 5 and Articles 331a–331e;

b. the public law provisions of the Confederation and the cantons governing work and vocational training.

2 Where federal or cantonal provisions governing work and vocational training impose an obligation under public law on the employer or employee, the other party has a claim under civil law for performance of said obligation if it is susceptible to inclusion in the individual employment contract.

Art. 343173

Section Two: Special Individual Employment Contracts A.174 The Apprenticeship Contract

Art. 344 An apprenticeship contract is a contract whereby the employer under- takes to provide an apprentice with the requisite training for a particu- lar vocation and the apprentice undertakes to work in the employer’s service in order to acquire such training.

Art. 344a 1 An apprenticeship contract is valid only if it is done in writing. 2 The contract must stipulate the nature and duration of the vocational training, the salary, the probation period, the working hours and the holiday entitlement. 3 The probation period must be no less than one month and no longer than three months. Where not stipulated by the parties in the contract, it is three months.

172 Amended by No II 2 of the Federal Act of 18 Dec. 1998, in force since 1 May 1999 (AS 1999 1384 1387; BBl 1998 4873).

173 Repealed by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, with effect from 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

174 Amended by Annex No II 3 to the Federal Act of 13 Dec. 2002 on Vocational and Professional Education and Training, in force since 1 Jan. 2004 (SR 412.10).

119

220 Code of Obligations

II. Effects 1. Special obligations of the trainee and his legal representative

2. Special obligations of the employer

III. Termination 1. Early termina- tion

4 By agreement between the parties and with the consent of the can- tonal authority, the probation period may exceptionally be extended before its expiry to a final duration of up to six months. 5 The contract may contain other terms, in particular regarding the supply of work tools, contributions towards the costs of board and lodgings, the payment of insurance premiums and other obligations to be performed by the parties. 6 Any agreement restricting the apprentice’s freedom to decide his vocational activities once the apprenticeship is complete is void.

Art. 345 1 The apprentice must do his utmost to achieve the goal of the appren- ticeship. 2 The apprentice’s legal representative must do his best to support the employer in his task and to foster a good relationship between the employer and the apprentice.

Art. 345a 1 The employer must ensure that the vocational training is supervised by a specialist with the necessary professional skills and personal qualities. 2 He must without deducting any salary allow the apprentice the time required to attend technical college and take interdisciplinary courses and to sit the vocational examinations on completion of the apprentice- ship. 3 While the apprentice is still under the age of 20, the employer must grant him a holiday entitlement of at least five weeks per year of apprenticeship. 4 He may allocate work outside the relevant vocational field and piece work to the apprentice only insofar as such work is related to the vocation in which the apprentice is being instructed and the training is not thereby impaired.

Art. 346 1 During the probation period, the apprenticeship relationship may be terminated at any time by giving seven days’ notice. 2 The apprenticeship relationship may be terminated with immediate effect for good cause within the meaning of Article 337, and in par- ticular where:

a. the specialist supervising the training lacks the professional skills or personal qualities required to train the apprentice;

120

220Federal Act on the Amendment of the Swiss Civil Code

2. Certificate of apprenticeship

I. Definition and conclusion 1. Definition

2. Conclusion and content

b. the apprentice does not have the physical or intellectual apti- tude required for his training or if his health or morals are in doubt; the apprentice and, where applicable, his legal represen- tative must be heard beforehand;

c. the training cannot be completed or can only be completed un- der fundamentally different conditions.

Art. 346a 1 At the end of the apprenticeship, the employer must provide the apprentice with a certificate setting out the requisite information concerning the vocational training acquired and the duration of the apprenticeship. 2 At the request of the apprentice or his legal representative, the cer- tificate must also give information on the skills, achievements and conduct of the apprentice.

B. The Commercial Traveller’s Contract

Art. 347 1 Under a commercial traveller’s contract, the commercial traveller undertakes to broker or conclude all manner of transactions on behalf of the owner of a trading, manufacturing or other type of commercial company off the employer’s business premises in exchange for pay- ment of a salary. 2 Any employee who is not primarily engaged in itinerant activities or who works only occasionally or temporarily for the employer or who acts as a travelling salesman for his own account is not considered a commercial traveller.

Art. 347a 1 The employment relationship is defined by written contract which stipulates in particular:

a. the duration and termination of the employment relationship; b. the commercial traveller’s authority; c. the remuneration and reimbursement of expenses; d. the applicable law and the forum, where one of the parties is

resident abroad. 2 In the absence of a written contract, the matters specified in the previous paragraph are determined by statutory provision and custom- ary working conditions.

121

220 Code of Obligations

II. Obligations and authority of the commercial traveller 1. Special obligations

2. Del credere

3. Authority

3 An oral agreement is valid only with regard to the commencement of service, the nature and location of the commercial travel and other terms that do not contradict the statutory provisions or the written contract.

Art. 348 1 The commercial traveller must visit the clients in the prescribed manner unless there is just cause to vary it; he may neither broker nor conclude transactions on his own behalf or on behalf of a third party without the written consent of the employer. 2 Where the commercial traveller is authorised to conclude transac- tions, he must comply with the prescribed prices and other terms and conditions and must declare that any changes thereto are subject to approval by the employer. 3 The commercial traveller must report regularly on his activities, pass on all orders received immediately to the employer and notify the employer of any matters of note that concern his clients.

Art. 348a 1 Any agreement whereby the commercial traveller is made liable for the client’s payment or any other type of performance of the client’s obligations or for all or part of the recovery costs is void. 2 Where the commercial traveller concludes transactions with private individuals, he may by means of a written undertaking assume liability in a given transaction for at most one-quarter of the losses incurred by the employer as a result of non-performance of the client’s obligations, on condition that an appropriate del credere commission is agreed. 3 In the case of insurance policies the travelling insurance broker may by means of a written undertaking assume liability for at most one-half of the recovery costs where a single-payment premium or premium instalments are not paid and he seeks their recovery by way of legal action or compulsory execution.

Art. 348b 1 Unless otherwise agreed in writing, a commercial traveller only has authority to broker transactions. 2 Where the commercial traveller is authorised to conclude transac- tions, his powers extend to all legal procedures normally associated with their execution; however, without special authority he may not take receipt of payments from clients nor approve payment periods.

122

220Federal Act on the Amendment of the Swiss Civil Code

III. Special obligations of the employer 1. Area of activity

2. Salary a. In general

b. Commission

c. Prevention from travelling

3 Article 34 of the Federal Act of 2 April 1908175 on Insurance Policies is reserved.

Art. 349 1 Where a particular area or clientele is allocated to the commercial traveller, it is deemed to have been allocated to him exclusively unless otherwise agreed in writing; however, the employer remains author- ised to enter into transactions personally within the area or clientele allocated to the commercial traveller. 2 The employer may unilaterally vary the contractually stipulated area or clientele where legitimate reasons require such variation before expiry of the notice to terminate the contract; however, where this is the case, the commercial traveller is entitled to compensation and has good cause for termination of the employment relationship.

Art. 349a 1 The employer must pay the commercial traveller a salary consisting of a fixed salary component with or without commission. 2 A written agreement whereby the salary consists exclusively or principally of commission is valid only if such commission gives appropriate remuneration for the services of the commercial traveller. 3 The salary may be freely determined by written agreement for a probation period of no more than two months.

Art. 349b 1 Where an area or clientele is allocated exclusively to a commercial traveller, the agreed or customary commission is payable to him on all transactions concluded by him or his employer within such area or clientele. 2 If a particular area or clientele has not been allocated exclusively to him, the commercial traveller is entitled to commission only on trans- actions that he personally brokered or concluded. 3 Where it is not yet possible to calculate the precise value of a transac- tion when the commission falls due, the initial commission payable is based on the minimum value calculated by the employer, with the balance falling due at the latest when the transaction is executed.

Art. 349c 1 Where the commercial traveller through no fault of his own is pre- vented from travelling and his salary must nonetheless be paid to him

SR 221.229.1

123

175

220 Code of Obligations

3. Expenses

4. Special lien

IV. Termination 1. In special circumstances

by law or by contract, it is calculated on the basis of the fixed salary component plus appropriate compensation for loss of commission. 2 Where the commission makes up less than one-fifth of the salary, it may be agreed in writing that no compensation for loss of commission is owed to him should he be prevented from travelling through no fault of his own. 3 Where a commercial traveller who is prevented from travelling through no fault of his own receives his full salary, at the employer’s request he must carry out work on the business premises to the extent he is capable of such work and it may reasonably be required of him.

Art. 349d 1 Where the commercial traveller works for several employers at the same time and there is no written agreement stipulating how expenses are to be divided, each employer must reimburse an equal share. 2 Any agreement stipulating that the fixed salary component or com- mission includes reimbursement of all or part of the expenses is void.

Art. 349e 1 By way of securing claims due to him under the employment rela- tionship and, in the event that the employer becomes insolvent, claims that are not yet due, the commercial traveller has a special lien on chattels and securities and on any payments received from clients by virtue of an authority to collect with which he has been vested. 2 The lien does not extend to travel tickets, price lists, client lists and other documents.

Art. 350 1 Where commission makes up at least one-fifth of a commercial traveller’s salary and is subject to major seasonal fluctuations, and where the commercial traveller has worked for the employer since the end of the previous season, any notice of termination served on him by the employer during the following season may not expire until the end of the second month following the month in which it was served. 2 On the same conditions, where a commercial traveller has been retained by an employer until the end of one season any notice of termination given by him during the period prior to the beginning of the following season may not expire until the end of the second month following the month in which it was served.

124

220Federal Act on the Amendment of the Swiss Civil Code

2. Special consequences

I. Definition and conclusion 1. Definition

2. Notification of conditions

II. Special obligations of the home worker 1. Performance of the work

Art. 350a 1 At the end of the employment relationship, the commercial traveller is entitled to commission on all the transactions that he concluded or brokered and on all orders passed on to the employer before the end of the employment relationship, whatever the date of their acceptance or execution. 2 The commercial traveller must return to the employer all samples, patterns and models, price lists, customer lists and other documents supplied to him for his work activities by the end of the employment relationship, subject to the right of lien.

C. The Homeworker’s Contract

Art. 351 Under a homeworker’s contract, the homeworker176 undertakes to work for the employer in return for a salary, such work to be carried out alone or with members of his family and in his home or on other premises of his choosing.

Art. 351a 1 Before each work assignment is given to the homeworker, the em- ployer must inform him of the applicable conditions and specifications to the extent these are not already covered by the general terms and conditions of employment; he must specify the materials to be pro- cured by the homeworker and state in writing the amounts to be reim- bursed for such materials and the salary. 2 If information regarding the salary and the amounts to be reimbursed for materials procured by the homeworker is not given in writing before the work is allocated, the customary terms and conditions of employment are applicable.

Art. 352 1 The homeworker must start the work he has accepted on time, finish it by the agreed deadline and deliver the results to the employer. 2 If the work is defective and the homeworker is at fault, he is obliged to rectify it at his own expense to the extent that the defects can be removed.

176 Term in accordance with Art. 21 no. 1 of the Homeworking Act of 20 March 1981, in force since 1 April 1983 (SR 822.31). This amendment is taken into account in Art. 351- 354 and 362 para. 1.

125

220 Code of Obligations

2. Materials and work tools

III. Special obligations of the employer 1. Acceptance of completed work

2. Salary a. Payment

b. When prevented from working

IV. Termination

Art. 352a 1 The homeworker is obliged to treat the materials and tools supplied by the employer with all due care, to give account of how they are used and to return tools and unused materials to the employer. 2 Where in the course of his work the homeworker notes defects in the materials or tools supplied, he must inform the employer immediately and await further instructions before continuing work. 3 Where the materials or tools supplied have been damaged through the fault of the homeworker, he is liable to the employer at most for the replacement cost.

Art. 353 1 The employer must inspect the completed work on delivery and notify the homeworker of any defects within one week. 2 Where the employer fails to notify defects to the homeworker promptly, the work is deemed to have been accepted.

Art. 353a 1 Where the homeworker is engaged by the employer on a continuous basis, the salary for the work carried out is paid twice monthly or, with the homeworker’s consent, at the end of each month, and otherwise on delivery of the completed work. 2 Each salary payment must be accompanied by a written statement giving the reasons for any salary deductions that have been made.

Art. 353b 1 An employer who engages the home worker on a continuous basis is obliged pursuant to Articles 324 and 324a to pay his salary in the event that the employer fails to accept his work or he is prevented from working by personal circumstances for which he is not at fault. 2 In other cases the employer is not obliged to pay the salary pursuant to Articles 324 and 324a.

Art. 354 1 Where trial work is assigned to the homeworker, unless otherwise agreed the employment relationship is deemed to have been entered into on a trial basis for a fixed period. 2 Unless otherwise agreed, where the homeworker is engaged by the employer on a continuous basis, the employment relationship is deemed to have been entered into for an indefinite period, and in all other cases it is deemed to have been entered into for a fixed period.

126

220Federal Act on the Amendment of the Swiss Civil Code

I. Definition, content, form and duration 1. Definition and content

2. Freedom of association and freedom to practise a profession

D. Applicability of General Provisions

Art. 355 The general provisions governing individual employment contracts are applicable by way of supplement to apprenticeship contracts, commer- cial traveller’s contracts and homeworker’s contracts.

Section Three: The Collective Employment Contract and the Standard Employment Contract A. The Collective Employment Contract

Art. 356 1 A collective employment contract is a contract whereby employers or employers’ associations and employees’ associations jointly lay down clauses governing the conclusion, nature and termination of employ- ment relationships between the employers and individual employees. 2 The collective employment contract may also contain other clauses, provided they pertain to the relationship between employers and employees or are limited to the formulation of such clauses. 3 Further, the collective employment contract may define the mutual rights and obligations of the contracting parties and the monitoring and enforcement of the clauses specified in the previous paragraphs. 4 Where more than one employers’ association and/or employees’ association is bound by the collective employment contract either from the outset or as a result of subsequent accession with the consent of the original contracting parties, they have equal rights and obligations thereunder and any contrary agreement is void.

Art. 356a 1 Any clause in a collective employment contract or individual agree- ment between the contracting parties intended to compel an employer or employee to join a contracting association is void. 2 Any clause in a collective employment contract or individual agree- ment between the contracting parties intended to exclude or restrict the practice of a particular profession or occupation by an employee or his acquisition of the necessary vocational training is void. 3 The clauses and agreements referred to in the previous paragraph are valid by way of exception if they are justified by overriding interests that warrant protection, in particular personal health and safety or the quality of work; however, denial of access to the profession is not an interest that warrants protection.

127

220 Code of Obligations

3. Accession

4. Form and duration

II. Effects 1. On participat- ing employers and employees

Art. 356b 1 Individual employers and individual employees in the service of employers bound by the collective employment contract may accede to it with the consent of the contracting parties, whereupon they become participating employers and employees. 2 The collective employment contract may stipulate the rules govern- ing such accession. Unreasonable conditions attaching to accession, such as unreasonable monetary contributions, may be declared void or limited to an admissible level by the court; however, clauses and agreements intended to set contributions in favour of one individual contracting party are always void. 3 Any clause in a collective employment contract or individual agree- ment between the contracting parties intended to compel members of associations to accede to the collective employment contract is void if such associations are not entitled to become party to it or to conclude an analogous contract.

Art. 356c 1 The conclusion of a collective employment contract, its amendment and termination by mutual agreement, the accession of a new contract- ing party and notice to terminate the contract are valid only if done in writing, as are declarations of accession by individual employers or employees, the consent to such accession by the contracting parties pursuant to Article 356b paragraph 1 and notice to withdraw from the contract. 2 Where the collective employment contract is open-ended and does not provide otherwise, after one year has elapsed any of the contract- ing parties may withdraw from it at any time by giving six months’ notice, which is effective for all other parties. The same applies muta- tis mutandis to parties subsequently acceding to the contract.

Art. 357 1 Unless otherwise stipulated in the collective employment contract, its provisions relating to the formation, nature and termination of individ- ual employment relationships are binding on the participating employ- ers and employees for the duration of the contract and may not be derogated. 2 Any agreement between participating employers and employees that contradicts the compulsory provisions of the collective employment contract is void and replaced by those provisions; however, such an agreement may be valid if it is to the benefit of the employee.

128

220Federal Act on the Amendment of the Swiss Civil Code

2. On the contracting parties

3. Joint enforce- ment

III. Relationship to mandatory law

Art. 357a 1 The contracting parties are obliged to ensure compliance with the collective employment contract; to this end associations must exert their influence on their members and, where required, have recourse to the means placed at their disposal by their articles of association and the law. 2 Each contracting party has a duty to maintain harmonious industrial relations and in particular to refrain from any hostile action on matters regulated by the collective employment contract; such duty applies without restriction only where expressly so agreed.

Art. 357b 1 A collective employment contract concluded between associations may stipulate that each contracting party has an actionable claim against the other parties in the event that they fail to discharge their duty to ensure that the participating employers and employees abide by the contract as regards the following matters:

a. the formation, nature and termination of employment relation- ships, in respect of which the claim is for a declaratory judg- ment only;

b. the payment of contributions to equalisation funds or other in- stitutions in connection with the employment relationship, the representation of employees within businesses and the mainte- nance of harmonious industrial relations;

c. monitoring activities, the provision of security and contractual penalties in relation to the provisions set out in letters a and b.

2 Clauses within the meaning of the previous paragraph may be agreed where the contracting parties are expressly authorised so to do by their articles of association or resolution passed by their governing body. 3 Unless otherwise stipulated in the collective employment contract, the provisions governing simple partnerships are applicable mutatis mutandis to relations between the contracting parties.

Art. 358 The mandatory law of the Confederation and the cantons takes prece- dence over the collective employment contract; however, other provi- sions may be agreed to the benefit of employees provided they do not conflict with mandatory law.

129

220 Code of Obligations

I. Definition and content

II. Competent authorities and procedure

III. Effects

IV. Minimum wage 1. Requirements

B. The Standard Employment Contract

Art. 359 1 The standard employment contract is a contract whereby clauses governing the formation, nature and termination of certain types of employment relationship are laid down. 2 The cantons draw up standard employment contracts for agricultural workers and domestic staff to regulate in particular working hours, leisure time and employment conditions for female employees and minors. 3 Article 358 is applicable mutatis mutandis to the standard employ- ment contract.

Art. 359a 1 Where the scope of application of a standard employment contract extends over more than one canton, the Federal Council is responsible for issuing it, and otherwise the canton is responsible. 2 Before being issued the standard employment contract is published in an appropriate manner and a time limit set within which interested parties may submit their comments in writing; further, the relevant professional associations and public bodies are consulted. 3 The standard employment contract comes into force once it has been issued in accordance with the provisions governing official publica- tions. 4 The same procedure applies to the rescission or amendment of a standard employment contract.

Art. 360 1 Unless otherwise agreed, the standard employment contract is di- rectly applicable to the employment relationships that it governs. 2 The standard employment contract may stipulate that agreements derogating from certain of its provisions must be done in writing.

Art. 360a177 1 Where the wages that are customary for a geographical area, occupa- tion or industry are repeatedly and unfairly undercut within a particular occupation or economic sector and there is no collective employment contract laying down a minimum wage that may be declared univer- sally binding, on application by the tripartite commission as defined in

177 Inserted by Annex No 2 to the Federal Act of 8 Oct. 1999 on Workers posted to Switzerland, in force since 1 June 2004 (SR 823.20).

130

220Federal Act on the Amendment of the Swiss Civil Code

Article 360b, the competent authority may issue a fixed-term standard employment contract providing for a minimum wage varied by region and, where applicable, by locality in order to combat or prevent abu- sive practices. 2 Such minimum wage must not conflict with the public interest or damage the legitimate interests of other economic sectors or sections of the population. It must have due regard to the minority interests of the affected economic sectors or occupations that stem from regional and business diversity.

Art. 360b178 2. Tripartite 1 The Confederation and each canton establishes a tripartite commis- commissions sion consisting of an equal number of employers’ and employees’

representatives in addition to representatives of the state. 2 Employers’ and employees’ associations have the right to put for- ward candidates for selection as their representatives within the mean- ing of paragraph 1. 3 The commissions monitor the labour market. If they observe abusive practices within the meaning of Article 360a paragraph 1, they nor- mally seek to reach agreement directly with the employers concerned. Where this cannot be achieved within two months, they petition the competent authority to issue a standard employment contract fixing a minimum wage for the affected sectors or occupations. 4 If labour market conditions in the affected sectors change, the tripar- tite commission petitions the competent authority to amend or rescind the standard employment contract. 5 To enable them to discharge their responsibilities, the tripartite commissions have the right to obtain information and inspect any business document necessary to the conduct of their investigation. In the event of a dispute, a ruling is given by a body specially appointed for this purpose by the Confederation or the canton, as applicable. 6 Where necessary for the conduct of their investigations, on applica- tion the tripartite commissions may obtain personal data contained in corporate collective employment contracts from the Federal Statistical Office.179

178 Inserted by Annex No 2 to the Federal Act of 8 Oct. 1999 on Workers posted to Switzerland, in force since 1 June 2003 (SR 823.20).

179 Inserted by Art. 2 No 2 of the Federal Act of 17 Dec. 2004 approving and implementing the Protocol relating to the extension of the Agreement between the Swiss Confederation, of the one part, and the EU and its member states, of the other part, on the free movement of persons to new EU member states and approving the revision of the accompanying measures on the free movement of persons, in force since 1 April 2006 (AS 2006 979 994; BBl 2004 5523 6187).

131

220 Code of Obligations

3. Official secrecy

4. Effects

5. Associations’ right of action

6. Notification

A. Provisions from which no derogation is permissible to the detriment of the employer or the employee

Art. 360c180 1 The members of tripartite commissions are subject to official se- crecy; in particular they are obliged to keep secret from third parties any information of a commercial or private nature gained in the exer- cise of their office. 2 Such duty of secrecy remains in force even after membership of the tripartite commission has ceased.

Art. 360d181 1 The standard employment contract as defined in Article 360a also applies to employees who work only temporarily within its geographi- cal scope and to employees whose services have been loaned out. 2 It is not permissible to derogate from a standard employment contract as defined in Article 360a to the detriment of the employee.

Art. 360e182

Employers’ and employees’ associations have the right to apply for a declaratory judgment as to whether an employer is in compliance with the standard employment contract as defined in Article 360a.

Art. 360f183

A canton issuing a standard employment contract pursuant to Article 360a must forward a copy to the competent federal office184.

Section Four: Mandatory Provisions

Art. 361 1 It is not permissible to derogate from the following provisions to the detriment of either the employer or the employee by individual agree- ment, standard employment contract or collective employment con- tract: Article 321c: paragraph 1 (overtime); Article 323: paragraph 4 (advances);

180 Inserted by Annex No 2 to the Federal Act of 8 Oct. 1999 on Workers posted to Switzerland, in force since 1 June 2003 (SR 823.20).

181 Inserted by Annex No 2 to the Federal Act of 8 Oct. 1999 on Workers posted to Switzerland, in force since 1 June 2004 (SR 823.20).

182 Inserted by Annex No 2 to the Federal Act of 8 Oct. 1999 on Workers posted to Switzerland, in force since 1 June 2004 (SR 823.20).

183 Inserted by Annex No 2 to the Federal Act of 8 Oct. 1999 on Workers posted to Switzerland, in force since 1 June 2004 (SR 823.20).

184 Now the State Secretariat for Economic Affairs (SECO).

132

220Federal Act on the Amendment of the Swiss Civil Code

Article 323b: paragraph 2 (set-off against countervailing claims); Article 325: paragraph 2 (assignment and pledge of salary claims); Article 326: paragraph 2 (allocation of work); Article 329d: paragraph 2 and 3 (holiday pay); Article 331: paragraphs 1 and 2 (employee benefits scheme con-

tributions);

Article 331b: (assignment and pledge of claims to occupational benefits);185

...186

Article 334: paragraph 3 (termination of long-term employment relationships);

Article 335: (termination of employment relationships); Article 335k: (social plan during bankruptcy or composition pro-

ceedings)187

Article 336: paragraph 1 (wrongful termination); Article 336a: (compensation in the event of wrongful termination); Article 336b: (compensation procedure); Article 336d: (termination by the employee at an inopportune

juncture); Article 337: paragraphs 1 and 2 (termination with immediate

effect for good cause); Article 337b: paragraph 1 (consequences of justified termination); Article 337d: (consequences of failure to take up post or departure

without just cause); Article 339: paragraph 1 (maturity of claims); Article 339a: (return); Article 340b: paragraph 1 and 2 (consequences of infringement of

the prohibition of competition); Article 342: paragraph 2 (civil law effects of public law);

185 Inserted by Annex No 2 to the Federal Act of 17 Dec. 1993 on the Vesting of Occupational Old Age, Survivors' and Invalidity Benefits, in force since 1 Jan. 1995 (SR 831.42).

186 Repealed by Annex No 2 to the Federal Act of 17 Dec. 1993 on the Vesting of Occupational Old Age, Survivors' and Invalidity Benefits (SR 831.42).

187 Inserted by Annex to the Federal Act of 21 June 2013, in force since 1 Jan. 2014 (AS 2013 4111; BBl 2010 6455).

133

220 Code of Obligations

...188

Article 346: (early termination of apprenticeship contract); Article 349c: paragraph 3 (prevention from travelling); Article 350: (termination in special cases); Article 350a: paragraph 2 (return).189 2 Any agreement or clause of a standard employment contract or collective employment contract that derogates from the aforemen- tioned provisions to the detriment of the employer or the employee is void.

Article 362 B. Provisions 1 It is not permissible to derogate from the following provisions to the from which no derogation is detriment of the employee by individual agreement, standard employ- permissible to ment contract or collective employment contract:190the detriment of the employee Article 321e: (employee’s liability);

Article 322a: paragraphs 2 and 3 (share in the business results); Article 322b: paragraphs 1 and 2 (entitlement to commission); Article 322c: (statement of commission); Article 323b: paragraph 1, second sentence (salary statement); Article 324: (salary where employer fails to accept work); Article 324a: paragraphs 1 and 3 (salary where employee is pre-

vented from working); Article 324b: (salary where employee has compulsory insurance); Article 326: paragraphs 1, 3 and 4 (piece work); Article 326a: (piece work rates); Article 327a: paragraph 1 (reimbursement of expenses in general); Article 327b: paragraph 1 (reimbursement of expenses for motor

vehicles); Article 327c: paragraph 2 (advances for expenses); Article 328: (protection of the employee’s personality rights in

general); Article 328a: (protection of personality rights of employees living

in the employer’s household);

188 Repealed by Annex No 5 to the Civil Jurisdiction Act of 24 March 2000 (SR 272). 189 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989

(AS 1988 1472 1479; BBl 1984 II 574). 190 Amended by Annex No 1 to the Federal Act of 3 Oct. 2003, in force since 1 July 2005

(AS 2005 1429 1437; BBl 2002 6998, 2003 1032 2595).

134

220Federal Act on the Amendment of the Swiss Civil Code

191

192

193

194

195

196

197

Article 328b: (protection when handling personal data);191

Article 329: paragraphs 1, 2 and 3 (days off work); Article 329a: paragraphs 1 and 3 (holiday entitlement); Article 329b: paragraphs 2 and 3 (reduction of holiday entitlement); Article 329c: (consecutive weeks and timing of holidays); Article 329d: paragraph 1 (holiday pay); Article 329e: paragraphs 1 and 3 (leave for youth work);192

Article 329f: (maternity leave);193

Article 330: paragraphs 1, 3 and 4 (security); Article 330a: (reference); Article 331: paragraphs 3 and 4 (contributions and information for

employee benefits); Article 331a: (beginning and end of insurance cover);194

...195

Article 332: paragraph 4 (remuneration for inventions); Article 333: paragraph 3 (liability in the event of transfer of em-

ployment relationships); Article 335i: (duty to negotiate in order to conclude a social

plan)196

Article 335j: (preparation of the social plan by an arbitral tribu- nal)197

Article 336: paragraph 2 (wrongful termination by the employer); Article 336c: (termination by the employer at an inopportune junc-

ture); Article 337a: (termination with immediate effect because salary is

at risk);

Inserted by Annex No 2 to the Federal Act of 19 June 1992 on Data Protection, in force since 1 July 1993 (SR 235.1). Inserted by Art. 13 of the Federal Act of 6 Oct. 1989 on Youth Work, in force since 1 Jan. 1991 (SR 446.1). Inserted by Annex No 12Annex No 1 to the Federal Act of 3 Oct. 2003, in force since 1 July 2005 (AS 2005 1429 1437; BBl 2002 6998, 2003 1032 2595). Amended by Annex No 2 to the Federal Act of 17 Dec. 1993 on the Vesting of Occupational Old Age, Survivors' and Invalidity Benefits, in force since 1 Jan. 1995 (SR 831.42). Repealed by Annex No 2 to the Federal Act of 17 Dec. 1993 on the Vesting of Occupational Old Age, Survivors' and Invalidity Benefits (SR 831.42). Inserted by Annex to the Federal Act of 21 June 2013, in force since 1 Jan. 2014 (AS 2013 4111; BBl 2010 6455). Inserted by Annex to the Federal Act of 21 June 2013, in force since 1 Jan. 2014 (AS 2013 4111; BBl 2010 6455).

135

220 Code of Obligations

Article 337c: paragraph 1 (consequences of termination without just cause);

Article 338: (death of the employee); Article 338a: (death of the employer); Article. 339b: (Requirements for severance allowance); Article. 339d: (benefits in lieu); Article. 340: paragraph 1 (Requirements for prohibition of compe-

tition); Article. 340a: paragraph 1 (restrictions on prohibition of competi-

tion); Article. 340c: (extinction of prohibition of competition); Article. 341: paragraph 1 (no right of waiver); Article. 345a: (obligations of the master198); Article. 346a: (certificate of apprenticeship); Article. 349a: paragraph 1 (commercial traveller’s salary); Article. 349b: paragraph 3 (payment of commission); Article. 349c: paragraph 1 (salary where prevented from travelling); Article. 349e: paragraph 1 (commercial traveller’s lien); Article. 350a: paragraph 1 (commission on termination of the em-

ployment relationship); Article. 352a: paragraph 3 (home worker’s liability); Article. 353: (acceptance of completed work); Article. 353a: (payment of salary); Article. 353b: paragraph 1 (salary where home worker is prevented

from working).199 2 Any agreement or clause of a standard employment contract or collective employment contract that derogates from the aforemen- tioned provisions to the detriment of the employee is void.

198 Now: the employer. 199 Amended by No I of the Federal Act of 18 March 1988, in force since 1 Jan. 1989

(AS 1988 1472 1479; BBl 1984 II 574).

136

220Federal Act on the Amendment of the Swiss Civil Code

Title Eleven: The Contract for Work and Services

A. Definition

B. Effects I. Contractor’s obligations 1. In general

2. Regarding materials

3. Prompt commencement and contractual performance of work

Art. 363 A contract for work and services is a contract whereby the contractor undertakes to carry out work and the customer undertakes to pay him for that work.

Art. 364 1 The contractor generally has the same duty of care as the employee in an employment relationship.200 2 The contractor is obliged to carry out the work in person or to have it carried out under his personal supervision, unless the nature of the work is such that his personal involvement is not required. 3 Unless otherwise required by agreement or custom, the contractor is obliged to supply the resources, tools and machinery necessary for performance of the work at his own expense.

Art. 365 1 Where the contractor is responsible for supplying the materials, he is liable to the customer for their quality and has the same warranty obligation as a seller. 2 Where materials are supplied by the customer, the contractor must treat them with all due care, give account of how they are used and return any that remain unused to the customer. 3 Where in the course of his work the contractor notes defects in the materials supplied or the designated construction site or any other circumstance arises which might compromise the correct or timely performance of the work, he must inform the customer immediately, failing which he himself will be liable for any adverse consequences.

Art. 366 1 Where the contractor fails to commence the work on time or delays its performance in breach of contract or, through no fault of the cus- tomer, falls so far behind that there is no longer any prospect of com- pleting the work on time, the customer is entitled to withdraw from the contract without waiting for the agreed delivery date. 2 Where during the course of the work it becomes evident that, through the fault of the contractor, the work will be performed in a manner that is defective or otherwise contrary to the agreement, the customer may

200 Amended by No II Art. 1 No 6 of the Federal Act of 25 June 1971, in force since 1 Jan. 1972 (at the end of this Code, Final and Transitional Provisions of Title X).

137

220 Code of Obligations

4. Liability for defects a. Identification of defects

b. Rights of the customer in the event of defects

c. Customer’s liability

d. Approval of the work

set or have the court set the contractor an appropriate time limit within which to take remedial action and notify him that any failure to do so will result in the hire of a third party to take such remedial action or to complete the work at the risk and expense of the contractor.

Art. 367 1 The customer must inspect the condition of the delivered or com- pleted work as soon as feasible in the normal course of business and must inform the contractor of any defects discovered. 2 Each party is entitled to request that the work be inspected by experts at his own expense and that a legal record be made of their findings.

Art. 368 1 Where the work is so defective or deviates from the contractual terms to such an extent that the customer has no use for it or cannot equitably be expected to accept it, the customer may refuse acceptance and, if the contractor is at fault, seek damages. 2 In the case of minor defects in the work or only slight deviations from the contractual terms, the customer may reduce the price in proportion to the decrease in its value or require the contractor to rectify the work at his own expense and to pay damages if he was at fault, provided such rectification is possible without excessive cost to the contractor. 3 In the case of work carried out on the customer’s land or property which by its nature cannot be removed without disproportionate detri- ment to the contractor, the customer has only the rights stipulated in paragraph 2.

Art. 369 The rights accruing to the customer in respect of defects in the work are forfeited if he is at fault for such defects due to having given in- structions concerning performance of the work that were contrary to the express warnings of the contractor or for any other reason.

Art. 370 1 Once the completed work has been expressly or tacitly approved by the customer, the contractor is released from all liability save in re- spect of defects which could not have been discovered on acceptance and normal inspection or were deliberately concealed by the contrac- tor. 2 Tacit approval is presumed where the customer omits to inspect the work and give notice of defects as provided by law.

138

220Federal Act on the Amendment of the Swiss Civil Code

e. Time limits

II. Customer’s obligations 1. Due date for payment

2. Amount of payment a. Firm commit- ment

3 Where defects come to light only subsequently, the customer must notify the contractor as soon as he becomes aware of them, failing which the work is deemed to have been approved even in respect of such defects.

Art. 371201 1 The right of the customer to bring claims due to defects in the work is limited to two years from acceptance of the work. However, the period amounts to five years where defects in a movable object that has been incorporated in an immovable work in a manner consistent with its nature and purpose have caused the work to be defective. 2 The customer’s claims in respect of defects in an immovable work against both the contractor and any architect or engineer who rendered services in connection with such work become time-barred five years after completion of the work. 3 Otherwise the rules governing time limits for the corresponding rights of a buyer apply mutatis mutandis.

Art. 372 1 The customer must pay for the work on completion or delivery. 2 Where the work is delivered in stages and payment in instalments has been agreed, the amount due for each stage of the work is payable on delivery thereof.

Art. 373 1 Where the payment was fixed in advance as an exact amount, the contractor is obliged to perform the work for the agreed amount and may not charge more even if the work entailed more labour or greater expense than predicted. 2 However, where performance of the work was prevented or seriously hindered by extraordinary circumstances that were unforeseeable or excluded according to the conditions assumed by both parties, the court may at its discretion authorise an increase in the price or the termination of the contract. 3 The customer must pay the full price even where the work has en- tailed less labour than predicted.

201 Amended by No I of the Federal Act of 16 March 2012 (Limitation Periods for Guarantee Claims. Extension and Coordination), in force since 1 Jan. 2013 (AS 2012 5415; BBl 2011 2889 3903).

139

220 Code of Obligations

b. By the value of the work

C. Termination I. Withdrawal because estimate exceeded

II. Destruction of the work

III. Withdrawal by the customer against indem- nity

IV. Impossibility of performance for reasons attributable to the customer

Art. 374 Where the price was not fixed in advance or fixed only as an approxi- mate amount, it is determined according to the value of the work carried out and the expenses incurred by the contractor.

Art. 375 1 Where an estimate agreed with the contractor is exceeded by a dis- proportionate amount through no fault of the customer, he has the right to withdraw from the contract before or after completion. 2 In the case of construction work carried out on his land or property, the customer is entitled to an appropriate reduction in the price or, if the work is not yet complete, to call a halt to the work and withdraw from the contract against equitable compensation for work already done.

Art. 376 1 If by accident the work is destroyed prior to completion or delivery, the contractor is not entitled to payment for work done or of expenses incurred unless the customer is in default on acceptance of the work. 2 In this case any loss of materials is borne by the party that supplied them. 3 Where the work has been destroyed either due to a defect in the materials supplied or the construction site designated by the customer or as a result of the method of performance prescribed by him, the contractor is entitled to payment for the work already done and of expenses incurred that were not included in the price, provided he alerted the customer to the risks in good time, and also to damages if the customer was at fault.

Art. 377 The customer may withdraw from the contract at any time before the work is completed provided he pays for work already done and in- demnifies the contractor in full.

Art. 378 1 Where completion of the work is rendered impossible by chance occurrence affecting the customer, the contractor is entitled to payment for the work already done and of expenses incurred that were not included in the price. 2 Where the customer is at fault for the impossibility of performance, the contractor may also claim damages.

140

220Federal Act on the Amendment of the Swiss Civil Code

V. Death or incapacity of the contractor

A. Definition

B. Effects I. Transfer of copyright and warranty

II. Originator’s power of disposal

Art. 379 1 Where the contractor dies or becomes incapable of finishing the work through no fault of his own, the contract for work and services lapses if it was concluded with a view to the personal attributes of the con- tractor. 2 The customer is obliged to accept and pay for work already done to the extent it is of use to him.

Title Twelve: The Publishing Contract

Art. 380 A publishing contract is a contract whereby the originator – the author of a literary or artistic work or his legal successor – undertakes to entrust the work to a publisher, who undertakes to reproduce and distribute it.

Art. 381 1 The author’s rights to the work are transferred to the publisher to the extent and for as long as required for performance of the contract. 2 The originator must give warranty to the publisher that he had the right to make the work available for publication at the time the con- tract was concluded and, where it is subject to copyright protection, that he holds the copyright. 3 Where all or part of the work has already been made available for publication to a third party or the originator is aware that it has already been published, he must inform the publisher before entering into the contract.

Art. 382 1 As long as the editions of the work to which the publisher is entitled have not yet been exhausted, the originator may not make other ar- rangements regarding the work or parts thereof to the publisher’s detriment. 2 Newspaper articles or relatively short passages of magazine copy may be published elsewhere by the originator at any time. 3 Contributions to collections or anthologies and relatively lengthy magazine articles must not be published elsewhere by the originator within three months of the appearance in print of such contribution or article.

141

220 Code of Obligations

III. Number of editions

IV. Publication and sale

V. Improve- ments and corrections

VI. Collected and separate editions

VII. Translation rights

Art. 383 1 Where no clause was agreed that stipulates the number of editions, the publisher is entitled to produce only one. 2 Where nothing was agreed, the publisher determines the size of the edition but at the originator’s request must print at least enough to generate reasonable sales, and once the first print run is completed he must not print any further copies. 3 Where the publishing contract confers publishing rights for several or all editions of a work and the publisher fails to produce a new edition after the previous edition is exhausted, the originator may have the court set a time limit for the publication of a new edition, failing which the publisher forfeits such rights.

Art. 384 1 The publisher is obliged to publish the work in an appropriate format without abridgment, addition or alteration, to take reasonable steps to publicise the work and to devote the customary resources in order to promote sales thereof. 2 He must fix the price at his discretion but not so high as to hinder sales of the work.

Art. 385 1 The author retains the right to correct and improve his work provided this does not prejudice the interests or increase the liability of the publisher, but must compensate the publisher for any unforeseen costs incurred as a result. 2 The editor may not produce a new version, edition or print run of the work without having previously given the author the opportunity to improve it.

Art. 386 1 The right to publish different works by the same author separately does not entail the right to publish them together in collected edition. 2 Similarly, the right to publish the complete works of an author or all of his works in a given genre does not give the publisher the right to publish the individual works separately.

Art. 387 Unless otherwise agreed with the publisher, the originator retains the exclusive right to commission a translation of the work.

142

220Federal Act on the Amendment of the Swiss Civil Code

VIII. Author’s remuneration 1. Amount

2. Due date for payment, record of sales and complimentary copies

C. Termination I. Destruction of the work

II. Destruction of the edition

III. Grounds for termination pertaining to the person of the author or the publisher

Art. 388 1 The originator is deemed entitled to remuneration where in the cir- cumstances the presumption is that publication of the work would necessarily involve such remuneration. 2 The amount thereof is fixed by the court on the basis of expert opin- ion. 3 Where the publisher is entitled to produce several editions, the pre- sumption is that the level of remuneration and the other terms and conditions for subsequent editions are the same as for the first edition.

Art. 389 1 The remuneration is payable as soon as the complete work or, in the case of works appearing in separate parts (volumes, fascicles, issues), each part thereof is printed and ready for distribution. 2 Where the remuneration is made partly or entirely contingent on expected sales, the publisher is obliged to produce the customary record of sales with corroborating documentation. 3 Unless otherwise agreed, the originator is entitled to receive the customary number of complimentary copies.

Art. 390 1 If the work is destroyed by chance after delivery to the publisher, he remains obliged to pay the author’s remuneration. 2 If the author has a second copy of the destroyed work, he must make it available to the publisher, and otherwise he must recreate the work where this is possible with little effort. 3 In either case he is entitled to appropriate compensation.

Art. 391 1 If an edition already produced by the publisher is partly or entirely destroyed by chance prior to its distribution, the publisher is entitled to replace the destroyed copies at his own expense without giving rise to a claim for additional remuneration on the part of the originator. 2 The publisher is obliged to replace the destroyed copies where this is possible without disproportionate expense.

Art. 392 1 The contract is extinguished on the death or incapacity of the author before the work is completed or in the event that the author is pre- vented from completing it through no fault of his own.

143

220 Code of Obligations

D. Work on a project origi- nated by the publisher

A. Definition

B. Conclusion of the contract

C. Effects I. Scope of agency

2 By way of exception, the court may authorise the full or partial continuation of the contract, where this is deemed both feasible and equitable, and order any necessary measures. 3 In the event of the publisher’s bankruptcy, the originator may entrust the work to another publisher unless he is furnished with security for performance of the publishing obligations not yet due at the time bankruptcy proceedings were commenced.

Art. 393 1 Where one or more authors accept a commission to work on a project originated by a publisher, they are entitled only to the agreed remu- neration. 2 The publisher owns the copyright to the work as a whole.

Title Thirteen: The Agency Contract Section One: The Simple Agency Contract

Art. 394 1 An agency contract is a contract whereby the agent undertakes to conduct certain business or provide certain services in accordance with the terms of the contract. 2 Contracts for the provision of work or services not covered by any other specific type of contract are subject to the provisions governing agency. 3 Remuneration is payable where agreed or customary.

Art. 395 An agency contract is deemed to have been accepted where it has not been declined immediately and relates to business which is conducted by the agent by official appointment or on a professional basis or for which he has publicly offered his services.

Art. 396 1 Unless expressly defined by the contract, the scope of the agency is determined by the nature of the business to which it relates. 2 In particular, it includes the authority to carry out such transactions as are required for performance of the contract.

144

220Federal Act on the Amendment of the Swiss Civil Code

II. Obligations of the agent 1. Compliance with instructions

1bis. Duty to notify

2. Faithful performance a. In general

b. In the event of delegation

3 The agent requires special authority to agree a settlement, accept an arbitration award, contract bill liabilities, alienate or encumber land or make gifts.202

Art. 397 1 An agent who has received instructions from the principal on how to conduct the business entrusted to him may deviate from them only to the extent that circumstances prevent him from obtaining the princi- pal’s permission and that he may safely assume such permission would have been forthcoming had the principal been aware of the situation. 2 Where such conditions are not satisfied and the agent nevertheless deviates from the principal’s instructions to the latter’s detriment, the agency contract is deemed to have been performed only if the agent accepts liability for the resultant damage.

Art. 397a203

If it is anticipated that the principal will become permanently incapa- ble of judgement, the agent must notify the adult protection authority at the principal's domicile if such notification appears appropriate in order to safeguard the interests concerned.

Art. 398 1 The agent generally has the same duty of care as the employee in an employment relationship.204 2 The agent is liable to the principal for the diligent and faithful per- formance of the business entrusted to him. 3 He must conduct such business in person unless authorised or com- pelled by circumstance to delegate it to a third party or where such delegation is deemed admissible by custom.

Art. 399 1 An agent who has delegated the business entrusted to him to a third party without authority is liable for the latter’s actions as if they were his own. 2 Where such delegation was authorised, he is liable only for any failure to act with due diligence when selecting and instructing the third party.

202 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

203 Inserted by Annex No 10 of the Federal Act of 19 Dec. 2008 (Adult Protection, Law of Persons and Law of Children), in force since 1 Jan. 2013 (AS 2011 725; BBl 2006 7001).

204 Amended by No II Art. 1 No 7 of the Federal Act of 25 June 1971, in force since 1 Jan. 1972 (at the end of this Code, Final and Transitional Provisions of Title X).

145

220 Code of Obligations

3. Account of agency

4. Transfer of acquired rights

III. Obligations of the principal

IV. Liability of joint principals and agents

D. Termination I. Grounds 1. Revocation, termination

3 In both cases, claims held by the agent against the third party may be enforced the principal directly against the third party.

Art. 400 1 The agent is obliged at the principal’s request, which may be made at any time, to give an account of his agency activities and to return anything received for whatever reason as a result of such activities. 2 He must pay interest on any sums which he is late in forwarding to the principal.

Art. 401 1 Where the agent acting on the principal’s behalf acquires claims in his own name against third parties, such claims pass to the principal provided he has fulfilled all his obligations towards the agent under the agency relationship. 2 The same applies in relation to the agent’s assets if the agent is bankrupt. 3 Similarly, where the agent is bankrupt, the principal may claim chattels of which the agent took possession in his own name but on the principal’s behalf, subject to the agent’s own rights of lien.

Art. 402 1 The principal is obliged to reimburse the agent for expenses incurred in the proper performance of the agency contract plus interest and to release him from obligations entered into. 2 The principal must also compensate the agent for any loss or damage incurred in performance of the agency contract unless the principal can prove that the damage occurred through no fault of his own.

Art. 403 1 Where several persons conclude an agency contract as principals, they are jointly and severally liable to the agent. 2 Where several persons conclude an agency contract as agents, they are jointly and severally liable to the principal and, save to the extent they are authorised to delegate to third parties, may commit the princi- pal only through joint action.

Art. 404 1 The agency contract may be revoked or terminated at any time by either party.

146

220Federal Act on the Amendment of the Swiss Civil Code

2. Death, incapacity, bankruptcy

II. Effects of extinction of the contract

A. Definition and applicable law

B. Introduction of or to foreign nationals I. Costs of return journey

2 However, a party doing so at an inopportune juncture must compen- sate the other for any resultant damage.

Art. 405 1 Unless otherwise agreed or implied by the nature of the agency business, the agency contract ends on loss of capacity to act, bank- ruptcy, death or declaration of presumed death of the principal or the agent.205 2 However, where termination of the agency contract jeopardises the principal’s interests, the agent, his heir or his representative is obliged to continue conducting the agency business until such time as the principal, his heir or his representative is able to conduct it himself.

Art. 406 Actions taken by the agent before he became aware of the termination of the agency contract are binding on the principal or his heir as if the contract had still been in force.

Section Onebis:206 The Marriage or Partnership Brokerage Contract

Art. 406a 1 A person assuming the role of agent under a marriage or partnership brokerage contract undertakes, in exchange for remuneration, to intro- duce the principal to persons who are potential spouses or long-term partners. 2 The provisions governing simple agency contracts are applicable by way of supplement to marriage or partnership brokerage contracts.

Art. 406b 1 Where the person to be introduced travels from or to a foreign desti- nation, the agent must reimburse the costs of the return journey if this takes place within six months of arrival. 2 Where the local authority has borne such costs, it is subrogated to the claim held by the person introduced against the agent. 3 The agent may claim reimbursement of such travel costs from the principal only up to the maximum amount stipulated in the contract.

205 Amended by Annex No 10 of the Federal Act of 19 Dec. 2008 (Adult Protection, Law of Persons and Law of Children), in force since 1 Jan. 2013 (AS 2011 725; BBl 2006 7001).

206 Inserted by Annex No 2 to the Federal Act of 26 June 1998, in force since 1 January 2000 (AS 1999 1118 1142; BBl 1996 I 1).

147

220 Code of Obligations

II. Duty to obtain a licence

C. Form and content of the contract

D. Entry into force, with- drawal

Art. 406c 1 Professional marriage and partnership brokerage activities involving foreign nationals require a licence issued by the authority designated by cantonal law and are regulated by that authority. 2 The Federal Council issues the implementing provisions and deter- mines in particular:

a. licence requirements and durations; b. the penalties imposed on the agent in the event of infringe-

ments; c. the obligation of the agent to furnish security for the costs of

repatriating persons introduced under the contract.

Art. 406d The contract must be done in writing and contain the following infor- mation:

1. the name and address of each party; 2. the number and nature of the services that the agent undertakes

and the amount of the remuneration and costs, in particular registration fees, corresponding to each service;

3. the maximum amount owed to the agent by way of reim- bursement for his defraying the costs of return journeys of per- sons travelling to or from foreign countries (Art. 406b);

4. the terms of payment; 5. the right of the principal to withdraw from the contract in writ-

ing and without compensation within seven days; 6. the stipulation that the agent is prohibited from accepting any

payment before the seven-day period has expired; 7. the right of the principal to terminate the contract at any time,

subject to any liability in damages arising from termination at an inopportune juncture.

Art. 406e 1 The contract does not become binding on the principal until seven days after he receives a duplicate signed by both parties. During this period, the principal may withdraw from the contract by notifying the agent in writing. Any advance waiver of this right is invalid. The time limit is met if the notification of withdrawal is posted on the seventh day. 2 The agent must not accept any payment from the principal before the seven-day period has expired.

148

220Federal Act on the Amendment of the Swiss Civil Code

E. Declaration of withdrawal and notice of termination

F. Information and data protection

G. Reduction

A. Letter of credit

B. Loan authorisation I. Definition and form

SR 235.1

3 If the principal withdraws from the contract, no compensation may be claimed from him.

Art. 406f The declaration of withdrawal and notice of termination must be done in writing.

Art. 406g 1 Before the contract is signed and throughout its duration, the agent must inform the principal of any particular difficulties pertaining to the latter’s personal circumstances that might arise in the performance of the obligations thereunder. 2 When processing the principal’s personal data, the agent is bound by a duty of discretion; the provisions of the Federal Act of 19 June 1992207 on Data Protection are reserved.

Art. 406h Where excessive remuneration or expenses have been agreed, the principal may apply to the court to reduce these to an appropriate amount.

Section Two: The Letter of Credit and the Loan Authorisation

Art. 407 1 The provisions governing agency and payment instructions are applicable to letters of credit in which the principal instructs the ad- dressee to pay a specified person the sums requested by the latter, whether or not a maximum amount is stipulated. 2 Where the letter of credit does not stipulate a maximum amount and obviously disproportionate amounts are requested, the addressee must notify the principal and withhold payment pending further instructions. 3 The instruction conveyed by means of a letter of credit is deemed to have been accepted only where acceptance of a specified amount has been declared.

Art. 408 1 Where a person has received and accepted an order to act as an agent in granting or renewing a loan to a third party in his own name and for

149

207

220 Code of Obligations

II. Incapacity of payee to enter into a contract

III. Payment extension granted on own authority

IV. Borrower and principal

A. Definition and form

B. Broker’s fee I. When due

his own account but on the authorisation of the principal, the principal is liable for the payee’s obligation in the same manner as a surety, provided that the agent has not exceeded his authority. 2 The principal incurs such liability only where the authorisation was given in writing.

Art. 409 The principal may not plead as defence against the agent the fact that the payee did not have personal capacity to enter into the contract.

Art. 410 The principal ceases to be liable for the obligation where the agent has on his own authority granted the payee an extension of the term of payment or has neglected to proceed against him as instructed by the principal.

Art. 411 The legal relationship between the principal and the third party granted a loan is subject to the provisions governing the legal relationship between the surety and the principal debtor.

Section Three: The Brokerage Contract

Art. 412 1 A brokerage contract is a contract whereby the broker is instructed to alert the principal to an opportunity to conclude a contract or to facili- tate the conclusion of a contract in exchange for a fee. 2 The brokerage contract is generally subject to the provisions govern- ing simple agency contracts.

Art. 413 1 The broker’s fee becomes payable as soon as the information he has given or the intermediary activities he has carried out result in the conclusion of the contract. 2 Where the contract is concluded subject to a condition precedent, the fee becomes due only once such condition has been satisfied. 3 Where the principal has contractually undertaken to reimburse the broker’s expenses, the broker may request such reimbursement even if the transaction fails to materialise.

150

220Federal Act on the Amendment of the Swiss Civil Code

II. Fixing the fee

III. Forfeiture

IV. ...

V. Excessive fees

C. Reservation of cantonal law

A. General I. Definition

Art. 414 Where the amount of remuneration is not stipulated, the parties are deemed to have agreed a fee determined by the tariff of fees, where such exists, and otherwise by custom.

Art. 415 Where the broker acts in the interests of a third party in breach of the contract or procures a promise of remuneration from such party in circumstances tantamount to bad faith, he forfeits his right to a fee and to any reimbursement of expenses.

Art. 416208

Art. 417209

Where an excessive fee has been agreed for identifying an opportunity to enter into or facilitating the conclusion of an individual employment contract or a purchase of land or buildings, on application by the debtor the court may reduce the fee to an appropriate amount.

Art. 418 The cantons reserve the right to enact special regulations governing stockbrokers, official brokers and employment agencies.

Section Four:210 The Commercial Agency Contract

Art. 418a 1 An agent is a person who undertakes to act on a continuous basis as an intermediary for one or more principals in facilitating or concluding transactions on their behalf and for their account without entering into an employment relationship with them.211 2 Unless otherwise agreed in writing, the provisions of this Section also apply to persons acting as agents by way of secondary occupation. The provisions governing del credere, prohibition of competition and

208 Repealed by Annex No 2 to the Federal Act of 26 June 1998 (AS 1999 1118; BBl 1996 I 1).

209 Amended by No II, Art. 1, No 8 of the Federal Act of 25 June 1971, in force since 1 January 1972 (at the end of this Code, final and transitional provisions, Title X).

210 Inserted by No I of the Federal Act of 4 February 1949 (AS 1949 813 819). 211 Amended by No II Art. 1 No 8 and 9 of the Federal Act of 25 June 1971, in force since

1 Jan. 1972 (at the end of the CO, Final and Transitional Provisions to Title X.).

151

220 Code of Obligations

II. Applicable law

B. Obligations of the agent I. General and del credere

II. Duty of discretion and prohibition of competition

C. Powers of representation

termination of contracts for good cause may not be excluded to the detriment of the agent.

Art. 418b 1 The provisions governing brokerage contracts apply by way of supplement to agents acting as intermediaries and those governing commissions apply by way of supplement to agents acting as proxies. 2 ...212

Art. 418c 1 The agent must safeguard the principal’s interests with the diligence of a prudent businessman. 2 Except where otherwise agreed in writing, the agent may also act for other principals. 3 He may assume liability for the client’s payment or any other type of performance of the client’s obligations or for all or part of the costs of recovering receivables only by means of a written undertaking. The agent thereby acquires an inalienable entitlement to adequate special remuneration.

Art. 418d 1 The agent must not exploit or reveal the principal’s trade secrets with which he has been entrusted or of which he became aware by reason of the agency relationship even after the end of the commercial agency contract. 2 The provisions governing service contracts are applicable mutatis mutandis to a contractual prohibition of competition. Where such a prohibition has been agreed, on termination of the contract the agent has an inalienable entitlement to adequate special remuneration.

Art. 418e 1 The agent is considered to be authorised only to facilitate transac- tions, to receive notices of defects and other declarations whereby clients exercise or reserve their rights in respect of defective perform- ance by the principal, and to exercise the principal’s rights to secure evidence thereof. 2 By contrast, the agent is not considered to be authorised to accept payments, to grant time limits for payments or to agree other modifica- tions of the contract with clients.

212 Repealed by No 1, letter b, of the Annex to the Federal Act of 18 December 1987 on Private International Law (IPLA – SR 291).

152

220Federal Act on the Amendment of the Swiss Civil Code

D. Obligations of the principal I. In general

II. Commission 1. On business facilitated and concluded a. Scope and entitlement

b. Lapse of entitlement

3 Articles 34 and 44 paragraph 3 of the Federal Act of 2 April 1908 on Insurance Policies213 are reserved.

Art. 418f 1 The principal must do everything in his power to enable the agent to perform his activities successfully. In particular, he must furnish the agent with the necessary documentation. 2 He must notify the agent immediately if he anticipates that the num- ber and/or volume of transactions that will be possible or desirable is likely to be substantially smaller than was agreed or to be expected in the circumstances. 3 Where a particular area or clientele is allocated to the agent, it is allocated to him exclusively unless otherwise agreed in writing.

Art. 418g 1 The agent is entitled to the agreed or customary commercial agent’s commission or sales commission on all transactions that he facilitated or concluded during the agency relationship and, unless otherwise agreed in writing, on transactions concluded during the agency rela- tionship by the principal without the agent’s involvement but with clients acquired by him for transactions of that kind. 2 An agent to whom a particular area or clientele has been allocated exclusively is entitled to the agreed commission or, in the absence of such an agreement, the customary commission on all transactions concluded during the agency relationship with clients belonging to that area or clientele. 3 Unless otherwise agreed in writing, the entitlement to the commis- sion is established as soon as the transaction has been validly con- cluded with the client.

Art. 418h 1 The agent’s entitlement to commission lapses subsequently where the execution of a concluded transaction is prevented for reasons not attributable to the principal. 2 By contrast, the agent is not entitled to any commission where no consideration is given in return for the principal's performance, or where the consideration is so limited that the principal cannot reasona- bly be expected to pay any commission.

SR 221.229.1

153

213

220 Code of Obligations

c. Due date

d. Statement of commission

2. Collection commission

III. Inability to work

IV. Costs and expenses

Art. 418i Unless otherwise provided by agreement or custom, the commission falls due at the end of the calendar half-year in which the transaction was concluded, whereas in insurance business the commission falls due when the first annual premium has been paid.

Art. 418k 1 Where the agent is not obliged by written agreement to draw up a statement of commission, the principal must provide him with a writ- ten statement as at each due date indicating the transactions on which commission is payable. 2 On request, the agent must be granted access to the books of account or supporting documents that are relevant to such statement. The agent may not waive this right in advance.

Art. 418l 1 Unless otherwise provided by agreement or custom, the agent is entitled to a collection commission on any amounts he collects and delivers to the principal in accordance with the latter’s instructions. 2 At the end of the agency relationship the agent loses his authority to collect payments and his entitlement to further collection commission.

Art. 418m 1 The principal is obliged to pay the agent appropriate compensation if, in breach of his legal or contractual obligations, he is at fault in pre- venting the agent from earning the volume of commission that was agreed or to be expected in the circumstances. Any agreement to the contrary is void. 2 Where an agent who is permitted to represent only one principal at a time is prevented from working through no fault of his own by illness, Swiss compulsory military service or similar reasons, he is entitled for a relatively short period to adequate compensation for loss of income, provided the commercial agency contract has lasted for at least one year. The agent may not waive this right in advance.

Art. 418n 1 Unless otherwise provided by agreement or custom, the agent is not entitled to reimbursement of costs and expenses incurred in the normal performance of his duties, but is entitled to reimbursement of those incurred as a result of special instructions issued by the principal or in the capacity of agent without authority for the principal, such as freight charges and customs duties.

154

220Federal Act on the Amendment of the Swiss Civil Code

V. Special lien

E. Termination I. Expiry of duration

II. Notice of termination 1. In general

2. For good cause

2 The duty to reimburse costs and expenses obtains even where the transaction fails to materialise.

Art. 418o 1 By way of securing claims due to him under the commercial agency relationship and, in the event that the principal becomes insolvent, claims that are not yet due, the agent has a special lien on chattels and securities that he holds pursuant to the contract and on any payments received from clients by virtue of an authority to collect with which he has been vested, and this right of lien may not be waived in advance. 2 The lien does not extend to price lists and client lists.

Art. 418p 1 Where the commercial agency contract was concluded for a fixed term or its duration is limited by virtue of its purpose, it ends without notice on expiry of that term. 2 Where a fixed-term commercial agency contract is tacitly extended by both parties on expiry of its duration, it is deemed to have been renewed for the same duration subject to a maximum of one year. 3 Where termination is subject to prior notice, failure by both parties to give notice is deemed tacit renewal of the contract.

Art. 418q 1 Where the commercial agency contract was not concluded for a fixed term and its duration is not limited by virtue of its purpose, it may be terminated by either party during the first year of the contract by giving one month’s notice expiring at the end of the following calen- dar month. Any agreement of a shorter notice period must be done in writing. 2 Where the contract has lasted for at least one year, it may be termi- nated by giving two months’ notice expiring at the end of a calendar quarter. However, the parties may agree a longer notice period or a different termination date. 3 The notice period must be the same for both the principal and the agent.

Art. 418r 1 The principal and the agent may at any time terminate the contract with immediate effect for good cause. 2 The provisions governing service contracts are applicable mutatis mutandis.

155

220 Code of Obligations

III. Death, incapacity, bankruptcy

IV. Claims of the agent 1. Commission

2. Compensation for clientele

V. Duty of restitution

Art. 418s 1 The agency relationship ends on the death or incapacity of the agent or the bankruptcy of the principal. 2 Where in essence the agency relationship was entered into with the principal in person, it ends on his death.

Art. 418t 1 Unless otherwise provided by agreement or custom, the agent is entitled to commission on orders subsequently placed by a client acquired by him during the agency relationship only if such orders are placed before the end of the commercial agency contract. 2 On termination of the agency relationship, all the agent’s claims for commission or reimbursement of expenses fall due. 3 A later due date may be agreed in writing for commission on transac- tions to be performed in full or in part after the agency relationship has ended.

Art. 418u 1 Where the agent’s activities have resulted in a substantial expansion of the principal’s clientele and considerable benefits accrue even after the end of the agency relationship to the principal or his legal succes- sor from his business relations with clients acquired by the agent, the agent or his heirs have an inalienable claim for adequate compensa- tion, provided this is not inequitable. 2 The amount of such claim must not exceed the agent’s net annual earnings from the agency relationship calculated as the average for the last five years or, where shorter, the average over the entire duration of the contract. 3 No claim exists where the agency relationship has been dissolved for a reason attributable to the agent.

Art. 418v By the time the agency relationship ends, each contracting party must return to the other everything received from him or from third parties for his account during the relationship. The contracting parties’ rights of lien are unaffected.

156

220Federal Act on the Amendment of the Swiss Civil Code

A. Rights and obligations of the agent I. Manner of execution

II. Liability of the agent in general

III. Liability of agents lacking capacity to enter into contracts

B. Position of the principal I. Agency in the principal’s best interests

II. Business conducted in the agent’s interests

Title Fourteen: Agency without Authority

Art. 419 Any person who conducts the business of another without authorisa- tion is obliged to do so in accordance with his best interests and pre- sumed intention.

Art. 420 1 The agent is liable for negligence. 2 However, where the agent acted in order to avert imminent damage to the principal, his liability is judged more leniently. 3 Where agency activities are carried out against the express or other- wise recognisable will of the principal and the prohibition was neither immoral nor illegal, the agent is also liable for chance occurrences unless he can prove that they would have occurred even without his involvement.

Art. 421 1 Where the agent lacked the capacity to enter into contractual com- mitments, he is liable for his agency activities only to the extent that he is enriched or alienated the enrichment in bad faith. 2 Further liability in tort is reserved.

Art. 422 1 Where agency activities were in the best interests of the principal, he is obliged to reimburse the agent for all expenses that were necessary or useful and appropriate in the circumstances plus interest, to release him to the same extent from all obligations assumed and to compen- sate him at the court’s discretion for any other damage incurred. 2 Provided the agent acted with all due care, the claim accrues to him even if the intended outcome was not achieved. 3 Where the agent’s expenses are not reimbursed, he has the right of repossession in accordance with the provisions governing unjust enrichment.

Art. 423 1 Where agency activities were not carried out with the best interests of the principal in mind, he is nonetheless entitled to appropriate any resulting benefits. 2 The principal is obliged to compensate the agent and release him from obligations assumed only to the extent the principal is enriched.

157

220 Code of Obligations

III. Approval of agency activities

A. Buying and selling commis- sion I. Definition

II. Obligations of the commission agent 1. Duty of notification, insurance

2. Treatment of goods on commission

3. Pricing by the principal

Art. 424 Where the agent’s actions are subsequently approved by the principal, the provisions governing agency become applicable.

Title Fifteen: The Commission Contract

Art. 425 1 A buying or selling commission agent is a person who, in return for a commission, buys or sells chattels or securities in his own name but for the account of another (the principal). 2 The provisions governing agency apply to the commission agency relationship, unless otherwise provided in this Title.

Art. 426 1 The commission agent must keep the principal informed and in particular must notify him immediately of the performance of the commission contract. 2 He is obliged to insure the goods on commission only where so instructed by the principal.

Art. 427 1 Where the goods for sale on commission are evidently defective, the commission agent must safeguard the rights of recourse against the carrier, secure evidence of the defective condition of the goods, pre- serve the goods where possible and notify the principal immediately. 2 If the commission agent omits to discharge these obligations, he is liable for any damage caused by such omission. 3 Where there is a risk that the goods for sale on commission will rapidly deteriorate, the commission agent has the right and, should the interests of the principal so require, the obligation to arrange their sale with the assistance of the competent authority of the place where the goods are located.

Art. 428 1 Where the commission agent sells goods below the minimum price instructed, he is liable to the principal for the difference unless he can prove that such sale averted loss or damage that the principal would otherwise have incurred and that he was unable to seek the principal’s instructions in the time available.

158

220Federal Act on the Amendment of the Swiss Civil Code

4. Advances and loans to third parties

5. Del credere

III. Rights of the commission agent 1. Reimburse- ment of ad- vances and expenses

2. Commission a. Entitlement

b. Forfeiture and conversion into transaction for own account

2 Furthermore, where the commission agent is at fault, he must com- pensate the principal for any other damage caused by the breach of contract. 3 Where the commission agent buys at a lower price or sells at a higher price than instructed by the principal, he is not permitted to retain the profit but must credit it to the principal.

Art. 429 1 A commission agent who makes cash advances or extends credit to a third party without the consent of the principal does so at his own risk. 2 However, where sale on credit is the customary commercial practice at the place of sale, the commission agent is entitled to sell on credit unless the principal has instructed otherwise.

Art. 430 1 Except where he extends credit without authority, the commission agent is liable for the debtor’s payment or performance of other obli- gations only to the extent that he has expressly assumed such liability or if this is a customary commercial practice at his place of business. 2 A commission agent who assumes liability for performance by the debtor is entitled to special remuneration (del credere commission).

Art. 431 1 The commission agent is entitled to reimbursement of all advances, expenses and other costs incurred on the principal’s behalf plus inter- est on all such amounts. 2 He may also claim remuneration for storage and transport costs, though not for the wages of his employees.

Art. 432 1 The commission agent is entitled to commission on execution of the transaction or failure to execute it for a reason attributable to the principal. 2 In the case of transactions that could not be executed for other rea- sons, the commission agent is entitled to remuneration for his endeav- ours only to the extent provided for by local custom.

Art. 433 1 The commission agent forfeits his right to commission if he has acted improperly towards the principal and in particular if he has secured an inflated purchase price or a deflated sale price.

159

220 Code of Obligations

3. Special lien

4. Sale of goods at auction

5. Agent acting for his own account a. Pricing and commission

b. Presumption of trading for own account

c. Lapse of right to trade for own account

2 Moreover, in both these cases the principal has the right to take action against the commission agent himself as buyer or seller.

Art. 434 The commission agent has a special lien in respect of the goods on commission and the sale proceeds.

Art. 435 1 Where the goods on commission remain unsold or the order to sell is withdrawn and the principal fails to take them back or otherwise dispose of them within a reasonable time, the commission agent may apply to the competent authority at the place where the goods are located to arrange to have them sold at auction. 2 The auction may be ordered without first hearing the principal if neither he nor a representative is present at that location. 3 However, official notice must be served on the principal before the auction is held, unless the goods in question are susceptible to rapid deterioration.

Art. 436 1 Unless otherwise instructed by the principal, a commission agent instructed to buy or sell goods, bills of exchange or other securities with a quoted exchange or market price is entitled, in his own capacity as seller, to deliver the goods he is instructed to buy or, in his own capacity as buyer, to purchase the goods he is instructed to sell. 2 In both cases, the commission agent must account for the exchange or market price that applied at the time the instruction was executed and is entitled to both the usual commission and reimbursement of the expenses normally incurred in commission business. 3 In other respects the transaction is treated as a contract of sale.

Art. 437 Where the commission agent is permitted to act for his own account and he notifies the principal that the instruction has been executed without naming another person as buyer or seller, the presumption is that he himself has assumed the obligations of the buyer or seller.

Art. 438 The commission agent is not permitted to act as buyer or seller if the principal has withdrawn his instruction and the notice of withdrawal reached the commission agent before he dispatched the notice of execution.

160

220Federal Act on the Amendment of the Swiss Civil Code

B. Forwarding contract

A. Definition

B. Effects I. Obligations of the carrier 1. Required information

2. Packaging

3. Power of disposal over freight

Art. 439 A forwarding agent or carrier who in return for payment undertakes to carry or forward goods for the consignor’s account but in his own name is regarded as a commission agent but is subject to the provi- sions governing contracts of carriage in relation to the forwarding of the goods.

Title Sixteen: The Contract of Carriage

Art. 440 1 A carrier is a person who undertakes to transport goods in return for payment (freight charge). 2 The provisions governing agency apply to contracts of carriage unless otherwise provided in this Title.

Art. 441 1 The consignor must give the carrier precise details of the address of the consignee and the place of delivery, the number, type of packag- ing, weight and content of packages, the delivery date and the trans- port route, as well as the value of any valuable objects. 2 The consignor is liable for any detriment arising from missing or inaccurate details.

Art. 442 1 The consignor ensures that the goods are properly packaged. 2 He is liable for the consequences of defects in packaging that are not externally apparent. 3 By contrast, the carrier is liable for the consequences of defects that were externally apparent if he accepted the goods without reservation.

Art. 443 1 While the goods are in the carrier’s possession, the consignor has the right to reclaim them against compensation for the carrier for expenses incurred and any detriment resulting from their repossession, except where:

1. a bill of lading has been issued by the consignor and delivered to the consignee by the carrier;

2. the consignor has arranged for an acknowledgement of receipt to be issued by the carrier and cannot return it;

161

220 Code of Obligations

II. Position of the carrier 1. Treatment of freight a. Delivery not possible

b. Sale

c. Liability

2. Liability of the carrier a. Loss or destruction of the goods

3. the carrier has sent the consignee written notice that the goods have arrived and are ready for collection;

4. the consignee has requested delivery of the goods after they have arrived at destination.

2 In these cases the carrier is obliged to comply solely with the con- signee’s instructions, although where the consignor has arranged for an acknowledgement of receipt to be issued by the carrier and the goods have not yet arrived at destination, the carrier is bound by such instruc- tions only if the acknowledgement of receipt has been delivered to the consignee.

Art. 444 1 Where the goods are rejected, the associated claims remain unpaid or the consignee cannot be contacted, the carrier must inform the con- signor and in the interim place the goods in storage or deposit them with a third party at the risk and expense of the consignor. 2 If neither consignor nor consignee disposes of the goods within a reasonable period, in the same manner as a commission agent the carrier may apply to the competent authority at the place where the goods are located to arrange to have them sold in favour of the rightful beneficiary.

Art. 445 1 Where the goods are likely to deteriorate rapidly or their probable value does not cover the associated costs, the carrier must without delay arrange for official confirmation of that fact and may arrange for the sale of the goods in the same manner as when delivery is not possible. 2 Where possible, the interested parties must be informed that such sale has been ordered.

Art. 446 When exercising the rights conferred on him with regard to the han- dling of the goods, the carrier must safeguard the interests of their owner to the best of his ability and is liable in damages for any fault on his part.

Art. 447 1 If the goods are lost or destroyed, the carrier must compensate their full value unless he can prove that the loss or destruction resulted from the nature of the goods or through the fault of the consignor or the consignee or occurred as a result of instructions given by either or of

162

220Federal Act on the Amendment of the Swiss Civil Code

b. Delay, damage, partial destruction

c. Liability for sub-contractors

3. Duty of notification

4. Lien

5. Forfeiture of liability claims

circumstances which could not have been prevented even by the dili- gence of a prudent carrier. 2 The consignor is deemed to be at fault if he fails to inform the carrier of any especially valuable freight goods. 3 Agreements stipulating an interest in excess of the full value of the goods or an amount of compensation lower than their full value are reserved.

Art. 448 1 Subject to the same conditions and reservations as apply to the loss or destruction of goods, the carrier is liable for any damage resulting from late delivery, damage in transit or the partial destruction of the goods. 2 Unless specifically agreed otherwise, the damages claimed may not exceed those for total loss.

Art. 449 The carrier is liable for all accidents and errors occurring during the carriage of goods, regardless of whether he transports them to the final destination or sub-contracts the task to another carrier, subject to right of recourse against the sub-contractor to whom goods are entrusted.

Art. 450 The carrier must notify the consignee immediately on arrival of the goods.

Art. 451 1 Where the consignee disputes claims attaching to the goods, he may demand delivery only if the disputed amount is deposited with the court. 2 The deposited amount replaces the goods with regard to the carrier’s lien.

Art. 452 1 Unconditional acceptance of the goods and payment of the freight charge extinguish all claims against the carrier, except in cases of deliberate deceit or gross negligence. 2 Furthermore, the carrier remains liable for damage that is not exter- nally apparent where such damage is discovered within the time in which, in the circumstances, the consignee was able or might reasona-

163

220 Code of Obligations

6. Procedure

7. Time limits on actions for damages

C. State-owned and licensed carriers

bly be expected to inspect the goods, provided he notifies the carrier immediately on discovering such damage. 3 However, such notification must be given no later than eight days after delivery.

Art. 453 1 In any dispute, the competent authority at the place where the goods are located may, at the request of either party, order that the goods be deposited with a third party or, where necessary, sold after their condi- tion has been established. 2 The sale may be forestalled by satisfying all claims allegedly attach- ing to the goods or by depositing the amount of such claims with the court.

Art. 454 1 Actions for damages against the carrier become time-barred one year after the scheduled delivery date in the case of destruction, loss or delay and one year after the date on which the goods were delivered to the consignee in the case of damage. 2 The consignee and the consignor may always assert their claims against the carrier by way of defence, provided that objections are lodged within one year and that the claim is not extinguished by accep- tance of the goods. 3 The above does not apply to cases of malice or gross negligence on the part of the carrier.

Art. 455 1 Carriers operating under state licence are not empowered to exclude or restrict in advance the application of the provisions governing the carrier’s liability to their own benefit by means of special agreement or regulations governing their operations. 2 However, the parties may derogate contractually from said provi- sions to the extent permitted by this Title. 3 The special provisions governing contracts for the carriage of goods by providers of postal services, the railways and steamers are unaf- fected.214

214 Amended by Annex No II 2 of the Postal Services Act of 17 Dec. 2010, in force since 1 Oct. 2012 (AS 2012 4993; BBl 2009 5181).

164

220Federal Act on the Amendment of the Swiss Civil Code

D. Use of state transport facilities

E. Liability of the forwarding agent

A. Registered power of attorney I. Definition and conferral

II. Scope of authority

Art. 456 1 Any carrier or forwarding agent who uses a state transport facility to perform carriage obligations he has assumed or who assists in the carriage of goods by such a facility is subject to the special provisions governing freight transport that apply to that facility. 2 However, any agreement to the contrary between the carrier or for- warding agent and the principal is unaffected. 3 This article does not apply to road hauliers.

Art. 457 A forwarding agent who uses a state transport facility in order to perform obligations under a contract of carriage may not deny liability on grounds of insufficient right of recourse where right of recourse was forfeited through his own fault.

Title Seventeen: Registered Power of Attorney and other Forms of Commercial Agency

Art. 458 1 A registered attorney is a person who has been expressly or tacitly granted the authority to conduct operations and to sign per procuration on behalf of a trading, manufacturing or other commercial business by its owner. 2 The owner of the business must give notice of the granting of the power of attorney for entry in the commercial register but is bound by the actions of the registered attorney even before it is entered. 3 The granting of authority to conduct other kinds of business or trans- actions also requires entry of the attorney in the commercial register.

Art. 459 1 In dealings with bona fide third parties, the registered attorney is deemed authorised to commit the owner of the business by signing bills of exchange and to carry out on his behalf all types of transaction that fall within the scope of the commercial operations and business affairs of the owner. 2 The registered attorney is not authorised to alienate or encumber immovable property unless expressly vested with such powers.

Art. 460 1 The registered power of attorney may be limited to the business affairs of a specific branch.

III. Restrictions

165

220 Code of Obligations

IV. Withdrawal

B. Other forms of commercial agency

C. ...

D. Prohibition of competition

2 It may be conferred on two or more persons collectively (joint power of attorney) such that the signature of one attorney is not binding on the principal unless others participate in the transaction as prescribed. 3 Other limitations of authority have no legal effect on bona fide third parties.

Art. 461 1 Any withdrawal of the power of attorney must be entered in the commercial register, even where no entry was made of its conferral. 2 As long as such withdrawal has not been registered and published, the registered power of attorney remains in force as against bona fide third parties.

Art. 462 1 Where the owner of a trading, manufacturing or other commercial establishment appoints a person to represent him in managing the affairs of the business as a whole or in carrying out certain transactions on behalf of the business without granting that person a registered power of attorney, the agency authority of the representative extends to all activities that fall within the normal scope of the commercial operations of the business or are normally connected with the transac- tions in question. 2 However, a commercial agent is not authorised to sign bills of ex- change, take out loans or conduct litigation unless expressly granted such powers.

Art. 463215

Art. 464 1 A registered attorney or commercial agent appointed to manage the affairs of the business as a whole or employed by the owner of the business may not without the owner’s consent engage in transactions for his own account or that of a third party in the economic sectors in which the owner himself is active.216 2 In the event of any violation of this provision, the owner of the business may seek compensation for the resultant loss or damage and appropriate the relevant transactions for his own account.

215 Repealed by No II, Art. 6, No 1 of the Federal Act of 25 June 1971 (at the end of this Code, Final and Transitional Provisions, Title X).

216 Amended by No II, Art. 1, No 10 of the Federal Act of 25 June 1971, in force since 1 January 1972 (at the end of this Code, final and transitional provisions, Title X).

166

220Federal Act on the Amendment of the Swiss Civil Code

E. Extinction of power of attorney and other forms of commercial agency

A. Definition

B. Effects I. Relations between principal and payee

II. Obligations of the agent

Art. 465 1 The registered power of attorney and authority to act as commercial agent may be revoked at any time without prejudice to rights accruing to the parties concerned under any existing individual contract of employment, partnership agreement, agency agreement or the like.217 2 The death or incapacity of the owner of the business does not extin- guish the registered power of attorney or authority to act as commer- cial agent.

Title Eighteen: The Payment Instruction

Art. 466 By means of a payment instruction, the recipient of the instruction (agent) is authorised to transfer money, securities or other fungibles for the account of the party issuing the instruction (principal) to the payee and the payee is authorised to receive them in his own name.

Art. 467 1 Where the purpose of the payment instruction is to redeem a debt owed by the principal to the payee, the debt is redeemed only once the agent has made the transfer. 2 However, where the payee has accepted a payment instruction, he may assert his claim against the principal only if he called for payment from the agent but did not receive it before expiry of the term stipu- lated in the payment instruction. 3 A creditor who does not wish to accept a payment instruction re- ceived from his debtor must notify the debtor immediately in order to avoid liability in damages.

Art. 468 1 An agent who notifies the payee that he accepts the payment instruc- tion unreservedly is obliged to pay the payee and may raise against him only such objections as arise from their personal relationship or from the terms of the payment instruction, not objections arising from his relationship with the principal. 2 An agent who is indebted to the principal is obliged to comply with the payment instruction, provided that in doing so his own position is in no way prejudiced.

217 Amended by No II, Art. 1, No 11 of the Federal Act of 25 June 1971, in force since 1 January 1972 (at the end of this Code, final and transitional provisions, Title X).

167

220 Code of Obligations

III. Duty to notify non- payment

C. Revocation

D. Payment instructions relating to securities

A. Bailment in general I. Definition

3 Even in this case the agent is not obliged to declare his acceptance prior to payment, unless otherwise agreed with the principal.

Art. 469 Where the agent refuses to make the payment called for by the payee or declares in advance that he will not make it, the payee must notify the principal immediately in order to avoid liability in damages.

Art. 470 1 The principal may revoke the payment instruction as against the payee unless he issued it in order to redeem a debt to the payee or otherwise in favour of the latter. 2 He may revoke it as against the agent provided the agent has not notified the payee of his acceptance. 2bis Unless the regulations of a payment system provide otherwise, a payment instruction in a cashless transaction becomes irrevocable as soon as the transfer amount is debited from the principal's account.218 3 In the event of bankruptcy proceedings against the principal, pay- ment instructions that have not yet been accepted are deemed revoked.

Art. 471 1 The provisions of this Title apply to payment instructions made out to the bearers of negotiable securities on the premise that each such bearer is considered to be the payee in relation to the agent, whereas the rights as between the principal and the payee are established only in respect of each transferor and transferee. 2 The special provisions governing cheques and payment instructions similar in nature to bills of exchange are unaffected.

Title Nineteen: The Contract of Bailment

Art. 472 1 A contract of bailment is a contract in which the bailee undertakes to take receipt of a chattel entrusted to him by the bailor and to keep it in a safe place. 2 The bailee may claim remuneration only where this has been ex- pressly stipulated or was to be expected in the circumstances.

218 Inserted by Annex No 3 of the Uncertificated Securities Act of 3 Oct. 2008, in force since 1 Oct. 2009 (SR 957.1).

168

220Federal Act on the Amendment of the Swiss Civil Code

II. Obligations of the bailor

III. Obligations of the bailee 1. Prohibition of use

2. Return a. Rights of the bailor

b. Rights of the bailee

c. Place of return

3. Liability of joint bailees

4. Third-party rights of title

Art. 473 1 The bailor must reimburse the bailee for expenses incurred in per- formance of the contract. 2 He is liable to the bailee for loss or damage caused by the bailment unless he can prove that such loss or damage occurred through no fault of his own.

Art. 474 1 The bailee may not use the deposited chattel without the bailor’s consent. 2 If he does, he must pay the bailor adequate compensation and is liable for any chance occurrence unless he can prove that such occur- rence would have affected the chattel in any event.

Art. 475 1 The bailor may reclaim the bailed chattel together with any growth or accrual thereto at any time, even where a fixed term was agreed for the bailment. 2 However, the bailor must reimburse the bailee for expenses incurred with a view to bailment over the agreed term.

Art. 476 1 The bailee may return the bailed chattel before expiry of the stipu- lated term only where unforeseen circumstances render the bailee unable to keep the chattel safely or without detriment to himself. 2 Where no term was agreed for the bailment, the bailee may return the chattel at any time.

Art. 477 The bailed chattel is returned at the risk and expense of the bailor at the same place where it was to be kept.

Art. 478 Where several bailees have jointly received a chattel in bailment, they are jointly and severally liable.

Art. 479 1 If a third party claims title to the bailed chattel, the bailee remains obliged to return it to the bailor unless it has been attached by court order or the third party has brought action to establish title against the bailor.

169

220 Code of Obligations

IV. Official receiver

B. Bailment of fungibles

C. Warehousing business I. Right to issue documents of title to goods

II. Warehouse keeper’s duty of safe-keeping

III. Intermin- gling of stored goods

2 In this event, the bailee must inform the bailor immediately.

Art. 480 Where two or more persons, with a view to protecting their rights, deposit an object whose legal status is disputed or uncertain in bail- ment with a third party (official receiver), the latter may return it only with the consent of the interested parties or as directed by the court.

Art. 481 1 Where money is deposited with the express or tacit agreement that the bailee is not obliged to return precisely the same notes and coin but merely the same sum of money, all attendant risks and benefits pass to the bailee. 2 A tacit agreement is presumed if the sum of money was unsealed and open when deposited. 3 Where other fungibles or securities are deposited in bailment, the bailee has power to dispose of them only if expressly authorised so to do by the bailor.

Art. 482 1 A warehouse keeper who publicly offers warehousing services may apply to the competent authority for the right to issue documents of title to the goods kept in storage. 2 These documents of title to goods are securities that confer the right to take delivery of the goods stored. 3 They may be made out to a named person, to order or to bearer.

Art. 483 1 A warehouse keeper has the same duty of care in relation to stored goods as a commission agent. 2 Where feasible, he must inform the bailor of any changes in the condition of the goods that call for further measures. 3 He must allow the bailor to inspect the goods and to take test samples during business hours and to take measures necessary to preserve the goods at any time.

Art. 484 1 A warehouse keeper may mix fungibles with other items of the same kind and quality only if expressly authorised so to do. 2 Each bailor may reclaim a number corresponding to his deposit from any goods thus intermingled.

170

220Federal Act on the Amendment of the Swiss Civil Code

IV. Rights of the warehouse keeper

V. Return of the goods

D. Inns, hotels and stables I. Liability of hoteliers 1. Conditions and scope

2. Specific liability for valuables

3 The warehouse keeper may make the required division without the involvement of the other bailors.

Art. 485 1 The warehouse keeper is entitled to the agreed or customary ware- house fee and to reimbursement of all expenses not resulting from the actual storage of the goods (freight charges, customs duties, repairs). 2 Such expenses must be reimbursed immediately, whereas the ware- house fee is payable in arrears for every three months of storage and in any event whenever all or some of the goods are reclaimed. 3 The warehouse keeper’s claims are secured by a lien on the goods, provided he remains in possession of the goods or may dispose of them by means of a document of title to goods.

Art. 486 1 The warehouse keeper has the same obligation to return the goods as an ordinary bailee, except that he remains bound to observe the con- tractual storage duration even where an ordinary bailee would be entitled to return them sooner owing to unforeseen circumstances. 2 Where a document of title to goods has been issued, the warehouse keeper is entitled and obliged to release the goods only to the benefici- ary named therein.

Art. 487 1 Innkeepers and hoteliers who provide accommodation for persons not known to them are liable for any damage, destruction or misappro- priation of personal effects brought onto the premises by their guests unless they can prove that such loss or damage is attributable to the guest himself or to his visitors, companions or staff or to force majeure or to the nature of the objects in question. 2 However, the liability for personal effects brought onto the premises by guests is subject to an upper limit of 1,000 francs for each guest where no fault can be ascribed to the innkeeper or hotelier or his staff.

Art. 488 1 Where valuables, large sums of money or securities are not deposited with the innkeeper or hotelier, the latter is only liable for them if he or his staff are at fault. 2 Where he accepts or declines the deposit of such items, he is liable for their full value.

171

220 Code of Obligations

3. End of liability

II. Liability of stable owners

III. Lien

A. Requirements I. Definition

3 Where the guest cannot reasonably be expected to deposit such items, the innkeeper or hotelier is liable for them as for the other personal effects of the guest.

Art. 489 1 The guest’s claims are forfeited if he fails to report any loss or dam- age to the innkeeper or hotelier immediately. 2 The innkeeper or hotelier may not exempt himself from liability by posting disclaimer notices on the premises or making such liability dependent on conditions not specified in law.

Art. 490 1 Owners of stables are liable for any damage, destruction or misap- propriation of animals, vehicles and their appurtenances entrusted to or otherwise received by them or by their staff unless they can prove that such loss or damage is attributable to the bailor or his visitors, com- panions or staff or to force majeure or to the nature of the animals or objects deposited. 2 However, liability for animals, vehicles and appurtenances accom- modated in stables is subject to a maximum of 1,000 francs for each bailor where no fault can be ascribed to the stable owner or his staff.

Art. 491 1 Innkeepers, hoteliers and stable owners have a lien on the animals and objects brought onto their premises as security for their claims in connection with accommodation and storage. 2 The provisions governing the landlord’s or lessor’s right of lien apply mutatis mutandis.

Title Twenty:219 The Contract of Surety

Art. 492 1 Under a contract of surety, the surety undertakes as against the credi- tor of the principal debtor to vouch for performance of the obligation. 2 A contract of surety presupposes the existence of a valid primary obligation. A future or conditional obligation may be guaranteed by means of a contract of surety provided that the primary obligation takes effect.

219 Amended by No 1 of the Federal Act of 10 December 1941, in force since 1 July 1942 (AS 58 279 290 646; BBl 1939 II 857). See the transitional provisions for this title at the end of the Code of Obligations.

172

220Federal Act on the Amendment of the Swiss Civil Code

3 A person standing surety for performance of an obligation resulting from a contract that is not binding on the principal debtor as a result of error or incapacity to make a contract is liable for such obligation, subject to the conditions and doctrines of the law governing surety, if he was aware of the defect vitiating the contract at the time he gave his commitment. The same applies to any person who stands surety for performance of an obligation that is time-barred for the principal debtor. 4 Unless the law provides otherwise, the surety may not waive in advance the rights conferred on him under this Title.

Art. 493 II. Form 1 The contract of surety is valid only where the surety makes a written

declaration and indicates in the surety bond the maximum amount for which he is liable. 2 Where the surety is a natural person, his declaration must addition- ally be done in the form of a public deed in conformity with the rules in force at the place where the instrument is drawn up. Where the liability under surety does not exceed the sum of 2,000 francs, it is sufficient for the surety to indicate the amount for which he is liable and the existence of joint and several liability, if any, in his own hand in the surety bond itself. 3 Contracts of surety in favour of the Confederation or its public insti- tutions or in favour of a canton for the performance of public law obligations, such as customs duties, taxes and the like, and for freight charges merely require the written declaration of the surety and an indication in the surety bond itself of the amount for which he is liable. 4 Where the total liability is divided into smaller amounts in order to circumvent the formal requirement of a public deed, the formal re- quirements for contracts of surety for such partial amounts are the same as those prescribed for the total. 5 The sole formal requirement for subsequent amendments to the surety, except where the total liability is increased or the surety is transformed from a simple surety into a joint and several surety, is that they be done in writing. Where the principal obligation is assumed by a third party such that the debtor is released, the contract of surety is extinguished unless the surety has consented in writing to such as- sumption. 6 The formal requirements applicable to the contract of surety also apply to the conferral of special authority to enter into a contract of surety and the promise to stand surety for the contracting party or a third party. The parties may agree in writing to limit the surety’s liability to that portion of the principal obligation that is satisfied first.

173

220 Code of Obligations

III. Spouse’s consent

B. Substance I. Particularities of different types of surety 1. Simple surety

7 The Federal Council may cap the fee payable for drawing up the surety bond as a public deed.

Art. 494 1 A married person may validly stand as surety only with the written consent of his spouse given in advance or at the latest simultaneously, unless the spouses are separated by court judgment.

2202 ... 3 The spouse’s consent to subsequent amendments of a contract of surety is required only where the total liability is to be increased or a simple surety is to be transformed into a joint and several surety, or where the effect of the amendment is to diminish the level of security substantially. 4 The same applies mutatis mutandis to registered partners.221

Art. 495 1 The creditor may resort to a simple surety only if, after the surety was provided, the debtor is declared bankrupt or obtains a debt restruc- turing moratorium, or is the object of debt enforcement proceedings instigated with due diligence by the creditor which have resulted in the issue of a definitive certificate of loss, or has relocated his domicile abroad and can no longer be sued in Switzerland, or legal action against him in foreign courts has been substantially impeded as a result of such relocation. 2 Where the claim is secured by pledges, a simple surety may require that the creditor satisfy his claim first from such pledges, provided the debtor has not been declared bankrupt or obtained a debt restructuring moratorium. 3 Where the surety has undertaken solely to cover any shortfall suf- fered by the creditor (indemnity bond), he may not be sued unless a definitive certificate of loss has been issued against the principal debtor or the latter has relocated his domicile abroad and can no longer be sued in Switzerland, or legal action against him in foreign courts has been substantially impeded as a result of such relocation. Where a composition agreement has been concluded, the surety may be sued for the remitted portion of the principal obligation immediately on the entry into force of the composition agreement. 4 Agreements to the contrary are reserved.

220 Repealed by No I of the Federal Act of 17 June 2005 (Sureties. Spouse’s consent), with effect from 1 December 2005 (AS 2005 5097 5098; BBl 2004 4647 4657).

221 Repealed by No II 2 of the Federal Act of 5 October 1984 amending the Civil Code (AS 1986 122; BBl 1979 II 1179). Amended by Annex No 11 to the Act of 18 June 2004 on partnerships, in force since 1 January 2007 (SR 211.231)

174

220Federal Act on the Amendment of the Swiss Civil Code

2. Joint and several surety

3. Co-surety

Art. 496 1 Where a person stands surety for an obligation by appending the words “joint and several” or an equivalent phrase, the creditor may resort to him before suing the principal debtor and before realising property given in pledge provided the principal debtor has defaulted on his debt payments and has been issued with payment reminders to no avail or is manifestly insolvent. 2 The creditor may resort to the surety before realising pledged chattels and claims only to the extent that these are deemed by the court unlikely to cover the debt or where such sequence was agreed or where the debtor has been declared bankrupt or obtained a debt restructuring moratorium.

Art. 497 1 Where two or more persons stand surety for a single divisible princi- pal obligation, each of them is liable as simple surety for his share and as collateral surety for the shares of the others. 2 Where they have assumed joint and several liability by agreement with the principal debtor or among themselves, each of them is liable for the whole obligation. However, a or-surety may refuse to pay more than his share if debt enforcement proceedings have not been com- menced against all other jointly and severally liable or-sureties who entered into the contract of surety before him or at the same time and who may be sued for the obligation in Switzerland. He has the same right if his or-sureties have paid their share or furnished real security. Unless otherwise agreed, a or-surety who has paid his share has a right of recourse against other jointly and severally liable or-sureties to the extent that each of them has not yet paid his share. This right may be exercised before recourse against the principal debtor. 3 Where it was apparent to the creditor that the surety entered into the contract on condition that others would stand surety with him for the same principal obligation, the surety is released if such condition is not fulfilled or if subsequently one of the or-sureties is released from his liability by the creditor or if his undertaking is declared invalid. In this last case the court may also, on grounds of equity, simply adjudicate that the surety’s liability be reduced by an appropriate amount. 4 Where several persons have independently agreed to stand surety for the same principal obligation, each of them is liable for the whole amount of his own commitment. However, unless otherwise agreed, a surety who pays such amount has a right of recourse against the others for their respective shares.

175

220 Code of Obligations

4. Collateral surety and counter-surety

II. Common provisions 1. Relationship between the surety and the creditor a. Scope of liability

b. Reduction of liability by court order

Art. 498 1 A collateral surety who stands surety to the creditor for performance of the obligation assumed by the primary surety is liable together with the latter in the same way as a simple surety is liable with the principal debtor. 2 A counter-surety stands surety for the right of recourse against the debtor accruing to the primary surety who honours his commitment.

Art. 499 1 In all cases, the surety’s liability is limited to the maximum amount indicated in the surety bond. 2 Unless otherwise agreed, he is liable up to this limit for:

1. the amount of the principal obligation, including the legal con- sequences of any fault or default on the part of the principal debtor, but not for damage resulting from the extinction of the contract and any contractual penalty unless this was expressly agreed;

2. the costs of debt enforcement proceedings and legal action brought against the principal debtor, provided that the surety was given timely opportunity to avoid them by satisfying the creditor, and, where applicable, for the costs of delivering pledges and transferring liens;

3. interest at the contractually agreed rate up to a maximum of the interest payable for the current year and the previous year or, where applicable, for the annual payments due for the current year and the previous year.

3 Unless otherwise provided by the contract or dictated by the circum- stances, the surety is liable only for the principal debtor’s obligations arising after the contract of surety was concluded.

Art. 500 1 Unless otherwise agreed at the outset or by subsequent amendment, the amount for which a surety who is a natural person is liable de- creases every year by three per cent or, where the claim is secured by mortgage, by one per cent of the original maximum liability. In all cases where the surety is a natural person, the amount decreases in at least the same proportion as the obligation. 2 This does not apply to contracts of surety in favour of the Confedera- tion or its public institutions or in favour of a canton for the perform- ance public law obligations such as customs duties, taxes and the like, and for freight charges, or to contracts of surety for the performance of official and civil service obligations or for obligations of variable

176

220Federal Act on the Amendment of the Swiss Civil Code

c. Resort to the surety

d. Defences

amount, such as current accounts and contracts for delivery by instal- ments, and for periodic, recurrent obligations.

Art. 501 1 The creditor may not apply to the surety in respect of the principal obligation before the date fixed for its payment even if such date is brought forward following the principal debtor’s bankruptcy. 2 Under a contract of surety of any type, in exchange for furnishing real security, the surety may request that the court suspend the debt enforcement proceedings against him until all pledges have been realised and a definitive certificate of loss has been issued against the principal debtor or a composition agreement has been concluded with the creditors. 3 Where the principal obligation may not fall due without notice being served by the creditor or the principal debtor, the time limit for the surety does not commence until the date on which he receives such notice. 4 Where the obligation of a principal debtor residing abroad is annulled or restricted by foreign legislation, such as by provisions relating to clearing systems or a ban on currency transfers, a surety resident in Switzerland may also rely on such legislation unless he has waived this defence.

Art. 502 1 The surety is entitled and obliged to plead against the creditor all defences open to the principal debtor or his heirs which are not based on the insolvency of the principal debtor. Suretyship for obligations that are not binding on the principal debtor owing to error or incapac- ity to make a contract or for time-barred obligations is reserved. 2 Where the principal debtor waives a defence that is open to him, the surety may nevertheless plead it. 3 Where the surety fails to plead defences open to the principal debtor, he forfeits his right of recourse to the extent that such defences would have released him from liability unless he can prove that he was un- aware of them through no fault of his own. 4 A person who stands surety for an obligation that is not actionable because it stems from gambling or betting may plead the same de- fences as are open to the principal debtor even if he was aware of that defect.

177

220 Code of Obligations

e. Creditor’s duty of diligence and duty to release documents and pledges

f. Right to demand accep- tance of payment

Art. 503 1 Where the liens and other securities and preferential rights furnished when the contract of surety is concluded or subsequently obtained from the principal debtor for the specific purpose of securing the claim under surety are reduced by the creditor to the detriment of the surety, the latter’s liability is decreased by an equal amount unless it can be proven that the damage is less. Claims for restitution of the over-paid amount are unaffected. 2 Moreover, in the case of contracts of surety for the performance of official and civil service obligations, the creditor is liable to the surety if, as a result of his failure to supervise the employee as required or to act with the diligence that could reasonably be expected of him, the obligation arose or increased to an extent that it would not have other- wise reached.222 3 On being satisfied by the surety, the creditor is required to furnish him with such documents and information as are required to exercise his rights. The creditor must also release to him the liens and other securities furnished when the contract of surety was concluded or subsequently obtained from the principal debtor for the specific pur- pose of securing the claim under surety or must take the requisite measures to facilitate their transfer. This does not apply to liens and rights of pledge held by the creditor in relation to other claims where they take precedence over those of the surety. 4 Where the creditor refuses without just cause to take such measures or has alienated the available evidence or the pledges and other securi- ties for which he is responsible in bad faith or through gross negli- gence, the surety is released from his liability. He may demand the return of sums already paid and seek compensation for any further damage incurred.

Art. 504 1 As soon as the principal obligation falls due, even as a result of the bankruptcy of the principal debtor, the surety may at any time demand that the creditor accept satisfaction from him. Where several persons stand surety for an obligation, the creditor is obliged to accept even a part payment, provided it at least equals the share of the surety offer- ing payment. 2 Where the creditor refuses without just cause to accept payment, the surety is released from his liability. In this event the liability of all other jointly and severally liable or-sureties is decreased by the amount of his share.

222 Amended by No II, Art. 1, No 12 of the Federal Act of 25 June 1971, in force since 1 January 1972 (at the end of this Code, final and transitional provisions, Title X).

178

220Federal Act on the Amendment of the Swiss Civil Code

g. Creditor’s duty to notify and to register his claim in bankruptcy and composition proceedings

2. Relationship between surety and principal debtor a. Right to security and release

b. Surety’s right of recourse a. In general

3 If the creditor is prepared to accept satisfaction, the surety may pay him even before the principal obligation falls due. However, the surety has no right of recourse against the principal debtor until the obligation falls due.

Art. 505 1 Where the debtor is six months in arrears in the payment of capital, interest accrued over half a year or an annual repayment, the creditor must notify the surety. The creditor must inform the surety of the status of the principal obligation on request. 2 In the event of bankruptcy or composition proceedings concerning the principal debtor, the creditor must register his claim and do every- thing conscionable to safeguard his rights. He must inform the surety of the bankruptcy or debt restructuring moratorium as soon as he himself learns of it. 3 Should the creditor fail to take any of these actions, he forfeits his claims against the surety to the extent of any damage to the latter resulting from such failure.

Art. 506 The surety may require that the principal debtor furnish security and demand his release from liability once the principal obligation falls due:

1. where the principal debtor breaches the agreements made with the surety, and in particular his promise to release the surety by a certain date;

2. where the principal debtor is in default or has relocated his domicile abroad and legal action against him in foreign courts has been substantially impeded as a result;

3. where the surety faces substantially greater risks than when he agreed to offer the surety because of a deterioration in the principal debtor’s financial situation, a decrease in the value of the security furnished or the fault of the principal debtor.

Art. 507 1 The surety is subrogated to the creditor’s rights to the extent that he has satisfied him. The surety may exercise these as soon as the obliga- tion falls due. 2 However, unless otherwise agreed, he is subrogated only to those liens and other securities which had been furnished when the contract of surety was concluded or were subsequently obtained from the principal debtor for the specific purpose of securing the claim. If on paying only part of the debt the surety is subrogated to only part of a

179

220 Code of Obligations

bb. Surety’s duty to notify

C. Termination of the contract of surety I. By operation of law

lien, the part remaining with the creditor takes precedence over that of the surety. 3 Special claims and defences arising from the legal relationship be- tween the surety and the principal debtor are reserved. 4 Where a pledge securing a claim under surety is realised or the owner of the pledge pays voluntarily, he may only have recourse against the surety for such payment where an agreement to this effect was reached between the pledgor and the surety or the pledge was given subse- quently by a third party. 5 The limitation period for the surety’s right of recourse commences on satisfaction of the creditor by the surety. 6 The surety has no right of recourse against the principal debtor for payment of any obligation that is not actionable or not binding on the principal debtor as a result of error or incapacity to make a contract. However, if he has assumed liability for a time-barred obligation at the behest of the principal debtor, the latter is liable to him pursuant to the provisions governing agency.

Art. 508 1 Where the surety pays the principal obligation in full or in part, he must notify the principal debtor. 2 If he fails to do so and the principal debtor pays it again because he was not and could not be expected to be aware of the surety’s pay- ment, the surety forfeits his right of recourse against the principal debtor. 3 This does not affect any claim against the creditor for unjust enrich- ment.

Art. 509 1 The surety is released as soon as the principal obligation is extin- guished for whatever reason. 2 Where the same person is both principal debtor and surety, the credi- tor retains the special advantages conferred by the contract of surety. 3 Any surety given by a natural person is extinguished once twenty years have elapsed from the date on which the contract was entered into. This does not apply to contracts of surety in favour of the Con- federation or its public institutions or in favour of a canton for the performance of public law obligations such as customs duties, taxes and the like, and for freight charges, or to contracts of surety for the performance of official and civil service obligations and for periodic, recurrent obligations.

180

220Federal Act on the Amendment of the Swiss Civil Code

II. Fixed-term contract of surety; revoca- tion

III. Open-ended contract of surety

4 During the final year of this period, the creditor may resort to the surety even where a longer duration was agreed for the contract of surety, unless the surety has previously extended the contract or re- placed it with a new one. 5 The contract of surety may be extended by means of a written decla- ration by the surety for an additional period of no more than ten years. However, the written declaration is valid only if done no earlier than one year before the contract expires. 6 Where the principal obligation becomes payable less than two years before the contract of surety expires and the creditor was unable to give notice to terminate it sooner, under a contract of surety of any type the creditor is entitled to resort to the surety without prior re- course to the principal debtor or the pledges. However, the surety has a right of recourse against the principal debtor even before the principal obligation becomes payable.

Art. 510 1 A contract of surety for a future obligation may be revoked by the surety at any time by means of a written declaration to the creditor, provided that the obligation has not yet arisen, where the principal debtor’s financial situation has substantially deteriorated since the contract was concluded or where it subsequently transpires that his financial situation is substantially worse than the surety had in good faith assumed. Contracts of surety for the performance of official and civil service obligations may no longer be revoked once the official or civil service relationship has come into being. 2 The surety is liable to compensate the creditor for any damage result- ing from the fact that he relied in good faith on the contract of surety. 3 Where a contract of surety is concluded for a fixed term, the surety’s liability is extinguished if the creditor fails to assert his claim at law within four weeks of the expiry of such term and to pursue it without significant interruption. 4 Where the obligation is not due at that juncture, the surety may exempt himself from liability only by furnishing real security. 5 If he fails to do so, the contract of surety remains valid, subject to the provision governing the maximum duration of contracts of surety, as if the agreed duration had been until the obligation falls due.

Art. 511 1 Where a contract of surety is concluded for an indefinite term, once the principal debtor’s obligation falls due the surety may, where action may be brought only on such conditions, request that the creditor assert his claim within a period of four weeks, instigate proceedings to

181

220 Code of Obligations

IV. Contracts of surety for official and civil service obliga- tions

A. No actionable claim

B. Debentures and voluntary payment

realise any existing pledges and pursue his claim without significant interruption. 2 In the case of claims that fall due on expiry of a period of notice served by the creditor, once one year has elapsed since the contract of surety was concluded, the surety has the right to request that the credi- tor serve notice and, once the obligation is due, exercise his rights in accordance with para. 1. 3 The surety is released if the creditor does not comply with such request.

Art. 512 1 A contract of surety for the performance of official obligations con- cluded for an indefinite term may be terminated subject to one year’s notice expiring at the end of a term of office. 2 Where there is no fixed term of office, the surety may terminate the contract by giving one year’s notice expiring at the end of a four-year period commencing when the office was taken up. 3 A person standing surety for the performance of civil service obliga- tions for an indefinite term has the same right to give notice of termi- nation as under an open-ended contract of surety for official obliga- tions. 4 Agreements to the contrary are unaffected.

Title Twenty-One: Gambling and Betting

Art. 513 1 Gambling and betting do not give rise to a claim. 2 The same applies to advances or loans knowingly made for the purposes of gambling or betting and to contracts for difference and transactions for delivery of commodities or securities that are specula- tive in character.

Art. 514 1 A promissory note or bill of exchange signed by the gambler or bettor to cover the sum gambled or bet may not be enforced even following delivery of the instrument, subject to the rights that securi- ties confer on bona fide third parties. 2 A voluntary payment may be reclaimed only where the intended gambling or betting activity could not take place as a result of chance occurrence or the actions of the recipient, or where the latter has com- mitted an impropriety.

182

220Federal Act on the Amendment of the Swiss Civil Code

C. Lotteries and prize draws

D. Gambling in casinos, loans from casinos

A. Life annuity I. Nature

II. Formal requirement

III. Rights of the annuitant 1. Exercise of entitlement

Art. 515 1 Lotteries and prize draws give rise to a claim only where they have been approved by the competent authority. 2 In the absence of such approval, the claim is treated as a gambling claim. 3 Lotteries or draws authorised abroad do not enjoy legal protection in Switzerland unless the competent Swiss authority has authorised the sale of tickets.

Art. 515a223

Games of chance in casinos give rise to claims where they take place in a casino licensed by the competent authority.

Title Twenty-Two: The Life Annuity Contract and the Lifetime Maintenance Agreement

Art. 516 1 A life annuity may be created for the lifetime of the annuitant, the grantor or a third party. 2 In the absence of any specific agreement, the presumption is that it is settled for the life of the annuitant. 3 Unless otherwise agreed, an annuity settled for the life of the grantor or of a third party passes to the heirs of the annuitant.

Art. 517 The life annuity contract is valid only if done in writing.

Art. 518 1 Unless otherwise agreed, the life annuity is payable every six months in advance. 2 If the person on whom the life annuity is settled dies before the end of the period for which it is payable in advance, the grantor owes the full amount. 3 If the grantor is declared bankrupt, the annuitant may assert his entitlements by bringing a capital claim for the amount that would be required at the time the grantor is declared bankrupt to establish an equivalent contract of annuity with a reputable annuity institution.

223 Inserted by Annex No 5 to the Gambling Act of 18 December 1998, in force since 1 April 2000 (SR 935.52).

183

220 Code of Obligations

2. Assignment224

IV. Life annuities under the law govern- ing insurance policies

B. Lifetime maintenance agreement I. Definition

II. Conclusion 1. Form

2. Security

III. Content

Art. 519 1 Unless otherwise agreed, the life annuitant may assign his rights. 2 ...225

Art. 520 The provisions of this Code governing life annuity contracts do not apply to life annuity contracts subject to the Federal Act of 2 April 1908226 on Insurance Policies, with the exception of the provision governing withdrawal of annuity entitlements.

Art. 521 1 A lifetime maintenance agreement is a contract in which the benefi- ciary undertakes to transfer an estate or individual assets to the settlor in return for an undertaking to provide maintenance and care for his lifetime. 2 If the settlor is appointed heir to the beneficiary, the entire relation- ship is subject to the provisions governing contracts of succession.

Art. 522 1 The lifetime maintenance agreement must be done in the same form as a contract of succession, even where it does not involve the designa- tion of an heir. 2 However, where it is concluded with a licensed care home on condi- tions approved by the competent authority, written form is sufficient.

Art. 523 A beneficiary who transfers land to the other party retains a statutory lien on the property as security for his claims in the same manner as a seller.

Art. 524 1 The beneficiary becomes part of the settlor’s household and the settlor is obliged to provide him such benefits as he might reasonably expect to receive in the light of the value of the assets transferred and his previous standard of living.

224 Amended by Annex No 6 to the Federal Act of 16 December 1994, in force since 1 January 1997 (AS 1995 1227 1309; BBl 1991 III 1).

225 Repealed by Annex No 6 to the Federal Act of 16 December1994 (AS 1995 1227; BBl 1991 III 1).

226 SR 221.229.1

184

220Federal Act on the Amendment of the Swiss Civil Code

IV. Challenge and reduction

V. Termination 1. Notice

2. Unilateral termination

2 The settlor is obliged to provide the beneficiary with appropriate accommodation and maintenance and, in the event of his illness, with the necessary care and medical treatment. 3 Subject to approval by the competent authority, care homes may adopt house rules whereby such benefits are incorporated as generally binding contractual terms.

Art. 525 1 A lifetime maintenance agreement may be challenged by persons to whom the beneficiary has a legal duty of maintenance where conclu- sion of the agreement would deprive the beneficiary of the means of discharging such duty. 2 Instead of rescinding the agreement, the court may order the settlor to maintain such persons, with any such maintenance being brought into account against the benefits owed to the beneficiary under the lifetime maintenance agreement. 3 Actions in abatement by heirs and legal challenges by creditors are reserved.

Art. 526 1 The lifetime maintenance agreement may be terminated by either party at any time subject to six months’ notice, where according to the agreement the performance of one party is substantially greater in value than that of the other and the party benefiting from such imbal- ance cannot show that the other intended it as a gift. 2 The decisive criterion here is the relation between the capital and the life annuity according to the principles applied by any reputable annu- ity institution. 3 Performance already rendered at the time of termination is returned after its capitalised value plus interest has been set off.

Art. 527 1 Either party may unilaterally terminate the agreement where the relationship has become unconscionable as a result of breach of con- tractual obligations or where other good cause has rendered its con- tinuation exceedingly difficult or impossible. 2 Where the agreement is terminated on such grounds, the party at fault must pay adequate compensation to the innocent party in addition to returning the performance received. 3 Instead of rescinding the agreement, at the request of one party or of its own accord the court may dissolve the joint household and award a life annuity to the beneficiary by way of compensation.

185

220 Code of Obligations

3. Termination on the death of the settlor

VI. Non- transferable claim, asserting claim in the event of bankruptcy and seizure

A. Definition

B. Relationship between partners I. Contributions

II. Profit and loss 1. Profit sharing

Art. 528 1 On the death of the settlor the beneficiary may within one year insist that the agreement be terminated. 2 In this event, he has a claim against the heirs equivalent to the claim he would have in the event of the settlor’s bankruptcy.

Art. 529 1 The beneficiary’s claim is non-transferable. 2 In the event of the settlor’s bankruptcy, the beneficiary has a claim equivalent to the capital that would be required to acquire from a reputable annuity institution a life annuity equal in value to the bene- fits owed to him by the settlor. 3 In the case of debt enforcement by attachment, the beneficiary may participate in the attachment in respect of this claim without need to bring prior enforcement proceedings.

Title Twenty-Three: The Simple Partnership

Art. 530 1 A partnership is a contractual relationship in which two or more persons agree to combine their efforts or resources in order to achieve a common goal. 2 A simple partnership within the meaning of this Title is any partner- ship that does not fulfil the distinctive criteria of any of the other types of partnership codified herein.

Art. 531 1 Each partner must make a contribution, which may be money, ob- jects, claims or labour. 2 Unless otherwise agreed, contributions must be equal and of the nature and size required to achieve the partnership’s purpose. 3 The bearing of risk by and warranty obligations of the partners are governed mutatis mutandis by the rules on leases where a contribution involves the transfer by an individual partner of the use of an object, and by the rules governing contracts of sale where it involves transfer of title.

Art. 532 Each partner is obliged to share with his fellow partners any profit which by nature belongs to the partnership.

186

220Federal Act on the Amendment of the Swiss Civil Code

2. Participation in profits and losses

III. Partnership resolutions

IV. Management of partnership business

V. Liability between partners 1. Prohibition of competition

2. Claims arising from partnership activities

Art. 533 1 Unless otherwise agreed, each partner has an equal share in profits and losses regardless of the nature and amount of his contribution. 2 Where only the partner’s share in the profits or his share in the losses is agreed, such agreement applies to both. 3 It is permitted to agree that a partner whose contribution to the com- mon purpose consists of labour will participate in the profits but not in the losses.

Art. 534 1 Partnership resolutions are made with the consent of all partners. 2 Where the partnership agreement provides for resolutions to be passed by majority vote, it is defined as a numerical majority of the partners.

Art. 535 1 All partners have the right to manage the partnership unless the task is entrusted exclusively to one or more partners or to third parties by agreement or resolution. 2 Where all or several partners have the right to manage the partner- ship, each of them may act without the involvement of the others, although every other partner authorised to manage the partnership has the right to object to and thereby forestall any management action before it is carried out. 3 The unanimous consent of all the partners is required to appoint a general attorney or to carry out transactions which transcend the scope of ordinary business, unless there is risk in delay.

Art. 536 No partner may carry out transactions for his own benefit which thwart or obstruct the purpose of the partnership.

Art. 537 1 Where one partner incurs expenses or contracts liabilities in connec- tion with affairs conducted on behalf of the partnership or suffers losses as a direct consequence of his management activities or the intrinsically associated risks, the other partners share his liability. 2 A partner who makes cash advances on behalf of the partnership may claim interest as of the date on which they were made. 3 By contrast, he is not entitled to remuneration for his personal ser- vices.

187

220 Code of Obligations

3. Due diligence

VI. Withdrawal and restriction of management authority

VII. Managing partners and other partners 1. In general

2. Right to information on the affairs of the partnership

VIII. Admission of new partners and sub- participation

Art. 538 1 Each partner must conduct partnership affairs with the diligence and care that he would normally devote to his own affairs. 2 He is liable to the other partners for any loss or damage caused through his fault and may not set off against such loss or damage the benefits obtained for the partnership in his other activities. 3 Managing partners who are remunerated for their management ser- vices are liable in accordance with the provisions governing agency.

Art. 539 1 The management authority granted to one of the partners under the partnership agreement may not be withdrawn or restricted by the other partners without good cause. 2 Where good cause exists, authority may be withdrawn by each of the other partners even where the partnership agreement provides other- wise. 3 In particular, good cause is deemed to exist where the managing partner is guilty of a serious breach of his duties or has become inca- pable of proper management of the partnership’s affairs.

Art. 540 1 Unless this Title or the partnership agreement provides otherwise, the relationship between the managing partners and the other partners is subject to the provisions governing agency. 2 Where a partner who lacks management authority conducts business on the partnership’s behalf or a managing partner exceeds his man- agement authority, the provisions governing agency without authority apply.

Art. 541 1 A partner who lacks management authority has the right to receive information on the status of the partnership’s affairs, to inspect its books and documents and to obtain a summary statement of its finan- cial position for his personal information. 2 Any contrary agreement is void.

Art. 542 1 No partner may admit a third party into the partnership without the consent of the other partners. 2 Where a partner unilaterally grants a third party a participation in his own share in the partnership or assigns his entire share to the third

188

220Federal Act on the Amendment of the Swiss Civil Code

C. Relationship between partners and third parties I. Representation

II. Effects of representation

D. Dissolution I. Grounds for dissolution 1. In general

party, the latter does not become a partner and in particular does not acquire any right to information on partnership affairs.

Art. 543 1 A partner who deals with a third party on behalf of the partnership but in his own name acquires rights and obligations as against that third party in a purely individual capacity. 2 Where a partner deals with a third party in the name of the partner- ship or all the partners, the other partners acquire rights and obliga- tions as against that third party only to the extent envisaged by the provisions governing representation. 3 A partner is presumed empowered to represent the partnership or all the partners in dealings with third parties as soon as management authority is conferred on him.

Art. 544 1 Objects, rights in rem and claims transferred to or acquired for the partnership belong jointly to the partners as stipulated in the partner- ship agreement. 2 Unless otherwise provided in the partnership agreement, the creditors of a partner may claim only the share in the proceeds of liquidation of that partner by way of satisfaction. 3 Subject to contrary agreement, partners are jointly and severally liable for obligations to third parties contracted jointly or through representatives.

Art. 545 1 The partnership is dissolved:

1. where the purpose of the partnership has been achieved or be- come impossible to achieve;

2. on the death of one of the partners, unless it was previously agreed that the partnership would continue with his heirs;

3.227 where the share in the proceeds of liquidation of a partner is subject to compulsory sale or one of the partners is declared bankrupt or made subject to a general deputyship;

4. by unanimous decision of the partners; 5. on expiry of the period for which the partnership was estab-

lished;

227 Amended by Annex No 10 of the Federal Act of 19 Dec. 2008 (Adult Protection, Law of Persons and Law of Children), in force since 1 Jan. 2013 (AS 2011 725; BBl 2006 7001).

189

220 Code of Obligations

2. Partnership of indefinite duration

II. Effect of dissolution on business management

III. liquidation 1. Treatment of contributions

6. by notice of termination served by one of the partners, where such right was reserved in the partnership agreement or the partnership was established for an indefinite duration or for the lifetime of one of the partners;

7. by court judgment in cases of dissolution for good cause. 2 The dissolution of the partnership may be requested for good cause before the duration of the partnership agreement expires or, where it was established for an indefinite duration, with immediate effect.

Art. 546 1 Where the partnership was established for an indefinite duration or for the lifetime of one of the partners, each partner may terminate the partnership by giving six months’ notice. 2 Notice must be given in good faith and not at an inopportune juncture and, where an annual accounting period is envisaged, it must expire at the end of a financial year. 3 Where on expiry of the term for which it had been established the partnership is tacitly continued, it is deemed renewed for an indefinite duration.

Art. 547 1 Where the partnership is dissolved for any reason other than notice of termination, a partner retains his authority to manage the partnership’s business until he learns of the dissolution or ought to have learned of it had he shown due diligence. 2 Where the partnership is dissolved on the death of a partner, the heir of the deceased must inform the other partners of his death without delay and continue in good faith to attend to the partnership affairs of the deceased until the requisite arrangements have been made. 3 The other partners must likewise continue to manage the partner- ship’s business in the interim.

Art. 548 1 Contributions to the partnership do not simply revert to those who made them in the liquidation that the partners must carry out after the partnership is dissolved. 2 However, each partner is entitled to the value for which his contribu- tion was accepted. 3Where no such value was determined, his claim is for the value of the contribution at the time it was made.

190

220Federal Act on the Amendment of the Swiss Civil Code

2. Division of surplus and deficit

3. liquidation method

IV. Liability towards third parties

A. Commercial partnerships

Art. 549 1 Where a surplus remains after satisfaction of partnership debts, reimbursement of the expenses incurred and advances made by each partner and return of the value of contributions, it is divided as profit among the partners. 2 Where, after satisfaction of debts and the reimbursement of expenses and advances, the partnership’s assets are not sufficient to cover the return of contributions, the shortfall is borne equally by the partners as a loss.

Art. 550 1 The liquidation following the dissolution of the partnership must be carried out jointly by all partners, including those without management authority. 2 However, where the partnership agreement related only to certain specific transactions to be carried out by one partner in his own name but on behalf of the partnership, that partner must carry out such transactions and give account of them to the other partners even after the partnership has been dissolved.

Art. 551 The dissolution of the partnership does not affect obligations entered into with third parties.

Division Three: Commercial Enterprises and the Cooperative228 Title Twenty-Four: The General Partnership Section One: Definition and Formation

Art. 552 1 A general partnership is a partnership in which two or more natural persons join together without limiting their liability towards creditors of the partnership in order to operate a trading, manufacturing or other form of commercial business under one business name. 2 The members of the partnership must have it entered in the commer- cial register.

228 New content in accordance with FL of 18 Dec. 1936, in force since 1 July 1937 (AS 53 185; BBl 1928 I 233, 1932 I 217). See Fin. and Trans. Prov. of Titles XXIV to XXXIII, at the end of the CO.

191

220 Code of Obligations

B. Non- commercial partnerships

C. Entry in the commercial register I. Place of registration

II. Representa- tion

III. Formal requirements

A. Freedom of contract, reference to simple partner- ship

Art. 553 Where a partnership does not operate a commercial business, it does not exist as a general partnership until it has itself entered in the com- mercial register.

Art. 554229

The partnership must be registered in the commercial register for the place where its seat is located.

Art. 555 The only details concerning arrangements for representation that are admissible for entry in the commercial register are those which limit it to one partner or specified partners or which provide for representation of the partnership by one partner acting jointly with other partners or with persons vested with a registered power of attorney.

Art. 556 1 All applications to have facts entered or entries modified must be signed by all the partners in person at the commercial registry or submitted in writing bearing duly authenticated signatures. 2 Partners who are to represent the partnership must enter the partner- ship’s business name and their own signature in person at the commer- cial registry or submit these in a duly authenticated form.

Section Two: Relationship between Partners

Art. 557 1 The relationship between the partners is primarily determined by the partnership agreement. 2 Unless otherwise agreed, the provisions governing simple partner- ships apply subject to the modifications set out in the following provi- sions.

229 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

192

220Federal Act on the Amendment of the Swiss Civil Code

B. Financial reporting230

C. Entitlement to profit, interest and fees

D. Losses

E. Prohibition of competition

Art. 558 1 For each financial year, the profit or loss and each partner’s share thereof are determined on the basis of the annual accounts.231 2 The interest on each partner’s share of the capital may be credited to that partner as provided in the agreement even if that share has been reduced by the loss for that financial year. Unless otherwise agreed, the interest rate is four per cent. 3 When calculating the profit or loss, the contractual fee for the work done by a partner is treated as a debt of the partnership.

Art. 559 1 Each partner has the right to draw profit, interest and fees for the previous financial year from the partnership’s funds. 2 Where so provided under the agreement, interest and fees may be drawn during the financial year, whereas profit may not be drawn until the annual report has been approved.232 3 Any profit, interest and fees not drawn by the partner are added to his share of the partnership’s capital once the annual report has been approved, provided that none of the other partners objects.233

Art. 560 1 Where a partner’s share of the capital has been reduced by losses, he remains entitled to his fees and the interest on his reduced share but may receive his share of the profit only when his share of the capital has been reconstituted. 2 No partner is obliged to make a higher contribution than stipulated in the agreement or to make good any reduction in his contribution caused by losses.

Art. 561 Without the consent of the other partners, no partner may engage in the line of business in which the partnership operates either for his own account or for third parties or participate in another business as a partner with unlimited liability, a limited partner or a member of a limited liability company.

230 Amended by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

231 Amended by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

232 Amended by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

233 Amended by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

193

220 Code of Obligations

A. In general

B. Representa- tion I. General principle

II. Scope

III. Withdrawal

IV. Registered power of attorney and commercial agency

V. Transactions and liability in tort

Section Three: Relationship between the Partnership and Third Parties

Art. 562 The partnership may acquire rights, assume obligations, sue and be sued in its own name.

Art. 563 Unless the commercial register contains an entry to the contrary, bona fide third parties may safely assume that any partner has authority to represent the partnership.

Art. 564 1 Any partner entitled to represent the partnership is authorised to carry out in the partnership’s name all transactions that serve the partner- ship’s objects. 2 Any restriction of the scope of such authority to represent the part- nership has no effect as against bona fide third parties.

Art. 565 1 Authority to represent the partnership may be withdrawn from a partner for good cause. 2 Where a partner makes a prima facie case for the existence of good cause and there is risk in delay, on his application the court may issue an interim order withdrawing authority to represent the partnership. The court’s order must be entered in the commercial register.

Art. 566 A registered attorney or commercial agent may be appointed to man- age the business of the partnership as a whole only with the consent of all partners authorised to represent the partnership, but such appoint- ment may be revoked as against third parties by any one of them.

Art. 567 1 The partnership acquires rights and assumes obligations by the transactions concluded in its name by any partner authorised to repre- sent it. 2 For such effect to occur, it is sufficient that the intention to act on behalf of the partnership can be inferred from the circumstances. 3 The partnership is liable in damages for any tort committed by a partner in the exercise of his partnership function.

194

220Federal Act on the Amendment of the Swiss Civil Code

C. Position of creditors I. Partners’ liability

II. Liability of new partners

III. Insolvency of the partnership

IV. Insolvency of the partner- ship and bankruptcy of the partners

Art. 568 1 The partners are jointly and severally liable with their entire assets for all obligations of the partnership. 2 Any contrary agreement between partners is void as against third parties. 3 However, a partner may not be held personally liable for a partner- ship debt, even after he leaves the partnership, unless he has been declared bankrupt or the partnership has been dissolved or debt en- forcement proceedings have been brought against it without success. This does not apply to a partner’s liability under a joint and several contract of surety concluded in favour of the partnership.

Art. 569 1 A person joining a general partnership is jointly and severally liable with his entire assets together with the other partners even for the partnership’s obligations that predate his accession. 2 Any contrary agreement between partners is void as against third parties.

Art. 570 1 The partnership’s creditors are entitled to satisfaction from the part- nership’s assets to the exclusion of the personal creditors of the indi- vidual partners. 2 Partners have no claim as creditors in insolvency for their capital contributions and accrued interest, but may assert claims for interest already due, fees and any expenses incurred on the partnership’s behalf.

Art. 571 1 The insolvency of the partnership does not result in the bankruptcy of the partners. 2 Likewise, the bankruptcy of one of the partners does not result in the insolvency of the partnership. 3 The rights of partnership creditors in the event of the bankruptcy of a partner are governed by the Debt Collection and Bankruptcy Act of 11 April 1889234.

SR 281.1

195

234

220 Code of Obligations

D. Position of personal creditors of partners

E. Set off

A. In general

B. Termination by personal creditors

Art. 572 1 The personal creditors of a partner have no rights to the partnership’s assets for the purposes of satisfying or securing their claims. 2 Enforcement proceedings brought by them are limited to the interest, fees, profit and share in the proceeds of liquidation payable to their debtor in his capacity as partner.

Art. 573 1 A personal creditor of a partner may not set off his claim against a debt owed to the partnership. 2 Similarly, a partner may not set off a debt to a personal creditor against any debt owed by the creditor to the partnership. 3 However, where a partnership creditor is simultaneously the personal debtor of a partner, the two debts may be set off against each other provided the partner may be held personally liable for any resulting debt to the partnership.

Section Four: Dissolution and Withdrawal

Art. 574 1 The partnership is dissolved by the commencement of insolvency proceedings against it. In other respects, the provisions governing simple partnerships apply to dissolution except where otherwise pro- vided in this Title. 2 Other than in the event of insolvency, the partners must report the dissolution to the commercial registrar. 3 Where an action for dissolution of the partnership is brought, on application by one of the parties the court may order provisional measures.

Art. 575 1 In the event of the bankruptcy of a partner, the bankruptcy admini- stration may petition for dissolution of the partnership by giving at least six months’ notice even where the partnership was formed for a fixed term. 2 The same right accrues to a creditor who has attached the share in the proceeds of liquidation of a partner indebted to him. 3 However, until such dissolution has been entered in the commercial register, the partnership or the other partners may prevent the notice from taking effect by satisfying the bankrupt estate or the creditor pursuing his claim.

196

220Federal Act on the Amendment of the Swiss Civil Code

C. Withdrawal of partners I. Agreement

II. Exclusion by court order

III. Exclusion by the other partners

IV. In the case of two partners

V. Determining the share

Art. 576 Where the partners agreed prior to dissolution that, notwithstanding the withdrawal of one or more partners, the partnership will be contin- ued by the remaining partners, it ceases to exist only for those that leave; in other respects it continues with all existing rights and obliga- tions.

Art. 577 Where there is good cause for the dissolution of the partnership that pertains chiefly to the person of one or more partners, at the request of all the other partners the court may rule that the partner or partners in question be excluded from the partnership and that their shares of the partnership’s assets be allocated to them.

Art. 578 Where a partner is declared bankrupt or a creditor who has attached the share in the proceeds of liquidation of a partner indebted to him requests that the partnership be dissolved, the other partners may exclude the partner in question and allocate his share of the partner- ship’s assets to him.

Art. 579 1 Where the partnership comprises two partners only, the partner who has not given rise to any cause for dissolution may, on the same condi- tions, continue the partnership’s affairs and allocate the other partner’s share of the partnership’s assets to him. 2 The court may issue an order to the same effect where dissolution has been requested for good cause pertaining chiefly to the person of one of the partners.

Art. 580 1 The amount payable to a partner leaving the partnership is deter- mined by agreement. 2 Where no provision is made on this matter in the partnership agree- ment and the parties cannot reach agreement, the court determines the amount with due regard to the asset position of the partnership at the time the partner leaves and any fault attributable to the departing partner.

197

220 Code of Obligations

VI. Registration

A. General principle

B. Liquidators

C. Representa- tion of heirs

D. Rights and obligations of the liquidators

Art. 581 The departure of a partner and the continuation of the partnership’s affairs by one of the partners must be entered in the commercial regis- ter.

Section Five: Liquidation

Art. 582 Following its dissolution, the partnership is liquidated in accordance with the following provisions, unless the partners have agreed on an alternative approach or the partnership’s assets are subject to insol- vency proceedings.

Art. 583 1 The liquidation is carried out by the partners who are authorised to represent the partnership, unless they are prevented from so doing for reasons pertaining to their person or the partners agree to appoint other liquidators. 2 At the request of a partner, for good cause the court may dismiss certain liquidators and appoint others to replace them. 3 The liquidators are entered in the commercial register, even where the representation of the partnership remains unchanged.

Art. 584 The heirs of a partner must appoint a joint representative for the pur- pose of the liquidation.

Art. 585 1 The liquidators wind up the dissolved partnership’s current business, discharge its obligations, call in all debts receivable and realise its assets as required for the division thereof. 2 They represent the partnership in all transactions carried out for liquidation purposes, are entitled to conduct legal proceedings, reach settlements, conclude arbitration agreements and even, where required for liquidation purposes, effect new transactions. 3 Where a partner objects to a decision by the liquidators to sell part- nership assets at an overall sale price or to their refusal of such a sale or to the manner in which they intend to dispose of immovable prop- erty, at his request the court will decide the matter. 4 The partnership is liable for any loss or damage resulting from torts committed by a liquidator in the exercise of his function.

198

220Federal Act on the Amendment of the Swiss Civil Code

E. Provisional distribution

F. Division I. Balance sheet

II. Repayment of capital and distribution of surplus

G. Deletion from the commercial register

H. Archiving of ledgers and other documents

A. Object and limitation period

Art. 586 1 Funds and other assets not required during the liquidation are distrib- uted among the partners on a provisional basis and brought into ac- count against their final share in the proceeds of liquidation. 2 The funds required to cover disputed obligations or obligations not yet due must be retained.

Art. 587 1 The liquidators draw up a balance sheet at the beginning of the liquidation. 2 Where the liquidation lasts for an extended period, interim balance sheets are drawn up every year.

Art. 588 1 Assets remaining after redemption of all partnership debts are used first to repay the capital to the partners and then to pay interest accrued over the liquidation period. 2 Any surplus is distributed among the partners in accordance with the provisions governing partners’ shares in the profit.

Art. 589 On completion of the liquidation, the liquidators apply to have the partnership’s business name deleted from the commercial register.

Art. 590 1 The ledgers and other documents of the dissolved partnership are kept for ten years commencing on the date of the partnership’s dele- tion from the commercial register at a location designated by the partners or, if they cannot reach agreement, by the registrar. 2 The partners and their heirs retain the right to inspect the ledgers and other documents.

Section Six: Time Limits

Art. 591 1 Claims of partnership creditors against a partner for partnership debts become time-barred five years after the notice of his withdrawal or of the dissolution of the partnership is published in the Swiss Official Gazette of Commerce, unless the debt is by its nature subject to a shorter limitation period.

199

220 Code of Obligations

B. Special cases

C. Interruption

A. Commercial partnerships

B. Non- commercial partnerships

2 Where the debt does not fall due until after such notice, the limitation period commences on the due date. 3 The time limits do not apply to claims between partners.

Art. 592 1 The five-year limitation period may not be invoked against a creditor seeking satisfaction solely from undivided partnership assets. 2 Where a partner takes over the partnership’s business with all its assets and liabilities, he may not invoke the five-year limitation period against its creditors. By contrast, for partners who have left the part- nership, the five-year limitation period is replaced by the two-year limitation period in accordance with the principles governing assump- tion of debt; the same applies in the event that a third party takes over the partnership’s business with all its assets and liabilities.

Art. 593 An interruption of the limitation period as against an ongoing partner- ship or another partner does not interrupt the limitation period as against a departing partner.

Title Twenty-Five: The Limited Partnership Section One: Definition and Formation

Art. 594 1 A limited partnership is a partnership in which two or more persons join together in order to operate a trading, manufacturing or other form of commercial business under a single business name in such a manner that at least one person is a general partner with unlimited liability but one or more others are limited partners liable only up to the amount of their specific contributions. 2 Partners with unlimited liability must be natural persons, but limited partners may also be legal entities and commercial enterprises. 3 The partners must have the partnership entered in the commercial register.

Art. 595 Where a limited partnership does not operate a commercial business, it does not exist as a limited partnership until it has itself entered in the commercial register.

200

220Federal Act on the Amendment of the Swiss Civil Code

C. Entry in the commercial register I. Place and contributions in kind235

II. Formal requirements

A. Freedom of contract, reference to general partner- ship

B. Management of business

Art. 596 1 The partnership must be registered in the commercial register for the place where its seat is located.236

2372 ... 3 Where the specific contributions of limited partners are made wholly or partly in kind, the contribution in kind must be expressly referred to as such and its precise value specified in the registration application and in the entry in the commercial register.

Art. 597 1 All applications to have facts entered or entries modified must be signed by all the partners in person at the commercial registry or submitted in writing bearing duly authenticated signatures. 2 Partners with unlimited liability who are to represent the partnership must enter the partnership’s business name and their own signature in person at the commercial registry or submit these in a duly authenti- cated form.

Section Two: Relationship between Partners

Art. 598 1 The relationship between the partners is primarily determined by the partnership agreement. 2 Unless otherwise agreed, the provisions governing general partner- ships apply subject to the modifications set out in the following provi- sions.

Art. 599 The partnership’s affairs are managed by the partner or partners with unlimited liability.

235 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

236 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

237 Repealed by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), with effect from 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

201

220 Code of Obligations

C. Position of limited partners

D. Share in profit and loss

A. In general

B. Representa- tion

C. Liability of general partners

Art. 600 1 A limited partner is by definition neither entitled nor obliged to manage the affairs of the partnership. 2 Nor is he entitled to object to actions taken by managing partners, providing these fall within the scope of the ordinary business activities of the partnership. 3 He has the right to request a copy of the profit and loss account and the balance sheet and to verify their accuracy by inspecting the part- nership’s ledgers and other documents or have them verified by an impartial expert; in the event of dispute, the expert is appointed by the court.238

Art. 601 1 A limited partner’s participation in any loss is limited to the amount of his specific contribution. 2 In the absence of agreement on the limited partners’ share in profits and losses, it is determined by the court at its discretion. 3 Where the limited partner’s specific contribution is not fully paid up or has been subsequently reduced, he may receive the interest, profit and fees due to him only when his contribution has been fully paid in or reconstituted.

Section Three: Relationship between the Partnership and Third Parties

Art. 602 The partnership may acquire rights, assume obligations, and sue and be sued in its own name.

Art. 603 The partnership is represented by its general partner or partners in accordance with the rules governing general partnerships.

Art. 604 A partner with unlimited liability may be sued for a partnership debt only if the partnership has been dissolved or debt enforcement pro- ceedings have been brought against it without success.

238 Amended by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

202

220Federal Act on the Amendment of the Swiss Civil Code

D. Liability of limited partners I. Acting for the partnership

II. Lack of registration

III. Name of limited partner in business name

IV. Scope of liability

V. Reduction of limited partner’s specific contri- bution

VI. Creditors’ right of action

Art. 605 A limited partner conducting business on behalf of the partnership without stating expressly that he is acting as its registered attorney or commercial agent is liable to bona fide third parties for obligations resulting from such business as if he were a general partner.

Art. 606 Where the partnership has engaged in business prior to being entered in the commercial register, a limited partner is liable to bona fide third parties for obligations resulting from such business as if he were a general partner unless he can prove that the third parties were aware of the limits to his liability.

Art. 607 Any limited partner whose name forms part of the partnership’s busi- ness name is liable to partnership creditors in the same manner as a general partner.

Art. 608 1 A limited partner is liable to third parties in the amount of his spe- cific contribution as entered in the commercial register. 2 Where he has stated a higher amount to third parties or the partner- ship has done so with his knowledge, he is liable up to such higher amount. 3 Creditors are at liberty to show that the value ascribed to contribu- tions in kind did not correspond to their real value at the time they were made.

Art. 609 1 Where by agreement with the other partners or by means of with- drawals a limited partner has reduced his specific contribution as entered in the commercial register or otherwise announced, such modification has no effect as against third parties until it has been entered in the commercial register and published. 2 For obligations contracted prior to such publication, the limited partner remains liable in the unmodified amount.

Art. 610 1 For the duration of the partnership, its creditors have no right of action against a limited partner.

203

220 Code of Obligations

VII. Entitlement to interest and profit

VIII. Joining limited partner- ships

E. Position of personal creditors

F. Set off

G. Insolvency I. In general

2 If the partnership is dissolved, the creditors, liquidators and insol- vency administrators may request that the limited partner’s specific contribution be allocated to the liquidation or insolvency assets to the extent that it has not been paid in or has been repaid to the limited partner.

Art. 611 1 Limited partners are entitled to interest and profit only where and to the extent that payment thereof does not result in a reduction of their specific contribution. 2 However, limited partners are required to repay interest and profit unlawfully received. Article 64 applies.239

Art. 612 1 A person joining a general or limited partnership as a limited partner is liable with his specific contribution for all partnership liabilities including those that were contracted prior to his accession. 2 Any agreement to the contrary between the partners is void as against third parties.

Art. 613 1 The personal creditors of a general partner or a limited partner have no rights to the partnership’s assets for the purposes of satisfying or securing their claims. 2 Enforcement proceedings brought by them are limited to the interest, profit and share in the proceeds of liquidation payable to their debtor and any fees due to him in his capacity as partner.

Art. 614 1 Where a partnership creditor is simultaneously the personal debtor of a limited partner, the creditor has no right to set off the two debts against each other unless the limited partner has unlimited liability. 2 In other respects, set off is subject to the provisions governing gen- eral partnerships.

Art. 615 1 The insolvency of the partnership does not result in the bankruptcy of the partners.

239 Amended by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

204

220Federal Act on the Amendment of the Swiss Civil Code

II. Insolvency of the partnership

III. Procedure against general partners

IV. Bankruptcy of limited partners

2 Likewise, the bankruptcy of one of the partners does not result in the insolvency of the partnership.

Art. 616 1 The partnership’s creditors are entitled to satisfaction from the part- nership’s assets to the exclusion of the personal creditors of the indi- vidual partners. 2 Limited partners have no claim as creditors in insolvency for their specific capital contributions.

Art. 617 Where the partnership’s assets are insufficient to satisfy the partner- ship’s creditors, the latter are entitled to seek satisfaction for the entire remainder of their claims from the personal assets of each individual general partner in competition with that partner’s personal creditors.

Art. 618 In the event of the bankruptcy of a limited partner, neither the partner- ship’s creditors nor the partnership itself have preferential rights over his personal creditors.

Section Four: Dissolution, Liquidation, Time Limits

Art. 619 1 The provisions governing general partnerships also apply to the dissolution and liquidation of limited partnerships and to the limitation periods applicable to claims against the partners. 2 Where a limited partner is declared bankrupt or his share in the proceeds of liquidation is attached, the provisions governing partners in general partnerships apply mutatis mutandis. However, the partner- ship is not dissolved by the death of a limited partner or his being made subject to a general deputyship.240

240 Second sentence amended by Annex No 10 of the Federal Act of 19 Dec. 2008 (Adult Protection, Law of Persons and Law of Children), in force since 1 Jan. 2013 (AS 2011 725; BBl 2006 7001).

205

220 Code of Obligations

Title Twenty-Six241: The Company Limited by Shares Section One: General Provisions

Art. 620 A. Definition 1 A company limited by shares is a company with its own business

name pre-determined capital (share capital)242 is determined in ad- vance and divided into specific amounts (shares) and whose liabilities are payable only from the company assets. 2 The shareholders are required only to fulfil the duties specified in the articles of association and are not personally liable for the company’s obligations. 3 A company limited by shares may also be established for a purpose that is non-commercial in character.

Art. 621243 B. Minimum The share capital must amount to at least 100,000 francs. share capital

Art. 622 C. Shares 1 The shares may be either registered or bearer shares. Shares issued as I. Types uncertificated securities in accordance with the Uncertificated Securi-

ties Act of 3 October 2008244 are either registered or bearer shares.245 2 Shares of both types may exist at the same time in a ratio fixed by the articles of association. 3 The articles of association may provide that registered shares should or may subsequently be converted into bearer shares or vice versa. 4 The nominal value of a share must be at least 1 centime.246 5 The share certificate must be signed by at least one member of the board of directors247. The company may decide that even shares issued in large numbers must bear a handwritten signature.

241 See also the Final Provisions relating to this Title at the end of this Code. 242 Term in accordance with No II 1 of the Federal Act of 4 Oct. 1991, in force since 1 July

1992 (AS 1992 733 786; BBl 1983 II 745). This amendment has been taken into account throughout the Code.

243 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745)

244 SR 957.1 245 Amended by Annex No 3 of the Uncertificated Securities Act of 3 Oct. 2008, in force

since 1 Jan. 2010 (SR 957.1). 246 Amended by No I of the Federal Act of 15 Dec. 2000, in force since 1 May 2001

(AS 2001 1047; BBl 2000 4337 No 2.2.1 5501). 247 Term in accordance with No II 3 of the Federal Act of 4 Oct. 1991, in force since 1 July

1992 (AS 1992 733 786; BBl 1983 II 745). This amendment has been taken into account throughout the Code.

206

220Federal Act on the Amendment of the Swiss Civil Code

II. Splitting and consolidating shares

III. Issue price

D. Shareholders

E. Articles of association I. Content prescribed by law

II. Further provisions 1. In general

Art. 623 1 By amending the articles of association, the general meeting may divide the shares into shares with a lower nominal value or consolidate them into shares with a higher nominal value, provided the share capital remains the same. 2 The consolidation of shares requires the consent of the shareholder.

Art. 624 1 The shares may be issued only at their nominal value or at a price that is higher. This does not apply to the issue of new shares to replace cancelled shares. 2–3 ...248

Art. 625249 1 A company limited by shares may be established by one or more natural persons or legal entities or other commercial enterprises.

Art. 626250

The articles of association must contain provisions concerning: 1. the business name and seat of the company; 2. the objects of the company; 3. the total share capital and the extent to which it is paid up; 4. the number, nominal value and types of shares; 5. the procedure for convening general meetings and the voting

rights of shareholders; 6. the governing bodies for management and auditing; 7. the form of the company’s external communications.

Art. 627251

In order to be binding, provisions on the following matters must be included in the articles of association:

248 Repealed by No I of the Federal Act of 4 Oct. 1991 (AS 1992 733; BBl 1983 II 745). 249 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability

Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

250 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

251 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

207

220 Code of Obligations

1. amendment of the articles of association, where different from the statutory provisions;

2. the payment of shares of profits paid to board members; 3. the interest paid to shareholders until commencement of the

company’s operations; 4. limitation of the company’s duration; 5. contractual penalties for failure to pay up share capital on time; 6. capital increases from authorised capital and contingent capital

increases; 7. authorisation for converting registered shares into bearer

shares and vice versa; 8. restrictions on the transferability of registered shares; 9. the preferential rights of individual share classes, participation

certificates, dividend rights certificates and the granting of special privileges;

10. restrictions on the voting rights of shareholders and their rights to appoint representatives;

11. cases not envisaged in law in which the general meeting may make resolutions only by qualified majority;

12. authority to delegate management responsibilities to individual members of the board of directors or to third parties;

13. the organisation and duties of the external auditors, where these go beyond those prescribed by law.

14.252 the possibility of converting shares issued in a specific form into another form, together with an allocation of resultant costs, where this derogates from the regulations in the Uncerti- ficated Securities Act of 3 October 2008253.

Art. 628 2. Relating 1 Where a shareholder makes a contribution in kind, the articles of specifically to contributions in association must indicate its nature and value, the name of the con- kind, acquisi- tributor and the shares allocated to him.255 tions in kind, special privi- 2 Where the company acquires or intends to acquire tangible fixedleges254

assets from shareholders or close associates, the articles of association

252 Inserted by Annex No 3 of the Uncertificated Securities Act of 3 Oct. 2008, in force since 1 Jan. 2010 (SR 957.1).

253 SR 957.1 254 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 255 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745).

208

220Federal Act on the Amendment of the Swiss Civil Code

F. Establishment I. Deed of incorporation 1. Content

2. Share subscription

must indicate their nature, the name of the person providing them and the consideration given by the company.256 3 Where special privileges are accorded to founder members or other persons on establishment of the company, the persons thus privileged must be named and each privilege precisely described and valued in the articles of association. 4 After ten years the general meeting may annul provisions of the articles of association concerning contributions in kind or acquisitions in kind. Provisions on acquisitions in kind may also be annulled if the company makes a final decision not to make the acquisition in kind. 257 258

Art. 629259 1 The company is established when the founder members declare by public deed that they are forming a company limited by shares, lay down the articles of association therein and appoint the governing bodies. 2 In such deed of incorporation, the founder members subscribe for the shares and declare:

1. that all the shares are validly subscribed for; 2. that the promised capital contributions correspond to the full

issue price; 3. that the requirements for payment of capital contributions pre-

scribed by law and the articles of association are met.

Art. 630260

The share subscription is valid only where: 1. the number, nominal value, type, class and issue price of the

shares are specified; 2. an unconditional commitment is given to pay up the capital

corresponding to the issue price.

256 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

257 Second sentence inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

258 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

259 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

260 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

209

220 Code of Obligations

II. Supporting documents

III. Capital contributions 1. Minimum contribution

2. Performance of contributions a. Money contributions

b. Contributions in kind

Art. 631261 1 In the deed of incorporation, the notary must cite each of the docu- ments supporting the establishment of the company individually and confirm that they were presented to the founder members. 2 The following documents must be appended to the deed of incorpora- tion:

1. the articles of association; 2. the incorporation report; 3. the audit confirmation; 4. confirmation of the deposit of capital contributions; 5. the agreements on contributions in kind; 6. agreements on acquisitions in kind that are already available.

Art. 632262 1 When the company is established, capital equivalent to at least 20 per cent of the nominal value of each share must be paid up. 2 In all cases the capital contribution must be at least 50,000 francs.

Art. 633263 1 Money contributions must be deposited with an institution subject to the Federal Act of 8 November 1934264 on Banks and Savings Banks for the exclusive use of the company. 2 The institution may release the money only when the company has been entered in the commercial register.

Art. 634265

Contributions in kind satisfy the contribution requirement only where: 1. made on the basis of an agreement to make a contribution in

kind done in writing as a public deed;

261 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

262 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

263 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

264 SR 952.0 265 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745).

210

220Federal Act on the Amendment of the Swiss Civil Code

c. Subsequent contribution

3. Verification of capital contribu- tions a. Statutory report

b. Audit confirmation

G. Entry in the commercial register I. Company

2. on being entered in the commercial register, the company im- mediately acquires ownership and the right to dispose of them or an unconditional right to enter them in the land register;

3. an incorporation report with audit confirmation is available.

Art. 634a266 1 The board of directors determines the rules governing subsequent contributions in respect of shares that are not fully paid-up. 2 Such subsequent contributions may be made in money or in kind or by means of set-off.

Art. 635267

The founder members draw up a written statutory report in which they give account of:

1. the nature and condition of contributions in kind or acquisi- tions in kind and the appropriateness of their valuation;

2. the existence of debts and whether such debts may be set off; 3. the reasons for and appropriateness of special privileges ac-

corded to founder members or other persons.

Art. 635a268

A licensed auditor verifies the incorporation report and confirms in writing that it is complete and accurate.

Art. 636–639269

Art. 640270

The company is entered in the commercial register of the place at which it has its seat.

266 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786: BBl 1983 II 745).

267 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

268 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786, BBl 1983 II 745).

269 Repealed by No I of the Federal Act of 4 Oct. 1991 (AS 1992 733; BBl 1983 II 745). 270 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability

211

220 Code of Obligations

Art. 641271 II. Branch Branch offices are entered in the commercial register for the place offices where they are located.

Art. 642272 III. Contribu- 1 The subject matter of contributions in kind and the shares issued in tions and acquisitions in exchange, the subject matter of acquisitions in kind and the considera- kind, special tion provided by the company, and the nature and value of special privileges privileges must be entered in the commercial register.

Art. 643 H. Acquisition of 1 The company acquires legal personality only through entry in the legal personality commercial register.I. Timing; entry conditions not satisfied273

2 It acquires legal personality thereby even if the conditions for such entry were in fact not satisfied. 3 However, where the law or the articles of association were contra- vened in the establishment of the company such that the interests of creditors or shareholders were substantially jeopardised or harmed, at the request of those creditors or shareholders the court may order that the company be dissolved. ...274 4 The foregoing right of action becomes time-barred if action is not brought within three months of publication in the Swiss Official Ga- zette of Commerce.

Art. 644 II. Shares issued 1 Shares issued before the company is entered in the commercial before entry register are void; however, the obligations arising from the share

subscription remain effective. 2 A person issuing shares prior to such entry is liable for all resultant losses.

271 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

272 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

273 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

274 Second sentence repealed by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

212

220Federal Act on the Amendment of the Swiss Civil Code

III. Obligations contracted prior to entry

J. Amending the articles of association

K. Increase in the share capital I. Ordinary and authorised capital increase 1. Ordinary capital increase

Art. 645 1 A person acting in the name of the company prior to entry in the commercial register is liable personally and jointly and severally for his actions. 2 Where such obligations were incurred expressly in the name of the company to be established and are assumed by the latter within three months of its entry in the commercial register, the persons who con- tracted them are relieved of liability and only the company is liable.

Art. 646275

Art. 647276 1 Any resolution adopted by the general meeting or the board of direc- tors concerning an amendment of the articles of association must be done as a public deed and entered in the commercial register.

Art. 648–649277

Art. 650278 1 A decision to increase the share capital is taken by means of resolu- tion passed by the general meeting; it must be carried out by the board of directors within three months. 2 The resolution of the general meeting must be done as a public deed and specify:

1. the full nominal value by which the share capital is to be in- creased and the amount of contributions to be paid up;

2. the number, nominal value and type of shares and the preferen- tial rights attaching to specific share classes;

3. the issue price or the authority conferred on the board of direc- tors to set the price, and the date on which the dividend enti- tlement commences;

4. the type of capital contributions to be made and, in the case of contributions in kind, their nature and value, the name of the contributor and the shares due to him in exchange;

275 Repealed by No I of the Federal Act of 4 Oct. 1991 (AS 1992 733; BBl 1983 II 745) 276 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability

277 Repealed by No I of the Federal Act of 4 Oct. 1991 (AS 1992 733; BBl 1983 II 745) 278 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786: BBl 1983 II 745).

213

220 Code of Obligations

2. Authorised capital increase a. Basis in articles of association

5. in the case of acquisitions in kind, the nature of such assets, the name of the contributor and the consideration provided by the company;

6. the nature and value of special privileges and the names of the beneficiaries;

7. any restriction on the transferability of new registered shares; 8. any restrictions on or cancellation of subscription rights and

the allocation of subscription rights that have not been exer- cised or have been withdrawn;

9. the conditions to be met when exercising contractual subscrip- tion rights.

3 Where the capital increase is not entered in the commercial register within three months, the resolution of the general meeting lapses.

Art. 651279 1 By amending the articles of association, the general meeting may authorise the board of directors to increase the share capital within a period of no more than two years. 2 The articles of association lay down the nominal amount by which the board of directors may increase the share capital. Such authorised capital may not exceed one-half of the existing share capital. 3 Further, the articles of association stipulate the same information as required for an ordinary capital increase, with the exception of the specifications concerning the issue amount, the type of contributions, acquisitions in kind and the date on which the dividend entitlement commences. 4 Within the limits of its authority, the board of directors may carry out share capital increases. In so doing it enacts the necessary provisions where these are not already laid down in the resolution of the general meeting. 5 The foregoing paragraphs are subject to the regulations of the Bank- ing Act of 8 November 1934280 on reserve capital.281

279 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

280 SR 952.0 281 Inserted by Annex No I of the Federal Act of 30 Sept. 2011 (Securing Stability in the

Financial Sector), in force since 1 March 2012 (AS 2012 811; BBl 2011 4717).

214

220Federal Act on the Amendment of the Swiss Civil Code

b. Amendment of the articles of association

3. Common provisions a. Share subscription

b. Issue prospec- tus

Art. 651a282 1 Following every capital increase, the board of directors reduces the nominal amount of the authorised capital in the articles of association accordingly. 2 On expiry of the time limit set for execution of the capital increase, the provision concerning the authorised capital increase is deleted from the articles of association by resolution of the board of directors.

Art. 652283 1 The shares are subscribed in a special document (subscription form) in accordance with the provisions governing the establishment of the company. 2 The subscription form must make reference to the resolution of the general meeting concerning the share capital increase or the authorisa- tion of such increase and to the resolution of the board of directors concerning the share capital increase. Where the law requires an issue prospectus, the subscription form also refers to this. 3 Where the subscription form does not indicate a time limit, it ceases to be binding three months after it was signed.

Art. 652a284 1 Where new shares are publicly offered for subscription, the company publishes an issue prospectus containing information on:

1. the content of the existing entry in the commercial register, with the exception of details relating to the persons authorised to represent the company;

2. the existing amount and composition of the share capital, in- cluding the number, nominal value and type of shares and the preferential rights attaching to specific share classes;

3. the provisions of the articles of association relating to any authorised or contingent capital increase;

4. the number of dividend rights certificates and the nature of the associated rights;

5. the most recent annual accounts and consolidated accounts with audit report and, if more than six months have elapsed since the accounting cut-off date, the interim accounts;

282 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

283 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

284 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

215

220 Code of Obligations

6. the dividends distributed in the last five years or since the company was established;

7. the resolution concerning the issue of new shares. 2 A public offer is any invitation to subscribe that is not addressed solely to a limited number of persons. 3 In the case of companies that do not have an auditor, the board of directors must arrange for an audit report to be prepared by a licensed auditor and provide information on the result of the audit in the issue prospectus.285

Art. 652b286 c. Subscription 1 Every shareholder is entitled to the proportion of the newly issued right shares that corresponds to his existing participation.

2 A resolution by the general meeting to increase the share capital may cancel this subscription right only for good cause. In particular, the takeover of companies, parts of companies or equity interests and employee share ownership are deemed to be good cause. The cancella- tion of the subscription right must not result in any improper advan- tage or disadvantage to the parties involved. 3 Where the company has granted a shareholder the right to subscribe to shares, it may not bar him from exercising such right on the basis of a restriction on the transferability of registered shares laid down in the articles of association.

Art. 652c287 d. Making Unless the law provides otherwise, capital contributions must be made capital contribu- tions in accordance with the provisions governing the establishment of the

company.

Art. 652d288

e. Increase from 1 The share capital may also be increased through conversion of freely equity capital disposable equity capital.

285 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

286 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

287 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

288 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

216

220Federal Act on the Amendment of the Swiss Civil Code

f. Capital increase report

g. Audit confirmation

2 The equity capital used to meet the amount of the increase is shown in the annual accounts as approved by the shareholders and in the audit report of a licensed auditor. If more than six months have elapsed since the accounting cut-off date, audited interim accounts are re- quired.289

Art. 652e290

The board of directors draws up a written report in which it gives account of:

1. the nature and condition of contributions in kind or acquisi- tions in kind and the appropriateness of their valuation;

2. the existence of debts and whether such debts may be set off; 3. the free disposability of the equity capital thus converted; 4. compliance with the resolution of the general meeting, in par-

ticular concerning restrictions on or cancellation of subscrip- tion rights and the allocation of subscription rights that have not been exercised or have been withdrawn;

5. the reasons for and appropriateness of special privileges ac- corded to specific shareholders or other persons.

Art. 652f291 1 A licensed auditor verifies the capital increase report and confirms in writing that it is complete and accurate.292 2 No such audit confirmation is required where the capital contribution for the new share capital is made in money, the share capital increase is not for the purpose of funding an acquisition in kind and subscrip- tion rights are not restricted or cancelled.

289 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

290 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

291 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

292 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

217

220 Code of Obligations

h. Amendment of articles of association and statements required

i. Entry in the commercial register; nullity of previously issued shares

II. Contingent capital increase 1. General principle

Art. 652g293 1 Once the capital increase report and, where required, the audit con- firmation are available, the board of directors amends the articles of association and issues declares:

1. that all shares are validly subscribed for; 2. that the promised capital contributions correspond to the full

issue price; 3. that the contributions have been made in accordance with the

requirements prescribed by law, the articles of association and the resolution of the general meeting.

2 The resolution and declarations must be done as public deeds. The notary must cite each of the documents supporting the capital increase individually and confirm that they were presented to the board of directors. 3 The amended articles of association, capital increase report, audit confirmation, agreements on contributions in kind and available agreements on acquisitions in kind must be enclosed with the public deed.

Art. 652h294 1 The board of directors notifies the amendment of the articles of association and its declarations for entry in the commercial register. 2 It must submit:

1. the public deeds concerning the resolutions of the general meeting and of the board of directors with their enclosures;

2. an authenticated copy of the amended articles of association. 3 Shares issued prior to entry of the capital increase are void; the obligations arising from the share subscription remain effective.

Art. 653295 1 The general meeting may resolve to make a contingent capital in- crease by stipulating in the articles of association that creditors of new bonds and similar debt instruments issued by the company or its group companies and employees will be granted rights to subscribe to new shares (conversion or option rights).

293 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

294 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

295 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

218

220Federal Act on the Amendment of the Swiss Civil Code

2. Restrictions

3. Basis in articles of association

2 The share capital automatically increases whenever and to the extent that such conversion or option rights are exercised and the contribution obligations are discharged by set-off or payment. 5 The foregoing paragraphs are subject to the regulations of the Bank- ing Act of 8 November 1934296 on reserve capital.297

Art. 653a298 1 The nominal amount by which the share capital may be increased in this contingent manner must not exceed one-half of the existing share capital. 2 The capital contribution must be at least equal to the nominal value.

Art. 653b299 1 The articles of association must stipulate:

1. the nominal amount of the contingent capital increase; 2. the number, nominal value and type of shares; 3. the beneficiaries of conversion or option rights; 4. the cancellation of the subscription rights of existing share-

holders; 5. preferential rights attached to specific share classes; 6. the restrictions on the transferability of newly registered

shares. 2 Where the bonds or similar debt instruments to which the conversion or option rights attach are not offered first to the shareholders for subscription, the articles of association must also stipulate:

1. the conditions on which the conversion or option rights may be exercised;

2. the basis on which the issue amount is to be calculated. 3 Conversion or option rights granted before the provision of the articles of association concerning the contingent capital increase has been entered in the commercial register are void.

SR 952.0 297 Inserted by Annex No I of the Federal Act of 30 Sept. 2011 (Securing Stability in the

Financial Sector), in force since 1 March 2012 (AS 2012 811; BBl 2011 4717). 298 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 299 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745).

219

296

220 Code of Obligations

4. Protection of shareholders

5. Protection of beneficiaries of conversion or option rights

6. Execution of capital increase a. Exercise of rights; capital contribution

Art. 653c300 1 Where bonds or similar debt instruments to which conversion or option rights attach are to be issued as part of a contingent capital increase, they must be offered first to the shareholders for subscription in proportion to the shareholders’ existing participations. 2 This priority subscription right may be restricted or cancelled for good cause. 3 Any cancellation of subscription rights required in order to carry out a contingent capital increase and any restriction or cancellation of priority subscription rights must not result in any improper advantage or disadvantage to the parties involved.

Art. 653d301 1 A creditor or employee who holds a conversion or option right to acquire registered shares may not be barred from exercising that right on account of restrictions on the transferability of registered shares, unless this possibility is reserved in the articles of association and the issue prospectus. 2 Conversion or option rights may be adversely affected by a share capital increase, by the issue of new conversion or option rights, or in some other manner only if the conversion price is lowered or the beneficiaries are granted some other form of adequate compensation or if the shareholders suffer the same adverse effect.

Art. 653e302 1 Conversion or option rights are exercised by making a written decla- ration that refers to the provision of the articles of association concern- ing the contingent capital increase; where the law requires an issue prospectus, the declaration must refer to it. 2 A capital contribution in money or by set-off must be made through a banking institution subject to the Banking Act of 8 November 1934303. 3 The shareholder’s rights are established when the capital contribution is made.

300 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

301 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

302 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

303 SR 952.0

220

220Federal Act on the Amendment of the Swiss Civil Code

Art. 653f304 b. Audit 1 At the end of each financial year, or earlier at the request of the board confirmation of directors, a licensed audit expert verifies whether the issue of the

new shares was in conformity with the law, the articles of association and, where required, the issue prospectus.305 2 The auditor confirms this in writing.

Art. 653g306 c. Amendment of 1 On receipt of the audit confirmation, the board of directors draws up the articles of association a public deed stating the number, nominal value and type of the newly

issued shares, the preferential rights attaching to specific share classes and the status of the share capital as at the end of the financial year or the date of the audit. It amends the articles of association as necessary. 2 In the public deed, the notary states that the audit confirmation con- tains the required information.

Art. 653h307 d. Entry The board of directors applies for the amendment to the articles of in the commer- cial register association to be entered in the commercial register within three

months of the end of the financial year and files the public deed and the audit confirmation.

Art. 653i308 7. Deletion 1 Where the conversion or option rights are extinct and this is con-

firmed in a written report drawn up by a licensed audit expert, the board of directors annuls the provisions of the articles of association concerning the contingent capital increase. 2 In such public deed the notary states that the auditors’ report contains the required information.

304 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

305 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

306 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

307 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

308 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745). Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969)

221

220 Code of Obligations

III. Preference shares 1. Require- ments309

2. Status of preference shares311

L. Participation certificates I. Definition; applicable provisions

Art. 654 1 Pursuant to or by amendment of the articles of association, the gen- eral meeting may resolve that preference shares be issued or that existing shares be converted into preference shares. 2 Where a company has issued preference shares, further preference shares conferring preferential rights over the existing preference shares may be issued only with the consent of both a special meeting of the adversely affected holders of the existing preference shares and of a general meeting of all shareholders, unless otherwise provided in the articles of association. 3 The same applies to any proposal to vary or cancel preferential rights attached to the preference shares that were conferred pursuant to the articles of association.

Art. 655310

Art. 656 1 Preference shares enjoy the preferential rights vis-à-vis ordinary shares that are expressly conferred on them by the original articles of association or by amendment thereof. In other respects they are of equal status with the ordinary shares. 2 In particular, preferential rights may relate to the dividend, with or without rights to cumulative dividends, to the share in the proceeds of liquidation and to subscription rights in the event that new shares are issued.

Art. 656a312 1 The articles of association may provide for participation capital divided into specific amounts (participation certificates). These par- ticipation certificates are issued against a capital contribution, have a nominal value and do not confer voting rights. 2 Unless otherwise provided by law, the provisions governing share capital, shares and shareholders also apply to the participation capital, participation certificates and participation certificate holders. 3 The participation certificates must be designated as such.

309 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

310 Repealed by No I of the Federal Act of 4 Oct. 1991 (AS 1992 733; BBl 1983 II 745). 311 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 312 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745).

222

220Federal Act on the Amendment of the Swiss Civil Code

II. Participation and share capital

III. Legal position of participation certificate holders 1. In general

2. Notice and resolutions of general meetings

Art. 656b313 1 Participation capital must not exceed an amount equal to double the share capital. 2 The provisions governing minimum capital and the minimum total contribution do not apply. 3 For the purposes of the provisions governing restrictions on acquisi- tion of a company's own shares, the general reserve, the instigation of a special audit against the will of the general meeting and duty of notification in the event of capital loss, participation capital is deemed to be part of the share capital. 4 An authorised or contingent increase of the share and participation capital must not in total exceed one-half of the combined existing share and participation capital. 5 Participation capital may be created by means of an authorised or contingent capital increase.

Art. 656c314 1 Participation certificate holders have no voting rights and, unless otherwise provided by the articles of association, none of the rights associated therewith. 2 Rights associated with voting rights are the right to convene a gen- eral meeting, the right to attend such a meeting, the right to informa- tion, the right of inspection and the right to table motions. 3 Where the articles of association do not grant a participation certifi- cate holder the right to information, the right of inspection or the right to instigate a special audit (Art. 697a et seq.), he may submit a written request for information, access to documents or the instigation of a special audit to the general meeting.

Art. 656d315 1 Whenever a general meeting is convened, notice must be given to participation certificate holders together with the agenda items and the motions tabled. 2 Every resolution passed by the general meeting must be made avail- able without delay at the seat of the company and in its registered branch offices for inspection by participation certificate holders. Their attention must be drawn to this in the notice relating to the meeting.

313 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

314 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

315 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

223

220 Code of Obligations

3. Representa- tion on the board of directors

4. Pecuniary rights a. In general

b. Subscription rights

Art. 656e316

The articles of association may grant participation certificate holders the right to have a representative on the board of directors.

Art. 656f 317 1 The articles of association must not place participation certificate holders at a disadvantage as against shareholders in respect of the distribution of the disposable profit and the proceeds of liquidation and subscription to new shares. 2 Where several share classes exist, the participation certificates must be treated as at least equivalent to the lowest ranking share class. 3 Amendments to the articles of association and other resolutions of the general meeting that adversely affect the position of participation certificate holders are permitted only if they also adversely affect the position of the shareholders to whom the participation certificate holders are equal in status to the same degree. 4 Unless otherwise provided by the articles of association, the prefer- ential rights of participation certificate holders and their rights to participate in the company’s governance as laid down by the articles of association may be restricted or cancelled only with the consent of a special meeting of the participation certificate holders concerned and of the general meeting of all shareholders.

Art. 656g318 1 Where participation capital is created, the shareholders have a sub- scription right as for the issue of new shares. 2 The articles of association may provide that shareholders may sub- scribe only to shares and participation certificate holders only to par- ticipation certificates where the share capital and the participation capital are to be increased simultaneously in the same proportions. 3 Where only the participation capital or only the share capital is to be increased or one is to be increased by a greater proportion, the sub- scription rights must be allocated so that shareholders and participation certificate holders may retain their relative participations in the overall capital.

316 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

317 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

318 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

224

220Federal Act on the Amendment of the Swiss Civil Code

M. Dividend rights certificates

N. Own shares I. Restrictions on acquisition

Art. 657319 1 The articles of association may provide for the creation of dividend rights certificates in favour of persons linked with the company by previous capital participation or by virtue of being shareholders, credi- tors, employees or similar. The articles of association must indicate the number of dividend rights certificates issued and the nature of the associated rights. 2 Such dividend rights certificates entitle their holders only to a share in the disposable profit or the proceeds of liquidation or to subscribe to new shares. 3 The dividend rights certificate must not have a nominal value; it must not be called a participation certificate or issued in exchange for a capital contribution stated as an asset in the balance sheet. 4 By operation of law, the beneficiaries under dividend rights certifi- cates form a community to which the provisions governing the com- munity of bond creditors apply mutatis mutandis. However, a decision to waive some or all rights under dividend rights certificates is binding only if taken by the holders of a majority of all such certificates in circulation. 5 Dividend rights certificates may be created in favour of the com- pany’s founder members only by means of the original articles of association.

Art. 658320

Art. 659321 1 The company may acquire its own shares only where freely dispos- able equity capital is available in the required amount and the com- bined nominal value of all such shares does not exceed 10 per cent of the share capital. 2 Where registered shares are acquired in connection with a restriction on transferability, the foregoing upper limit is 20 per cent. The com- pany’s own shares that exceed the threshold of 10 per cent of the share capital must be sold or cancelled by means of a capital reduction within two years.

319 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

320 Repealed by No I of the Federal Act of 4 Oct. 1991 (AS 1992 733; BBl 1983 II 745). 321 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745).

225

220 Code of Obligations

II. Consequences of acquisition

III. Acquisition by subsidiaries

A. Entitlement to a share of the profits and proceeds of liquidation I. In general

II. Calculation method

Art. 659a322 1 The voting rights on the company’s own shares and the rights associ- ated therewith are suspended. 2 The company must set aside an amount equivalent to the cost of acquiring its own shares as a separate reserve.

Art. 659b323 1 Where a company holds a majority interest in a subsidiary, any acquisition of its shares by such subsidiary is subject to the same restrictions and has the same consequences as the acquisition of its own shares. 2 Where a company acquires a majority interest in another company which holds shares of the acquirer, these shares are deemed the ac- quirer’s own shares. 3 The obligation to form a reserve rests with the company holding the majority interest.

Section Two: Rights and Obligations of Shareholders

Art. 660324 1 Every shareholder is entitled to a pro rata share of the disposable profit to the extent that the distribution of such profit among the share- holders is provided for by law or the articles of association. 2 On dissolution of the company, the shareholder is entitled to a pro rata share of the liquidation proceeds, unless otherwise provided by those articles of association that relate to the allocation of the assets of the dissolved company. 3 The preferential rights attaching to specific share classes stipulated in the articles of association are reserved.

Art. 661 Unless the articles of association provide otherwise, the share of the profits and the proceeds of liquidation are calculated in proportion to the amounts paid up on the share capital.

322 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

323 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

324 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

226

220Federal Act on the Amendment of the Swiss Civil Code

Art. 662325

Art. 662a326

Art. 663327

Art. 663a and 663b 328

Art. 663bbis329 2. 330Annual 1 Companies whose shares are listed on a stock exchange must provide report the following additional information in the notes to the balance sheet:I. Additional information on companies with 1. all remuneration distributed directly or indirectly to current listed shares members of the board of directors; 1. Remuneration

2. all remuneration distributed directly or indirectly to persons entrusted by the board of directors with all or some of the company’s management activities (executive board);

3. all remuneration distributed directly or indirectly to current members of the board of advisors;

4. all remuneration distributed directly or indirectly to former members of the board of directors, executive board and board of advisors where such remuneration relates to past activities as a governing officer of the company or is not customary market practice;

5. all remuneration distributed directly or indirectly to close asso- ciates of the persons specified in numbers 1–4 where such re- muneration is not customary market practice.

2 In particular, the following are deemed to be remuneration: 1. fees, salaries, bonuses and account credits;

325 Repealed by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), with effect from 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

326 Inserted by No I of the Federal Act of 4. Okt. 1991 (AS 1992 733; BBl 1983 II 745). Repealed by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), with effect from 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

327 Repealed by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), with effect from 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

328 Inserted by No I of the Federal Act of 4. Okt. 1991 (AS 1992 733; BBl 1983 II 745). Repealed by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), with effect from 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

329 Inserted by No I of the Federal Act of 7 Oct. 2005 (Transparency in relation to remuneration of members of the board of directors and the executive board), in force since 1 Jan. 2007 (AS 2006 2629 2632; BBl 2004 4471).

330 Amended by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

227

220 Code of Obligations

2. shares of profits paid to board members and commissions, par- ticipation in turnover and other forms of participation in the business results;

3. benefits in kind; 4. allocations of shares and conversion and option rights; 5. severance payments; 6. guarantee and pledge commitments in favour of third parties

and other collateral commitments; 7. waivers of claims; 8. expenditures giving rise to or increasing occupational benefit

entitlements; 9. all payments and benefits for additional work.

3 The following must also be stated in the notes to the balance sheet: 1. all loans and credit facilities extended to the current members

of the board of directors, executive board and board of advi- sors that are still outstanding;

2. loans and credit facilities to former members of the board of directors, executive board and board of advisors that were ex- tended on conditions other than the customary market condi- tions and are still outstanding;

3. all loans and credit facilities to close associates of the persons specified in numbers 1 and 2 that were extended on conditions other than the customary market conditions and are still out- standing.

4 The information provided on remuneration and credit must include: 1. the amount for the board of directors as a whole and the

amount for each member, specifying the name and function of the member concerned;

2. the amount for the executive board as a whole and the highest amount for each member, specifying the name and function of the member concerned;

3. the total amount for the board of advisors as a whole and the amount for each member, specifying the name and function of the member concerned.

5 Remuneration and credits to close associates must be shown sepa- rately. The names of such associates need not be given. In other re- spects the provisions governing information on remuneration and credit to members of the board of directors, executive board and board of advisors apply mutatis mutandis.

228

220Federal Act on the Amendment of the Swiss Civil Code

Art. 663c331 b. Sharehold- 1 Companies whose shares333 are listed on a stock exchange must ings332 specify the significant shareholders and their shareholdings in the

notes to the balance sheet, where these are known or ought to be known. 2 Significant shareholders are defined as shareholders and groups of shareholders linked through voting rights who own more than 5 per cent of all voting rights. Where the articles of association provide for a lower percentage threshold for registered shares (Art. 685d para. 1), that threshold applies for purposes of the duty of disclosure. 3 Also to be indicated are the shareholdings in the company and the conversion and option rights held by each current member of the board of directors, executive board and board of advisors including those held by their close associates, specifying the name and function of the member concerned.334

Art. 663d–663h335

Art. 664 and 665336

Art. 665a337

Art. 666 and 667338

Art. 668339

331 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

332 Amended by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

333 Revised by the Federal Assembly Drafting Committee [Art. 33 ParlPA – AS 1974 1051]. 334 Inserted by No I of the Federal Act of 7 Oct. 2005 (Transparency in relation to

remuneration of members of the board of directors and the executive board), in force since 1 Jan. 2007 (AS 2006 2629 2632; BBl 2004 4471).

335 Inserted by No I of the Federal Act of 4. Okt. 1991 (AS 1992 733; BBl 1983 II 745). Repealed by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), with effect from 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

336 Repealed by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), with effect from 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

337 Inserted by No I of the Federal Act of 4. Okt. 1991 (AS 1992 733; BBl 1983 II 745). Repealed by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), with effect from 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

338 Repealed by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), with effect from 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

339 Repealed by No I of the Federal Act of 4 Oct. 1991, with effect from 1 July 1992 (AS 1992 733; BBl 1983 II 745).

229

220 Code of Obligations

6. Valuation, revaluation342

C. Reserves I. Legal reserves 1. General reserve

Art. 669340

Art. 670341 1 Where as a result of a net loss for the year the company’s capital cover falls below one-half of the share capital and the legal reserves, in order to rectify the negative net worth, the company may revalue land, buildings or equity participations whose real value has risen above their value stated at cost up to a maximum equal to one-half of the share capital and the legal reserves. The revaluation amount is stated separately as a revaluation reserve. 2 The revaluation is permitted only where a licensed auditor issues written confirmation for the attention of the general meeting that the revaluation complies with the relevant statutory provisions.343

Art. 671344 1 Five per cent of the annual profit must be allocated to the general reserve until this equals 20 per cent of the paid-up share capital. 2 Even after it has reached the statutory level, the following must be allocated to the general reserve:

1. any share issue proceeds in excess of the nominal value re- maining after the issue costs have been met, unless used to fund write-downs or for staff welfare purposes;

2. any amount remaining from sums paid in on forfeited shares after any shortfall on the shares issued in return has been met;

3. ten per cent of the amounts distributed as the share in the profit above and beyond payment of a dividend of 5 per cent.

3 To the extent it does not exceed one-half of the share capital, the general reserve may be used only to cover losses or for measures designed to sustain the company through difficult times, to prevent unemployment or to mitigate its consequences.

340 Repealed by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), with effect from 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

341 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

342 Amended by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

343 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

344 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

230

220Federal Act on the Amendment of the Swiss Civil Code

2. Reserve for own shares

3. Revaluation reserve

II. Reserves pursuant to the articles of association 1. In general

2. For staff welfare purposes

4 The provisions in para. 2 number 3 and paragraph 3 do not apply to companies whose primary purpose is to hold equity participations in other companies (holding companies).

3455 ... 3466 ...

Art. 671a347

The reserve for the company's own shares may be written back in the amount of any sold or destroyed shares valued at cost.

Art. 671b348

The revaluation reserve may be written back only by means of conver- sion into share capital, fresh write-down or disposal of the revalued assets.

Art. 672349 1 The articles of association may stipulate that amounts greater than 5 per cent of the annual profit are to be allocated to reserves and that the reserve must contain more than the 20 per cent of paid-up share capital required by law. 2 They may provide for the formation of further reserves and specify the purpose and use thereof.

Art. 673350

In particular, the articles of association may provide for reserves earmarked for the foundation and funding of welfare schemes for the company’s employees.

345 Repealed by No II 2 of the Federal Act of 20 March 2009 on Rail Reform 2, with effect from 1 Jan. 2010 (AS 2009 5597 5629; BBl 2005 2415, 2007 2681).

346 Repealed by Annex No II 1 of the Insurance Oversight Act of 17 Dec. 2004, with effect from 1 Jan. 2006 (SR 961.01).

347 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

348 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

349 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

350 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

231

220 Code of Obligations

III. Ratio of the share in the profit to the reserves

D. Dividends, interest before commencement of operations and shares of profits paid to board members I. Dividends

II. Interest before commencement of operations

Art. 674351 1 The dividend may be determined only after the allocations to re- serves required by the law and the articles of association have been deducted. 2 The general meeting may resolve on the formation of reserves which are not provided for by law or the articles of association or which go beyond the requirements thereof, provided that

1. this is necessary for replacement purposes; 2. with a view to the long-term prosperity of the company or the

desirability of a stable dividend, such reserves are justified and in the best interests of the shareholders.

3 Similarly, the general meeting may resolve on the allocation of disposable profit to form reserves for the foundation and funding of welfare schemes for the company’s employees or for other welfare purposes even where such reserves are not provided for in the articles of association.

Art. 675 1 No interest may be paid on the share capital. 2 Dividends may be paid only from the disposable profit and from reserves formed for this purpose.352

Art. 676 1 The shareholders may be paid interest out of the investment account for the time required to prepare and build up the company prior to commencement of full operations. The articles of association must stipulate the latest time by which payment of such interest must cease. 2 If the company is expanded by means of an issue of new shares, the resolution concerning the capital increase may provide for a specified amount of interest to be paid on the new shares from the investment account until a precisely defined date, which must be no later than the date on which the new operational facility commences operations.

351 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

352 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

232

220Federal Act on the Amendment of the Swiss Civil Code

III. Shares of profits paid to board members

E. Return of benefits I. In general

II. Shares of profits paid to board members on insolvency

Art. 677353

Shares of the profit may be paid to members of the board of directors only out of the disposable profit and only after the allocation to the legal reserve has been made and a dividend of 5 per cent or a higher percentage laid down by the articles of association has been paid to the shareholders.

Art. 678354 1 Shareholders and members of the board of directors and their close associates who have unduly and in bad faith received dividends, shares of profits paid to board members, other shares of profits or interest before commencement of operations are obliged to return such bene- fits. 2 They are likewise obliged to return other benefits received from the company to the extent these are manifestly disproportionate to the performance rendered in return and to the company’s economic situa- tion. 3 The claim for restitution accrues to the company and the shareholder; the latter sues for performance to the company. 4 The obligation to return such benefits becomes time-barred five years after they were received.

Art. 679355 1 Where the company is declared insolvent, the members of the board of directors must return all shares of profits paid to board members received in the three years prior to commencement of insolvency proceedings, unless they can show that the conditions for payment of such shares of profits paid to board members set out in law and the articles of association were met; in particular, they must show that the payment was based on prudent accounting. 2 …356

353 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

354 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

355 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

356 Repealed by Annex to the Federal Act of 21 June 2013, with effect from 1 Jan. 2014 (AS 2013 4111; BBl 2010 6455).

233

220 Code of Obligations

F. Shareholder’s duty to contrib- ute I. Object

II. Consequences of default 1. By law and the articles of association

2. Call for performance

G. Issue and transfer of shares I. Bearer shares

Art. 680 1 A shareholder may not be required, even under the articles of asso- ciation, to contribute more than the amount fixed for subscription of a share on issue. 2 A shareholder does not have the right to reclaim the amount paid-up.

Art. 681 1 A shareholder who fails to pay in the issue amount for his share in good time is obliged to pay default interest. 2 Further, the board of directors has the power to declare that the defaulting shareholder has forfeited his rights in respect of the share subscription and any part payments already made and that his shares are forfeited and to issue new ones in their place. Where the forfeited shares have already been issued and cannot be physically obtained, such declaration of forfeiture is published in the Swiss Official Gazette of Commerce and in the form envisaged by the articles of association. 3 The articles of association may also provide that a shareholder in default also be required to pay a contractual penalty.

Art. 682 1 Where the board of directors intends to declare the defaulting share- holder in forfeit of his rights in respect of the share subscription or to require him to pay the contractual penalty provided for in the articles of association, it must make at least three calls for payment in the Swiss Official Gazette of Commerce and in the form provided for by the articles of association and set a grace period for such payment of at least one month commencing on the date on which the last call was published. The shareholder may be declared in forfeit of his rights in respect of the share subscription or required to pay the contractual penalty only if he fails to make the required payment within such grace period. 2 In the case of registered shares, such publication is replaced by a registered letter sent to each shareholder entered in the share register calling for payment and setting the grace period. In this case the grace period commences on receipt of the call for payment. 3 The defaulting shareholder is liable to the company for the amount not covered by the contributions of the new shareholder.

Art. 683 1 Bearer shares may be issued only after the full nominal value has been paid up.

234

220Federal Act on the Amendment of the Swiss Civil Code

II. Registered shares

H. Restricted transferability I. Statutory restriction

II. Restrictions under the articles of association 1. General principles

2. Unlisted registered shares a. Requirements for refusal

2 Shares issued before the full nominal value is paid up are void. Claims for damages are reserved.

Art. 684357 1 Unless otherwise provided by law or the articles of association, the company’s registered shares are transferable without restriction. 2 Transfer by means of transaction may also be effected by handing over the endorsed share certificate to the acquirer.

Art. 685358 1 Registered shares that have not yet been fully paid up may be trans- ferred only with the consent of the company, unless they are acquired by inheritance, division of estate, matrimonial property law or compul- sory execution. 2 The company may withhold consent only if the solvency of the acquirer is in doubt and the security requested by the company is not furnished.

Art. 685a359 1 The articles of association may stipulate that registered shares may be transferred only with the consent of the company. 2 This restriction also applies to establishment of a usufruct. 3 If the company goes into liquidation, the restriction on transferability is cancelled.

Art. 685b360 1 The company may refuse to give such consent providing it states good cause cited in the articles of association or offers to acquire the shares from the party alienating them for the company’s own account, for the account of other shareholders or for the account of third parties at their real value at the time the request was made. 2 Provisions governing the composition of the shareholder group which are designed to safeguard the pursuit of the company’s objects or its economic independence are deemed to constitute good cause.

357 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

358 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

359 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

360 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

235

220 Code of Obligations

b. Effect

3. Listed registered shares a. Requirements for refusal

3 Further, the company may refuse entry in the share register where the acquirer fails to declare expressly that he has acquired the shares in his own name and for his own account. 4 Where the shares were acquired by inheritance, division of estate, matrimonial property law or compulsory execution, the company may withhold its consent only if it offers to purchase the shares from the acquirer at their real value. 5 The acquirer may request the court at the seat of the company to determine the real value. The costs of the valuation are borne by the company. 6 Where the acquirer fails to decline such offer within a month of notification of the real value, it is deemed accepted. 7 The articles of association may not impose more restrictive condi- tions on transferability.

Art. 685c361 1 Where the consent required for transfer of shares is not given, the ownership of the shares and all attendant rights remain with the aliena- tor. 2 In the case of acquisition of shares by inheritance, division of estate, matrimonial property law or compulsory execution, ownership and the attendant pecuniary rights pass to the acquirer immediately, whereas the attendant participation rights pass to him only when the company has given its consent. 3 Where the company fails to refuse the request for consent within three months of receipt or refuses it without just cause, consent is deemed to have been given.

Art. 685d362 1 In the case of listed registered shares, the company may refuse to accept the acquirer as a shareholder only where the articles of associa- tion envisage a percentage limit on the registered shares for which an acquirer must be recognised as shareholder and such limit is exceeded. 2 Further, the company may refuse entry in the share register where at the company’s request the acquirer fails to declare expressly that he has acquired the shares in his own name and for his own account.

361 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

362 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

236

220Federal Act on the Amendment of the Swiss Civil Code

b. Duty of notification

c. Transfer of rights

d. Time limit for refusal

3 Where listed363 registered shares were acquired by inheritance, division of estate or matrimonial property law, entry of the acquirer may not be refused.

Art. 685e364

Where listed registered shares are sold on a stock exchange, the selling bank must without delay notify the company of the name of the seller and the number of shares sold.

Art. 685f 365 1 Where listed registered shares are acquired on a stock exchange, the attendant rights pass to the acquirer on transfer. Where listed regis- tered shares are acquired off-exchange, the attendant rights pass to the acquirer as soon as he has submitted a request for recognition as shareholder to the company. 2 Until such recognition of the acquirer by the company, he may not exercise the voting right conferred by the shares or any other rights associated with such voting right. The acquirer is not restricted in his exercise of any other shareholder rights, in particular subscription rights. 3 Acquirers not yet recognised by the company are entered as share- holders without voting rights in the share register once the rights have been transferred. The corresponding shares are deemed to be unrepre- sented at the general meeting. 4 Where the company’s refusal is unlawful, the company must recog- nise the acquirer’s voting right and the rights associated therewith from the date of the court judgment and pay the acquirer damages unless it can show that it was not at fault.

Art. 685g366

Where the company fails to refuse the request for recognition within 20 days, the shareholder is deemed to have been recognised.

363 Revised by the Federal Assembly Drafting Committee [Art. 33 ParlPA – AS 1974 1051]. 364 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 365 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 366 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745).

237

220 Code of Obligations

4. Share register a. Entry

b. Deletion

5. Registered shares not fully paid in369

III. Interim certificates

Art. 686367 1 The company keeps a share register of registered shares in which the names and addresses of the owners and beneficial owners are recorded. 2 Entry in the share register requires documentary proof that the share was acquired for ownership or of the reasons for beneficial ownership thereof. 3 The company must certify such entry on the share certificate. 4 In relation to the company the shareholder or beneficial owner is the person entered in the share register.

Art. 686a368

After hearing the parties involved the company may delete entries in the share register that resulted from false information supplied by the acquirer. The latter must be informed of the deletion immediately.

Art. 687 1 The acquirer of a registered share that is not fully paid up has an obligation to the company to pay up the remainder as soon as he is entered in the share register. 2 Where the person who subscribed for the share alienates it, he may be sued for the amount not paid up if the company becomes insolvent within two years of its entry in the commercial register and his legal successor has forfeited his rights arising from the share. 3 Where the seller is not the person who subscribed for the share, he is released from the duty to pay up as soon as the acquirer is entered in the share register. 4 Until such time as registered shares are fully paid up, the amount of the nominal value paid up must be entered on each share certificate.

Art. 688 1 Interim certificates made out to the bearer may be issued only for bearer shares whose the nominal value is fully paid up. Interim certifi- cates made out to the bearer issued before the full nominal value is paid up are void. Claims for damages are reserved. 2 Where interim certificates made out to the named holder are issued for bearer shares, they may be transferred only in accordance with the

367 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

368 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

369 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

238

220Federal Act on the Amendment of the Swiss Civil Code

J. Personal membership rights I. Participation in general meetings of shareholders 1. General principle

2. Entitlement as against the company

3. Representa- tion of the share- holder a. In general

b. Governing officer as representative

provisions governing assignment of claims, although their transfer does not take effect as against the company until it receives notice thereof. 3 Interim certificates for registered shares must be made out to a named holder. The transfer of such interim certificates is subject to the provisions governing the transfer of registered shares.

Art. 689370 1 The shareholder exercises his rights in the company’s affairs, such as the appointment of the governing officers, approval of the annual report and resolutions concerning allocation of the profit, at the gen- eral meeting. 2 He may represent his shares at the general meeting himself or may have them represented by a third party who, subject to contrary provi- sion in the articles of association, need not be a shareholder.

Art. 689a371 1 The membership rights conferred by registered shares may be exer- cised by any person authorised so to do by entry in the share register or a written power of attorney issued by the shareholder. 2 The membership rights conferred by bearer shares may be exercised by any person who shows he is in possession of the shares by present- ing them. The board of directors may direct that some other form of proof of possession be given.

Art. 689b372 1 A person exercising participation rights as a representative must comply with the instructions of the represented party. 2 A person in possession of a bearer share as a result of pledge, bail- ment or loan may exercise the attendant membership rights only if specially authorised to do so by the shareholder in writing.

Art. 689c373

Where the company proposes a member of its governing bodies or some other associate of the company to the shareholders to represent

370 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

371 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

372 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

373 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

239

220 Code of Obligations

c. Custodian as representative

d. Disclosure

4. Multiple beneficiaries377

their voting rights at a general meeting, it must simultaneously desig- nate an independent person who may be entrusted by the shareholders with the task of representing them.

Art. 689d374 1 Where a custodian wishes to act as representative in exercising the participation rights attaching to shares deposited with him, he asks the depositors for voting instructions prior to every general meeting. 2 Where the depositors’ instructions cannot be obtained in good time, the custodian exercises their voting rights in accordance with their general instructions; in the absence of general instructions, he votes in favour of the motions proposed by the board of directors. 3 Institutions subject to the Federal Act of 8 November 1934375 on Banks and Savings Banks and professional asset managers are deemed to be custodians acting as representatives.

Art. 689e376 1 Governing officers, independent representatives of voting rights and custodians acting as representatives inform the company of the num- ber, type, nominal value and class of the shares they represent. Failure to disclose such information renders the resolutions of the general meeting subject to challenge on the same conditions as apply to unau- thorised participation in the general meeting. 2 The chairman gives the general meeting the information as aggre- gates for each form of representation. Should he fail to do so even though a shareholder has requested it, any shareholder may challenge the resolutions of the general meeting by bringing action against the company.

Art. 690 1 Where a share is owned collectively, the beneficiaries of the rights it confers may exercise such rights only through a joint representative. 2 In the event of beneficial ownership of a share, such rights are repre- sented by the beneficial owner; he is liable in damages to the owner for any failure to take due account of the latter’s interests when exer- cising them.

374 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

375 SR 952.0 376 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 377 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745).

240

220Federal Act on the Amendment of the Swiss Civil Code

II. Unauthorised participation

III. Voting rights at general meetings of shareholders 1. General principle

2. Shares with privileged voting rights

Art. 691 1 The lending of shares for the purpose of exercising voting rights at a general meeting is forbidden if the intention in so doing is to circum- vent a restriction on voting rights. 2 Every shareholder is entitled to object to the participation of unau- thorised persons to the board of directors or in the minutes of the general meeting. 3 Where persons who are not authorised to participate in the general meeting participate in a decision on a resolution, any shareholder may challenge that resolution even if he has not raised an objection, unless the company can prove that their involvement exerted no influence on the decision made.

Art. 692 1 The shareholders exercise their voting rights at general meetings of shareholders in proportion to the total nominal value of the shares belonging to them. 2 Every shareholder has at least one vote, even if he holds only one share. However, the articles of association may impose restrictions on the number of votes cast by holders of multiple shares. 3 In the event that the nominal value of the shares is reduced as part of a restructuring of the company, the voting right conferred by the original nominal value may be retained.

Art. 693 1 The articles of association may stipulate that voting rights are deter- mined regardless of nominal value by the number of shares belonging to each shareholder such that each share confers one vote. 2 In this case, shares with a lower nominal value than other shares of the same company may be issued only as registered shares and must be fully paid up. The nominal value of these other shares must not exceed ten times the nominal value of the voting shares.378 3 The allocation of voting rights according to number of shares is not applicable for:

1. the election of external auditors; 2. the appointment of experts to audit the company’s business

management or parts thereof; 3. any resolution concerning the instigation of a special audit;

378 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

241

220 Code of Obligations

4. any resolution concerning the initiation of a liability action.379

3. Entitlement to exercise voting right

4. Exclusion of voting right

IV. Sharehold- ers’ rights of control 1. Availability of the annual report

2. Information and inspection

Art. 694 Voting right take effect as soon as the amount determined by law or the articles of association is paid up.

Art. 695 1 In the case of resolutions concerning the discharge of the board of directors, persons who have participated in any manner in the man- agement of the company’s business have no voting rights.

3802 ...

Art. 696381 1 No later than 20 days prior to the ordinary general meeting, the annual report and audit report must be made available for inspection by the shareholders at the seat of the company. Any shareholder may request that a copy of these reports be sent to him without delay. 2 Registered shareholders are notified of this in writing, bearer share- holders by publication in the Swiss Official Gazette of Commerce and in the form prescribed by the articles of association. 3 Any shareholder may request a copy of the annual report in the form approved by the general meeting and of the audit report from the company during the year following the general meeting.

Art. 697382 1 At the general meeting, any shareholder is entitled to information from the board of directors on the affairs of the company and from the external auditors on the methods and results of their audit. 2 The information must be given to the extent required for the proper exercise of shareholders’ rights. It may be refused where providing it would jeopardise the company’s trade secrets or other interests war- ranting protection.

379 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

380 Repealed by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), with effect from 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

381 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

382 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

242

220Federal Act on the Amendment of the Swiss Civil Code

V. Right to instigate a special audit 1. With approval of the general meeting

2. If motion rejected by the general meeting

3. Appointment

3 The company ledgers and business correspondence may be inspected only with the express authorisation of the general meeting or by reso- lution of the board of directors and only if measures are taken to safeguard trade secrets. 4 Where information or inspection is refused without just cause, the court may order it on application.383

Art. 697a384 1 Any shareholder may request the general meeting to have specific matters clarified by means of a special audit, where this is necessary for the proper exercise of shareholders’ rights and he has already exercised his right to information and inspection. 2 Where the general meeting adopts the motion, the company or any shareholder may apply to the court within 30 days for appointment of a special auditor.

Art. 697b385 1 Where the general meeting rejects the motion, shareholders together representing at least 10 per cent of the share capital or shares in the nominal value of 2 million francs may apply to the court within 30 days for appointment of a special auditor. 2 The applicants are entitled to have a special auditor appointed where they make a prima facie case that the founder members or governing officers have violated the law or the articles of association and thereby harmed the company or the shareholders.

Art. 697c386 1 The court decides after hearing the company and the applicant. 2 If the court accepts the application, it entrusts an independent expert with the task of carrying out the audit. The court defines the scope of the audit based on the application. 3 The court may also entrust the special audit to several experts jointly.

383 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

384 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

385 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

386 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

243

220 Code of Obligations

4. Audit activities

5. Report

6. Procedure and publication

7. Costs

Art. 697d387 1 The special audit must be carried out within a reasonable period and without unnecessary disruption to the company’s business. 2 Founder members, governing officers, agents, employees, official receivers and liquidators must provide the special auditor with infor- mation on any relevant facts. In cases of doubt, the court decides. 3 The special auditor hears the company on the results of the special audit. 4 He is required to preserve confidentiality.

Art. 697e388 1 The special auditor draws up a detailed report on the results of his audit, although he must safeguard trade secrets. He submits his report to the court. 2 The court makes the report available to the company and at its re- quest decides whether any passages in the report violate the company’s trade secrets or other interests warranting protection and therefore may not be presented to the applicants. 3 It gives the company and the applicants the opportunity to respond to the content of the report, adapted as necessary, and to ask supplemen- tary questions.

Art. 697f 389 1 The board of directors makes the report and the responses to it avail- able to the next general meeting. 2 Any shareholder may request a copy of the report and the responses to it from the company for one year following the general meeting.

Art. 697g390 1 Where the court grants the request for the appointment of a special auditor, it orders the company to make an advance payment and bear the costs. Where justified by special circumstances, it may order the applicants to bear some or all of the costs.

387 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

388 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

389 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

390 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

244

220Federal Act on the Amendment of the Swiss Civil Code

2 Where the general meeting has approved the special audit, the com- pany bears the costs.

Art. 697h391

Section Three: Organisation of the Company Limited by Shares A. The General Meeting

Art. 698 I. Powers 1 The supreme governing body of a company limited by shares is the

general meeting. 2 It has the following inalienable powers:

1. to determine and amend the articles of association; 2. to elect the members of the board of directors and the external

auditors; 3.392 to approve the management report and the consolidated ac-

counts; 4. to approve the annual accounts and resolutions on the alloca-

tion of the disposable profit, and in particular to set the divi- dend and the shares of profits paid to board members;

5. to discharge the members of the board of directors; 6. to pass resolutions concerning the matters reserved to the gen-

eral meeting by law or the articles of association.393

Art. 699 II. Convocation 1 The general meeting is convened by the board of directors or, where and agenda items necessary, by the external auditors.395 The liquidators and the repre-1. Right and duty394 sentatives of bond creditors also have the right to convene general

meetings.

391 Inserted by No I of the Federal Act of 4. Okt. 1991 (AS 1992 733; BBl 1983 II 745). Repealed by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), with effect from 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

392 Amended by No I 1 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

393 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

394 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

395 Term in accordance with No II 2 of the Federal Act of 4 Oct. 1991, in force since 1 July

245

220 Code of Obligations

2 The ordinary general meeting takes place every year within six months of the end of the financial year, and extraordinary general meetings are convened as and when required. 3 A general meeting may also be convened by one or more sharehold- ers together representing at least 10 per cent of the share capital. Shareholders together representing shares with a nominal value of 1 million francs may demand that an item be placed on the agenda. Meetings are convened and items placed on the agenda by written request, including details of agenda items and motions.396 4 Where the board of directors fails to grant such a request within a reasonable time, the court must at the request of the applicant order that a general meeting be convened.

Art. 700397 2. Form 1 Notice convening the general meeting must be given no later than 20

days before the date for which it is scheduled in the form prescribed by the articles of association. 2 The notice convening the meeting must include the agenda items and the motions of the board of directors and the shareholders who have requested that a general meeting be called or an item be placed on the agenda. 3 No resolutions may be made on motions relating to agenda items that were not duly notified; exceptions to this are motions to convene an extraordinary general meeting or to carry out a special audit and to appoint an auditor at the request of a shareholder.398. 4 No advance notice is required to propose motions on duly notified agenda items and to debate items without passing resolutions.

Art. 701 3. Universal 1 The owners or representatives of all the company’s shares may, if no meeting objection is raised, hold a general meeting without complying with the

formal requirements for convening meetings. 2 This meeting may hold validly discuss and pass binding resolutions on all matters within the remit of the general meeting, provided that the owners or representatives of all the shares are present.

396 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

397 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

398 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

246

220Federal Act on the Amendment of the Swiss Civil Code

III. Preparatory measures; minutes

IV. Participation of members of the board of directors

IV. Resolutions and elections 1. In general401

2. Important resolutions

Art. 702399 1 The board of directors takes the necessary measures to determine voting rights. 2 It ensures that minutes are kept. These record:

1. the number, type, nominal value and class of shares repre- sented by the shareholders, governing officers, independent voting right representatives and custodians acting as represen- tatives;

2. the resolutions and results of the elections; 3. the requests for information and the answers given in reply; 4. the statements made by shareholders for the record.

3 The shareholders are entitled to inspect the minutes.

Art. 702a400

The members of the board of directors are entitled to participate in the general meeting. They may table motions.

Art. 703 Unless otherwise provided by law or the articles of association, the general meeting passes resolutions and conducts elections by an abso- lute majority of the voting rights represented.

Art. 704402 1 A resolution by the general meeting requires at least two-thirds of the voting rights represented and an absolute majority of the nominal value of shares represented for:

1. any amendment of the company’s objects; 2. the introduction of shares with preferential voting rights; 3. any restriction on the transferability of registered shares;

399 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

400 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

401 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

402 Amended by No I of the Federal Act of 4 Oct. 1991. in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

247

220 Code of Obligations

V. Dismissal of the board of directors and the auditors406

4.403 an authorised or contingent capital increase or the creation of reserve capital in accordance with Article 12 of the Banking Act of 8 November 1934404;

5. a capital increase funded by equity capital, against contribu- tions in kind or to fund acquisitions in kind and the granting of special privileges;

6. any restriction or cancellation of the subscription right; 7. a relocation of the seat of the company; 8.405 the dissolution of the company

2 Provisions of the articles of association which stipulate that larger majorities than those prescribed by law are required in order to make certain resolutions may themselves be introduced only with the planned majority. 3 Registered shareholders who did not vote in favour of a resolution to amend the company’s objects or to introduce shares with preferential voting rights are not bound by restrictions on the transferability of their shares imposed by the articles of association for six months following publication of such resolutions in the Swiss Official Gazette of Commerce.

Art. 705 1 The general meeting is entitled to dismiss the members of the board of directors and the external auditors and any registered attorneys or commercial agents appointed by them. 2 The claims for compensation of persons thus dismissed are reserved.

403 Amended by Annex No I of the Federal Act of 30 Sept. 2011 (Securing Stability in the Financial Sector), in force since 1 March 2012 (AS 2012 811; BBl 2011 4717).

404 SR 952.0 405 Repealed by Annex No 2 des Mergers Act of 3 Oct. 2003 (SR 221.301). Amended by No

I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

406 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

248

220Federal Act on the Amendment of the Swiss Civil Code

VI. Challenging resolutions of the general meeting 1. Right of action and grounds407

2. Procedure

Art. 706 1 The board of directors and every shareholder may challenge resolu- tions of the general meeting which violate the law or the articles of association by bringing action against the company before the court. 2 In particular, challenges may be brought against resolutions which

1. remove or restrict the rights of shareholders in breach of the law or the articles of association;

2. remove or restrict the rights of shareholders in an improper manner;

3. give rise to the unequal treatment or disadvantaging of the shareholders in a manner not justified by the company’s ob- jects;

4. transform the company into a non-profit organisation without the consent of all the shareholders.408

3–4 ...409 5 A court judgment that annuls a resolution made by the general meet- ing is effective for and against all the shareholders.

Art. 706a410 1 The right to challenge lapses if the action is not brought within two months of the general meeting. 2 Where the board of directors is the claimant, the court appoints a representative for the company.

3 …411

407 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

408 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

409 Repealed by No I of the Federal Act of 4 Oct. 1991 (AS 1992 733; BBl 1983 II 745). 410 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 411 Repealed by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, with effect

from 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

249

220 Code of Obligations

Art. 706b412 VII. Nullity413 In particular, resolutions of the general meeting are void if they:

1. remove or restrict the right to participate in the general meet- ing, the minimum voting right, the right to take legal action or other shareholder rights that are mandatory in law;

2. restrict the shareholders’ rights of control beyond the legally permissible degree, or

3. disregard the basic structures of the company limited by shares or the provisions on capital protection.

B. The Board of Directors414

Art. 707 I. In general 1 The company’s board of directors comprises one or more mem- 1. Eligibility415 bers.416

4172 ... 3 Where a legal entity or commercial company holds an equity partici- pation in the company, it is not eligible as such to serve as a member of the board of directors; however, its representative may be elected in its stead.

Art. 708418

412 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

413 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

414 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

415 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

416 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

417 Repealed by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), with effect from 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

418 Repealed by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), with effect from 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

250

220Federal Act on the Amendment of the Swiss Civil Code

Art. 709419 3. Representa- 1 Where two or more different share classes exist with regard to voting tion of share- holder classes or property rights, the articles of association must stipulate that the and groups420 shareholders of each different share class are entitled to elect at least

one representative to the board of directors. 2 The articles of association may contain special provisions to protect minorities or specific groups of shareholders.

Art. 710421 4. Term of 1 The members of the board of directors are elected for a three-year office422 term of office unless the articles of association provide otherwise.

However, the term of office must not exceed six years. 2 Re-election is possible.

Art. 711423

Art. 712424 II. Organisation 1 The board of directors appoints a chairman and a secretary. The latter 1. Chairman and need not be a member of the board of directors.secretary

2 The articles of association may stipulate that the chairman be elected by the general meeting.

Art. 713425 2. Resolutions 1 The resolutions of the board of directors are made by majority of

votes cast. The chairman has a casting vote, unless the articles of association provide otherwise.

419 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

420 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

421 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

422 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

423 Repealed by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), with effect from 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

424 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

425 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

251

220 Code of Obligations

3. Void resolu- tions

4. Right to convene meetings

5. Right to information and inspection

2 Resolutions may also be made by written consent to a proposed motion, provided no member requests that it be debated orally. 3 Minutes are kept of the board’s discussions and resolutions and signed by the chairman and the secretary.

Art. 714426

The grounds for the nullity of resolutions by the general meeting apply mutatis mutandis to resolutions by the board of directors.

Art. 715427

Any member of the board of directors may request that the chairman convene a meeting without delay, but must state the reasons for his request.

Art. 715a428 1 Any member of the board of directors may request information on any company business. 2 At meetings, all members of the board of directors and all persons entrusted with managing the company’s business are obliged to give information. 3 Outside meetings, any member may request information from the persons entrusted with managing the company’s business concerning the company’s business performance and, with the chairman’s authori- sation, specific transactions. 4 Where required for the performance of his duties, any member may request the chairman to have books of account and documents made available to him for inspection. 5 If the chairman refuses a request for information, a request to be heard or an application to inspect documents, the board of directors rules on the matter. 6 Rulings or resolutions of the board of directors conferring on the directors more extensive rights to obtain information or inspect docu- ments are reserved.

426 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

427 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

428 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

252

220Federal Act on the Amendment of the Swiss Civil Code

Art. 716429 III. Duties 1 The board of directors may pass resolutions on all matters not re- 1. In general served to the general meeting by law or the articles of association.

2 The board of directors manages the business of the company, unless responsibility for such management has not been delegated.

Art. 716a430 2. Non- 1 The board of directors has the following non-transferable and inal- transferable duties ienable duties:

1. the overall management of the company and the issuing of all necessary directives;

2. determination of the company’s organisation; 3. the organisation of the accounting, financial control and finan-

cial planning systems as required for management of the com- pany;

4. the appointment and dismissal of persons entrusted with man- aging and representing the company;

5. overall supervision of the persons entrusted with managing the company, in particular with regard to compliance with the law, articles of association, operational regulations and directives;

6. compilation of the annual report431, preparation for the general meeting and implementation of its resolutions;

7. notification of the court in the event that the company is over- indebted.

2 The board of directors may assign responsibility for preparing and implementing its resolutions or monitoring transactions to committees or individual members. It must ensure appropriate reporting to its members.

Art. 716b432 3. Delegation of 1 The articles of association may authorise the board of directors to business management delegate the management of all or part of the company’s business to

individual members or third parties in accordance with its organisa- tional regulations.

429 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

430 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

253

220 Code of Obligations (AS 1992 733 786; BBl 1983 II 745).

431 Revised by the Federal Assembly Drafting Committee [Art. 33 ParlPA – AS 1974 1051]. 432 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786, BBl 1983 II 745).

(AS 1992 733 786; BBl 1983 II 745). 427 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 428 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745).

252

220Federal Act on the Amendment of the Swiss Civil Code

2 These regulations regulate the management of the company’s busi- ness, stipulate the bodies required to carry this out, define their duties and, in particular, regulate the company’s internal reporting. On re- quest, the board of directors issues information in writing concerning the organisation of the business management to shareholders and company creditors with a demonstrable interest warranting protection. 3 Where management of the company’s business has not been dele- gated, it is the responsibility of all the members of the board of direc- tors.

Art. 717433 IV. Duty of care 1 The members of the board of directors and third parties engaged in and loyalty managing the company’s business must perform their duties with all

due diligence and safeguard the interests of the company in good faith. 2 They must afford the shareholders equal treatment in like circum- stances.

Art. 718434 V. Representa- 1 The board of directors represents the company externally. Unless the tion articles of association or the organisational regulations stipulate other-1. In general

wise, every member has authority to represent the company. 2 The board of directors may delegate the task of representation to one or more members (managing directors) or third parties (executive officers). 3 At least one member of the board of directors must be authorised to represent the company. 4 The company must be able to be represented by one person who is resident in Switzerland. This requirement may be fulfilled by a mem- ber of the board of directors or by an executive officer.435

Art. 718a436 2. Scope and 1 The persons with authority to represent the company may carry out restriction any legal acts on behalf of the company that are consistent with the

company’s objects.

433 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

434 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

435 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives,

(AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

255

220 Code of Obligations

2 A restriction of such authority has no effect as against bona fide third parties; any provisions governing exclusive representation of the head office or a branch office or governing joint representation of the com- pany that are entered in the commercial register are exceptions to this rule.

Art. 718b437 3. Contracts If the company is represented in the conclusion of a contract by the between the company and its person with whom it is concluding the contract, the contract must be representative done in writing. This requirement does not apply to contract relating to

everyday business where the value of the company's goods or services does not exceed 1,000 francs.

Art. 719 3. Signatures438 The persons with authority to represent the company must sign by

appending their signature to the business name of the company.

Art. 720 4. Registra- The board of directors must apply to have the persons with authority to tion439 represent the company entered in the commercial register and submit

an authenticated copy of the relevant resolution. They must enter their own signatures in person at the commercial registry or submit these in a duly authenticated form.

437 Inserted by No I of the Federal Act of 4 Oct. 1991 (AS 1992 733, BBl 1983 II 745). Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

438 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

the Commercial Register and Business Names), in force since 1 Jan. 2008439 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).Companies and Amendments to the Law on Companies limited by Shares, Cooperatives,

436 Inserted by No I of the F deral Act of 4 Oct. 1991, in force since 1 July 1992the Commercial Register and Business Name ), in force since 1 Jan. 2008 (AS 1992 733 786, BBl 1983 II 745).

254

220 Code of Obligations

5. Registered attorneys and commercial agents441

VI. Directors’ and officers’ liability443

VII. Capital loss and overindebt- edness 1. Duty to notify

Art. 721440

The board of directors may appoint registered attorneys and other commercial agents.

Art. 722442

The company is liable for any loss or damage caused by unauthorised acts carried out in the exercise of his company function by a person with authority to represent the company or manage its business.

Art. 723–724444

Art. 725445 1 Where the last annual balance sheet shows that one-half of the share capital and the legal reserves are no longer covered, the board of directors must without delay convene a general meeting and propose financial restructuring measures. 2 Where there is good cause to suspect overindebtedness, an interim balance sheet must be drawn up and submitted to a licensed auditor for examination.446 If the interim balance sheet shows that the claims of the company’s creditors are not covered, whether the assets are ap- praised at going concern or liquidation values, the board of directors must notify the court unless certain company creditors subordinate their claims to those of all other company creditors to the extent of the capital deficit.

440 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

441 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

442 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

443 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

444 Repealed by No I of the Federal Act of 4 Oct. 1991 (AS 1992 733; BBl 1983 II 745). 445 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 446 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability

256

220Federal Act on the Amendment of the Swiss Civil Code

2. Commence- ment or stay of insolvency proceedings

VIII. Dismissal and suspen- sion449

3 If the company does not have an auditor, the licensed auditor must comply with the reporting duties of the auditor conducting a limited audit.447

Art. 725a448 1 On receiving notification, the court commences insolvency proceed- ings. On application by the board of directors or by a creditor it may grant a stay of insolvency proceedings where there is a prospect of financial restructuring; in this case the court orders measures to pre- serve the company’s assets. 2 The court may appoint an administrative receiver and either deprive the board of directors of its power of disposal or make its resolutions conditional on the consent of the administrative receiver. It defines the duties of the administrative receiver. 3 Public notice of the stay of insolvency proceedings is required only where necessary to protect third parties.

Art. 726 1 The board of directors may dismiss committees, managing directors, executive officers, registered attorneys and other commercial agents that it has appointed at any time. 2 The registered attorneys and commercial agents appointed by the general meeting may be suspended from their duties at any time by the board of directors, providing a general meeting is convened immedi- ately. 3 Claims for compensation by persons dismissed or suspended are reserved.

447 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

448 Inserted by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

449 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

257

220 Code of Obligations

I. Audit require- ment 1. Ordinary audit

2. Limited audit

C. 450 The External Auditors

Art. 727 1 The following companies must have their annual accounts and if applicable their consolidated accounts reviewed by an auditor in an ordinary audit:

1. publicly traded companies; these are companies that: a. have shares listed on a stock exchange, b. have bonds outstanding, c. contribute at least 20 per cent of the assets or of the turn-

over to the consolidated accounts of a company in terms of letter a or b;

2.451 companies that exceed two of the following thresholds in two successive financial years: a. a balance sheet total of 20 million francs, b. sales revenue of 40 million francs, c. 250 full-time positions on annual average;

3. companies that are required to prepare consolidated accounts. 2 An ordinary audit must be carried out if shareholders who represent at least 10 per cent of the share capital so request. 3 If the law does not require an ordinary audit of the annual accounts, the articles of association may provide or the general meeting may decide that the annual accounts be subjected to an ordinary audit.

Art. 727a 1 If the requirements for an ordinary audit are not met, the company must have its annual accounts reviewed by an auditor in a limited audit. 2 With the consent of all the shareholders, a limited audit may be dispensed with if the company does not have more than ten full-time employees on annual average. 3 The board of directors may request the shareholders in writing for their consent. It may set a period of at least 20 days for reply and give notice that failure to reply will be regarded as consent.

450 Amended by No I 1 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

451 Amended by No I of the Federal Act of 17 June 2011 (Auditing Law), in force since 1 Jan. 2012 (AS 2011 5863; BBl 2008 1589). See also the transitional provision below relating to this amendment.

258

220Federal Act on the Amendment of the Swiss Civil Code

II. Requirements for the auditor 1. In an ordinary audit

2. In a limited audit

III. Ordinary audit 1. Independence of the auditor

4 If the shareholders have dispensed with a limited audit, this also applies for subsequent years. Any shareholder has however the right, at the latest 10 days before the general meeting, to request a limited audit. In such an event, the general meeting must appoint the auditor. 5 The board of directors amends the articles of association to the extent required and applies to the commercial register for the deletion or the registration of the auditor.

Art. 727b 1 Publicly traded companies must appoint as an auditor an audit firm under state oversight in terms of the Auditor Oversight Act of 16 December 2005452. They must also arrange for audits that must be carried out in terms of the statutory provisions by a licensed auditor or a licensed audit expert to be carried out by a state supervised audit company. 2 Other companies that are required to have an ordinary audit must appoint as auditor a licensed audit expert in terms of the Auditor Oversight Act of 16 December 2005. They must also arrange for audits that must be carried out in terms of the statutory provisions by a li- censed auditor to be carried out by a licensed audit expert.

Art. 727c Companies that are required to have a limited audit must appoint as auditor a licensed auditor in terms of the Auditor Oversight Act of 16 December 2005453.

Art. 728 1 The auditor must be independent and form its audit opinion objec- tively. Its true or apparent independence must not be adversely af- fected. 2 The following are in particular not compatible with independence:

1. membership of the board of directors, any other decision- making function in the company or any employment relation- ship with it;

2. a direct or significant indirect participation in the share capital or a substantial claim against or debt due to the company;

3. a close relationship between the person managing the audit and a member of the board of directors, another person in a deci- sion-making function, or a major shareholder;

452 SR 221.302 453 SR 221.302

259

220 Code of Obligations

2. Duties of the auditor a. Subject matter and extent of the audit

4. the involvement in the accounting or the provision of any other services which give rise to a risk that the auditor will have to review its own work;

5. the assumption of a duty that leads to economic dependence; 6. the conclusion of a contract on non-market conditions or of a

contract that establishes an interest on the part of the auditor in the result of the audit;

7. the acceptance of valuable gifts or of special privileges. 3 The provisions on independence apply to all persons involved in the audit. If the auditor is a partnership or a legal entity, then the provi- sions on independence also apply to the members of the supreme management or administrative body and to other persons with a deci- sion-making function. 4 Employees of the auditor that are not involved in the audit may not be members of the board of directors or exercise any other decision- making function in the company being audited. 5 There is no independence if persons who do not meet the require- ments of independence are closely connected to the auditor, persons involved in the audit, the members of the supreme management or administrative bodies or others persons with a decision-making func- tion. 6 The provisions on independence also apply to companies that are under the same management as the company being audited or the auditor.

Art. 728a 1 The auditor examines whether:

1. the annual accounts and, if applicable, the consolidated ac- counts comply with the statutory provisions, the articles of as- sociation and the chosen set of financial reporting standards;

2. the motion made by the board of directors to the general meet- ing on the allocation of the balance sheet profit complies with the statutory provisions and the articles of association;

3. there is an internal system of control. 2 The auditor takes account of the internal system of control when carrying out the audit and in determining the extent of the audit. 3 The management of the board of directors is not the subject matter of the audit carried out by the auditor.

260

220Federal Act on the Amendment of the Swiss Civil Code

b. Audit report

c. Duty to notify

IV. Limited audit (Review) 1. Independence of the auditor

Art. 728b 1 The auditor provides the board of directors with a comprehensive report with conclusions on the financial reporting, the internal system of control as well as the conduct and the result of the audit. 2 The auditor provides the general meeting with a summary report in writing on the result of the audit. This report contains:

1. an assessment on the result of the audit; 2. information on independence; 3. information on the person who managed the audit and on his

specialist qualifications; 4. a recommendation on whether the annual accounts and the

consolidated accounts should be approved or rejected with or without qualification.

3 Both reports must be signed by the person who managed the audit.

Art. 728c 1 If the auditor finds that there have been infringements of the law, the articles of association or the organisational regulations, it gives notice of this to the board of directors in writing. 2 In addition, it informs the general meeting of any infringements of the law or the articles of association, if:

1. these are material; or 2. the board of directors fails to take any appropriate measures on

the basis of written notice given by the auditor. 3 If the company is clearly overindebted and the board of directors fails to notify the court of this, then the auditor will notify the court.

Art. 729 1 The auditor must be independent and form its audit assessment objectively. Its true or apparent independence must not be adversely affected. 2 Involvement in the accounting and the provision of other services for the company being audited are permitted. In the event that the risk of auditing its own work arises, a reliable audit must be ensured by means of suitable organisational and staffing measures.

261

220 Code of Obligations

2. Duties of the auditor a. Subject matter and extent of the audit

b. Audit report

c. Duty to notify

V. Common provisions 1. Appointment of the auditor

Art. 729a 1 The auditor examines whether there are circumstances that indicate that:

1. the annual accounts do not comply with the statutory provi- sions or the articles of association;

2. the motion made by the board of directors to the general meet- ing on the allocation of the balance sheet profit does not com- ply with the statutory provisions and the articles of association.

2 The audit is limited to conducting interviews, analytical audit activi- ties and appropriate detailed inspections. 3 The management of the board of directors is not the subject matter of the audit carried out by the auditor.

Art. 729b 1 The auditor provides the general meeting with a summary report in writing on the result of the audit. This report contains:

1. a reference to the limited nature of the audit; 2. an assessment on the result of the audit; 3. information on independence and, if applicable, on participa-

tion in accounting and other services provided to the company being audited;

4. information on the person who managed the audit, and on his specialist qualifications.

2 The report must be signed by the person who managed the audit.

Art. 729c If the company is obviously overindebted and the board of directors fails to notify the court, then the auditor will notify the court.

Art. 730 1 The general meeting appoints the auditor. 2 One or more natural persons or legal entities or partnerships may be appointed. 3 Public audit offices or their employees may also be appointed as auditor provided they meet the requirements of this Code. The provi- sions on independence apply mutatis mutandis. 4 At least one member of the auditor must be resident in Switzerland, or have its registered office or a registered branch office in Switzer- land.

262

220Federal Act on the Amendment of the Swiss Civil Code

2. Term of office of the auditor

3. Information and confidential- ity

4. Documenta- tion and safekeeping of documents

5. Approval of the accounts and allocation of profits

Art. 730a 1 The auditor is appointed for a period of one up to three financial years. Its term of office ends on the adoption of the annual accounts for the final year. Re-appointment is possible. 2 In the case of an ordinary audit, the person who manages the audit may exercise his mandate for seven years at the most. He may only accept the same mandate again after an interruption of three years. 3 If an auditor resigns, it must notify the board of directors of the reasons; the board of directors informs the next general meeting of these reasons. 4 The general meeting may remove an auditor at any time with imme- diate effect.

Art. 730b 1 The board of directors provides the auditor with all the documents and information that it requires, in writing if so requested. 2 The auditor safeguards the business secrets of the company in its assessments, unless it is required by law to disclose such information. In its reports, in submitting notices and in providing information to the general meeting, it safeguards the business secrets of the company.

Art. 730c 1 The auditor must document all audit services and keep audit reports and any other essential documents for at least ten years. It must ensure that electronic data can be made readable for the same period. 2 The documents must make it possible to confirm compliance with the statutory provisions in an efficient manner.

Art. 731 1 In companies that are required to have their annual accounts and, if applicable, their consolidated accounts reviewed by an auditor, the audit report must be submitted, before the annual accounts and the consolidated accounts are approved at the general meeting, and a resolution is passed on the allocation of the balance sheet profit. 2 If an ordinary audit is carried out, the auditor must be present at the general meeting. The general meeting may waive the presence of the auditor by unanimous resolution. 3 If the required audit report is not submitted, the resolutions on the approval of the annual accounts and the consolidated accounts as well as on the allocation of the balance sheet profit are null and void. If the provisions on the presence of the auditor are infringed, these resolu- tions may be challenged.

263

220 Code of Obligations

6. Special provisions

A. Resolution to reduce the capital

Art. 731a 1 The articles of association and the general meeting may specify details on the organisation of the auditor in more detail and expand its range of duties. 2 The auditor may not be assigned duties of the board of directors, or duties that adversely affect its independence. 3 The general meeting may appoint experts to audit the management or individual aspects thereof.

D.454 Defects in the Organisation of the Company

Art. 731b 1 If the company does not have a required corporate body or if the composition of one of these corporate bodies does not comply with the law, any shareholder or creditor or the commercial registrar may request the court to take the required measures. The court may in particular:

1. allow the company a period of time, under threat of its dissolu- tion, within which to re-establish the lawful situation;

2. appoint the required corporate body or an administrator; 3. dissolve the company and order its liquidation according to the

regulations on insolvency proceedings. 2 If the court appoints the required corporate body or an administrator, it determines the duration for which the appointment is valid. It re- quires the company to bear the costs and to make an advance payment to the appointed persons. 3 If there is good cause, the company may request the court to remove the persons the court has appointed.

Section Four: Reduction of the Share Capital

Art. 732 1 Where a company limited by shares intends to reduce its share capi- tal without simultaneously replacing the decrease with new, fully paid- up capital, the general meeting must pass a resolution to amend the articles of association accordingly.

454 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

264

220Federal Act on the Amendment of the Swiss Civil Code

2 The resolution may be adopted only where it has been ascertained by means of a special audit report that the claims of the company’s credi- tors are fully covered despite the reduction in the share capital. The audit report must be prepared by a licensed audit expert. The licensed audit expert must be present at the general meeting which adopts the resolution.455 3 The resolution must contain the results of the audit report and the method by which the capital reduction is to be carried out.456 4 Any book profit arising from the capital reduction must be used solely for write-downs. 5 The share capital may be reduced below 100,000 francs only if it is at the same time replaced by new fully paid-up capital of at least 100,000 francs.457

Art. 732a458 B. Cancellation 1 If the share capital is reduced to zero for the purpose of restructuring of shares in the event of measures and then increased again, the current membership rights of restructuring the shareholders lapse at the time of the reduction. Issued shares must

be cancelled. 2 When the share capital is increased again, the former shareholders have subscription rights that may not be withdrawn from them.

Art. 733 B. Call on If the general meeting passes a resolution to reduce the share capital, creditors459 the board of directors must give public notice of the resolution three

times in the Swiss Official Gazette of Commerce as well as in the form envisaged in the articles of association and announce to the creditors

455 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

456 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

457 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

458 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

459 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

265

220 Code of Obligations

C. Implementa- tion of the reduction460

D. Reduction in the case of negative net worth462

A. Dissolution in general I. Grounds

that within two months commencing with the third publication in the Swiss Official Gazette of Commerce that they may register their claims to be satisfied or secured.

Art. 734 The reduction of the share capital may be carried out only after the time limit set for the creditors has expired and the registered claims have been satisfied or secured and may be entered in the commercial register only when it has been verified by public deed that the provi- sions of this Section are fulfilled. The deed must be enclosed with the special audit report.461

Art. 735 The call to creditors and the satisfaction or securing of their claims may be omitted where the share capital is to be reduced in order to correct a situation of negative net worth caused by losses by an amount not exceeding such losses.

Section Five: Dissolution of a Company Limited by Shares

Art. 736 The company is dissolved:

1. in accordance with the articles of association; 2. by resolution of the general meeting, to be recorded in a public

deed; 3. by the commencement of insolvency proceedings; 4.463 by court judgment if shareholders together representing at least

ten per cent of the share capital request its dissolution for good cause. The court may order a different solution if appropriate and conscionable for the interested parties;

460 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

461 Second sentence Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

462 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

463 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

266

220Federal Act on the Amendment of the Swiss Civil Code

II. Notification for entry in the commercial register

III. Conse- quences

B. Dissolution with liquidation I. Consequences of liquidation; powers

II. Appointment and dismissal of the liquidators 1. Appoint- ment466

5. in the other cases envisaged by law.

Art. 737464

Where the company is dissolved for reasons other than insolvency or a court judgment, the board of directors notifies the dissolution for entry in the commercial register.

Art. 738465

The dissolved company enters into liquidation, with the exception of cases involving a merger, a split or the transfer of its assets to a public sector corporation.

Art. 739 1 A company entering into liquidation retains its legal personality and its existing business name, albeit with the words “in liquidation” appended to it, until such time as its assets have been distributed among the shareholders. 2 As of the company’s entry into liquidation, the powers of its govern- ing officers are limited to such actions as are necessary to carry out the liquidation but which by their nature may not be performed by the liquidators.

Art. 740 1 The liquidation is carried out by the board of directors, unless the articles of association or a resolution by the general meeting delegate it to other persons. 2 The board of directors notifies the liquidators for entry in the com- mercial register, even where the liquidation is carried out by the board of directors. 3 At least one of the liquidators must be resident in Switzerland and authorised to represent the company.467 4 Where the company is dissolved by court judgment, the court ap- points the liquidators.468

464 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

465 Amended by Annex No 2 of the Mergers Act of 3 Oct. 2003, in force since 1 July 2004 (SR 221.301).

466 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

467 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

267

220 Code of Obligations

2. Dismissal

III. Liquidation process 1. Balance sheet, call on creditors

2. Other duties

5 In the event of insolvency, the insolvency administrators carry out the liquidation in accordance with the provisions of insolvency law. The governing officers of the company retain their authority to repre- sent the company only to the extent such representation is still neces- sary.

Art. 741469 1 The general meeting may dismiss the liquidators it appointed at any time. 2 On application by a shareholder, the court may dismiss liquidators and appoint others as necessary for good cause.

Art. 742 1 On taking up their office, the liquidators must draw up a balance sheet. 2 The creditors are informed of the dissolution of the company and requested to register their claims, by separate letter in the case of creditors identifiable from the accounting records or in some other manner, and by public announcement in the Swiss Official Gazette of Commerce as well as in the form envisaged in the articles of associa- tion in the case of unknown creditors and those whose address is not known.

Art. 743 1 The liquidators must wind up the current business, call in any still outstanding share capital, realise the company’s assets and perform its obligations, providing the balance sheet and the call to creditors do not indicate overindebtedness. 2 Where they ascertain that the company is overindebted, they must immediately notify the court; the latter then declares the commence- ment of insolvency proceedings. 3 The liquidators must represent the company in all transactions car- ried out for liquidation purposes and are entitled to conduct legal actions, reach settlements, conclude arbitration agreements and even, where required for liquidation purposes, to effect new transactions. 4 They may also dispose of assets by private sale, unless the general meeting has instructed otherwise.

468 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

469 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

268

220Federal Act on the Amendment of the Swiss Civil Code

3. Protection of creditors

4. Distribution of assets

IV. Deletion from the commercial register

V. Archiving of accounting records

5 Where the liquidation lasts for an extended period, they must draw up interim balance sheets every year. 6 The company is liable for any loss or damage resulting from unau- thorised acts by a liquidator in the exercise of his duties.

Art. 744 1 Where known creditors have failed to register their claims, the amount thereof must be deposited with the court. 2 Similarly, the amount of claims not yet due from the company and of disputed obligations of the company must be deposited with the court unless the creditors are furnished with security in an equivalent amount or the distribution of the company’s assets is suspended until such obligations have been performed.

Art. 745 1 Unless the articles of association provide otherwise, once the debts of the dissolved company have been discharged, its assets are distributed among the shareholders in proportion to the amounts they contributed and with due regard to the preferential rights attaching to specific share classes.470 2 The distribution may take place no sooner than one year after the day on which the call to creditors was made for the third time. 3 Such distribution may take place after only three months where a licensed audit expert confirms that the debts have been redeemed and that in the circumstances it may safely be assumed that no third party interests will be harmed.471

Art. 746 On completion of the liquidation process, the liquidators apply to the commercial registry for the deletion of the business name.

Art. 747 The accounting records of the dissolved company are kept for ten years at a location designated by the liquidators or, if they cannot reach agreement, by the commercial registry.

470 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

471 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

269

220 Code of Obligations

C. Dissolution without liquida- tion I. ...

II. Takeover by a public sector corporation

A. Liability I. For the issue prospectus

II. Founder members’ liability

Art. 748─750472

Art. 751 1 Where the assets of a company limited by shares are taken over by the Confederation, by a canton or, under guarantee from the canton, by a district or commune, with the consent of the general meeting it may be agreed that no liquidation take place. 2 The resolution of the general meeting must be made in accordance with the provisions governing dissolution and notified to the commer- cial registry. 3 On entry of the resolution in the commercial register, the transfer of the company’s assets and debts is complete and the company’s name must be deleted.

Section Six: Liability

Art. 752473

Where information that is inaccurate, misleading or in breach of statu- tory requirements is given in issue prospectuses or similar statements disseminated when the company is established or on the issue of shares, bonds or other securities, any person involved whether wilfully or through negligence is liable to the acquirers of such securities for the resultant losses.

Art. 753474

Founder members, members of the board of directors and all persons involved in establishing the company are liable both to the company and to the individual shareholders and creditors for the losses arising where they

1. wilfully or negligently conceal, disguise or give inaccurate or misleading information on contributions in kind, acquisitions in kind or the granting of special privileges to shareholders or other persons in the articles of association, the statutory report

472 Repealed by Annex No 2 of the Mergers Act of 3 Oct. 2003, with effect from 1 July 2004 (SR 221.301).

473 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

474 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

270

220Federal Act on the Amendment of the Swiss Civil Code

III. Liability for administration, business management and liquidation

IV. Auditors’ liability

B. Damage to the company I. Claims outside insolvency

or a capital increase report or otherwise act unlawfully in ap- proving such a measure;

2. wilfully or negligently induce the entry of the company in the commercial register on the basis of a certificate or deed con- taining inaccurate information;

3. knowingly contribute to the acceptance of subscriptions from insolvent persons.

Art. 754475 1 The members of the board of directors and all persons engaged in the business management or liquidation of the company are liable both to the company and to the individual shareholders and creditors for any losses or damage arising from any intentional or negligent breach of their duties. 2 A person who, as authorised, delegates the performance of a task to another governing officer is liable for any losses caused by such offi- cer unless he can prove that he acted with all due diligence when selecting, instructing and supervising him.

Art. 755476

All persons engaged in auditing the annual and consolidated accounts, the company’s establishment, a capital increase or a capital reduction are liable both to the company and to the individual shareholders and creditors for the losses arising from any intentional or negligent breach of their duties. 2 If the audit is conducted by a public audit office or by one of its employees, the relevant public authority is liable. Legal action against persons involved in the audit is governed by public law.477

Art. 756478 1 In addition to the company, the individual shareholders are also entitled to sue for any losses caused to the company. The shareholder’s claim is for performance to the company.

475 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

476 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

477 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

478 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

271

220 Code of Obligations

II. Claims in insolvency

III. Effect of the resolution of release

C. Joint and several liability and recourse

2 …479

Art. 757480 1 In the event of the insolvency of the damaged company, its creditors are entitled to request that the company be compensated for the losses suffered. However, in the first instance the insolvency administrators may assert the claims of the shareholders and the company’s creditors. 2 Where the insolvency administrators waive their right to assert such claims, any shareholder or creditor is entitled to bring them. The proceeds are first used to satisfy the claims of the litigant creditors in accordance with the provisions of the Debt Collection and Bankruptcy Act of 11 April 1889481. Any surplus is divided among the litigant shareholders in proportion to their equity participation in the company; the remainder is added to the insolvent’s estate. 3 The assignment of claims held by the company in accordance with Article 260 of the Debt Collection and Bankruptcy Act of 11 April 1889 is reserved.

Art. 758482 1 The resolution of release adopted by the general meeting is effective only for disclosed facts and only as against the company and those shareholders who approved the resolution or who have since acquired their shares in full knowledge of the resolution. 2 The right of action of the other shareholders lapses six months after the resolution of release.

Art. 759483 1 Where two or more persons are liable for the losses, each is jointly and severally liable with the others to the extent that the damage is personally attributable to him on account of his own fault and the circumstances. 2 The claimant may bring action against several persons jointly for the total losses and request that the court determine the liability of each individual defendant in the same proceedings.

479 Repealed by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, with effect from 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

480 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992 (AS 1992 733 786; BBl 1983 II 745).

481 SR 281.1 482 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 483 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745).

272

220Federal Act on the Amendment of the Swiss Civil Code

D. Time limits

3 The right of recourse among several defendants is determined by the court with due regard to all the circumstances.

Art. 760 1 The claim for damages against any person held liable pursuant to the provisions above becomes time-barred five years after the date on which the injured party learned of the losses and of the person liable for it but in any event ten years after the date of the act which caused the losses. 2 Where the action stems from a criminal act for which criminal law provides for a longer time limit, the latter also applies to the civil claim.

Art. 761484

Section Seven: Involvement of Public Sector Corporations

Art. 762 1 Where public sector corporations such as the Confederation, or a canton, district or commune have a public interest in a company lim- ited by shares, the articles of association of the company may grant that corporation the right to appoint representatives to the board of directors or the external auditors, even if it is not a shareholder.485 2 In such companies and in public-private enterprises in which a public sector corporation participates as a shareholder, only the public sector corporation has the right to dismiss the representatives it appointed to the board of directors and the external auditors. 3 The members of the board of directors and external auditors ap- pointed by a public sector corporation have the same rights and duties as those elected by the general meeting.486 4 The public sector corporation is liable to the company, shareholders and creditors for the actions of the members of the board of directors and external auditors it appoints, subject to rights of recourse under federal and cantonal law.

484 Repealed by Annex No 5 of the Civil Jurisdiction Act of 24 March 2000 (SR 272). 485 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 486 Amended by No I of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745).

273

220 Code of Obligations

A. Definition

B. Directors I. Designation and powers

Section Eight: Exclusion of Application of the Code to Public-Sector Entities

Art. 763 1 The provisions governing the company limited by shares are not applicable to companies and entities established by special cantonal legislation and partly administered by the public authorities, such as banks, insurance or electricity companies, even if their capital is en- tirely or partly divided into shares and was raised with the help of private individuals, providing the canton assumes secondary liability for the obligations of such companies and entities. 2 The provisions governing the company limited by shares are not applicable to companies and entities established by special cantonal legislation prior to 1 January 1883 and partly administered by the public authorities even if the canton does not assume secondary liabil- ity for their obligations.

Title Twenty-Seven: The Partnership limited by Shares

Art. 764 1 A partnership limited by shares is a partnership whose capital is divided into shares and in which one or more partners have unlimited joint and several liability to its creditors in the same manner as part- ners in a general partnership. 2 Unless otherwise provided, the provisions governing companies limited by shares apply to partnerships limited by shares. 3 Where the capital of a partnership limited by shares is not divided into shares but into portions which merely define the degree of partici- pation of two or more limited partners, the provisions governing limited partnerships apply.

Art. 765 1 The partners with unlimited liability constitute the directors of the partnership limited by shares. They are responsible for business man- agement and representation. They must be named in the articles of association.

274

220Federal Act on the Amendment of the Swiss Civil Code

II. Approval of resolutions of the general meeting

III. Withdrawal of authority to manage business and represent the partnership

C. Supervisory board I. Appointment and powers

II. Liability action

2 The names of the directors and persons authorised to represent the partnership and their addresses, places of origin and function must be entered in the commercial register.487 3 Any changes to the body of partners with unlimited liability require the consent of the existing partners and the amendment of the articles of association.

Art. 766 Resolutions of the general meeting concerning modification of the partnership’s purpose, extension or curtailment of its areas of business and continuation of the partnership beyond the duration specified in the articles of association require the consent of the directors.

Art. 767 1 Authority to manage business and represent the partnership may be withdrawn from directors on the same conditions as apply to general partnerships. 2 If removed, a director no longer has unlimited liability for the future obligations of the partnership.

Art. 768 1 Responsibility for monitoring and continuous supervision of the management of the partnership’s business is allocated to a supervisory board, to which the articles of association may allocate further respon- sibilities. 2 The partnership’s directors have no right to vote on the appointment of the supervisory board. 3 The particulars of the members of the supervisory board must be entered in the commercial register.

Art. 769 1 On behalf of the partnership, the supervisory board may hold the directors to account and take action against them before the courts. 2 In the event of malicious conduct by the directors, the supervisory board is entitled to take legal action against them even if this is contra- dictory to a resolution of the general meeting.

487 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

275

220 Code of Obligations

D. Dissolution

E. Resignation

A. Definition

B. Nominal capital

Art. 770 1 The partnership is terminated by the departure, death, incapacity or bankruptcy of all the partners with unlimited liability. 2 In other respects, dissolution of the partnership limited by shares is governed by the same provisions as apply to the dissolution of compa- nies limited by shares; however, it may be dissolved by resolution of the general meeting before the date set in the articles of association only with the consent of the directors.

4883 ...

Art. 771 1 A partner with unlimited liability has the same right to resign as a partner in a general partnership. 2 Where one of two or more partners with unlimited liability exercises his right to resign, unless the articles of association provide otherwise the partnership is continued by the others.

Title Twenty-Eight:489 The Limited Liability Company Section One: General Provisions

Art. 772 1 A limited liability company is an incorporated company with sepa- rate legal personality in which one or more persons or commercial enterprises participate. Its nominal capital is specified in the articles of association. It is liable for its obligations to the extent of the company assets. 2 Each company member participates in the nominal capital by making at least one capital contribution. The articles of association may stipu- late obligations to make additional financial and material contribu- tions.

Art. 773 The nominal capital must amount to at least 20,000 francs.

488 Repealed by Annex No 2 of the Mergers Act of 3 Oct. 2003, with effect from 1 July 2004 (SR 221.301).

489 Amended by No I 2 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

276

220Federal Act on the Amendment of the Swiss Civil Code

C. Capital contributions

D. Profit sharing certificates

D. Company members

E. Articles of association I. Content prescribed by law

II. Conditional requirements as to content

Art. 774 1 The nominal value of the capital contribution must be at least 100 francs. In the event of restructuring, it may be reduced to one franc. 2 Capital contributions must be paid up to at least their nominal value.

Art. 774a The articles of association may provide for the creation of profit shar- ing certificates; the corresponding provisions for companies limited by shares apply.

Art. 775 A limited liability company may be established by one or more natural persons or legal entities or other commercial enterprises.

Art. 776 The articles of association must contain provisions on:

1. the business name and seat of the company; 2. the objects of the company; 3. the amount of nominal capital and of the number and nominal

value of the capital contributions; 4. the form of the company’s external communications.

Art. 776a In order to be binding, provisions on the following matters must be included in the articles of association:

1. the grounds and terms for making additional financial and ma- terial contributions;

2. the grounds for and the terms of first option, pre-emption and purchase rights of company members or the company in rela- tion to the capital contributions;

3. prohibition of competition clauses applicable to company members;

4. contractual penalties to ensure the fulfilment of obligations imposed by law or the articles of association;

5. preferential rights that are tied to individual classes of capital contributions (preferential capital contributions);

6. company members' rights to veto resolutions of the members’ general meeting;

277

220 Code of Obligations

7. restrictions on the voting rights of company members and their rights to appoint representatives;

8. profit-sharing certificates; 9. reserves in accordance with the articles of association; 10. powers accorded to the members’ general meeting that go be-

yond its statutory responsibilities; 11. the approval by the members’ general meeting of certain deci-

sions made by the managing directors; 12. the requirement of the consent of the members' general meet-

ing to the designation of natural persons to exercise manage- ment rights for company members that are the legal entities or commercial enterprises;

13. the power of the managing director to appoint managers, authorised signatories and authorised officers;

14. the payment of shares of profits to the managing directors; 15. interest paid to company members until commencement of the

company’s operations; 16. the organisation and duties of the auditor, where these go be-

yond those prescribed by law; 17. the granting of a right to resign under the articles of associa-

tion, the conditions for exercising the same and the severance payment to be made;

18. special reasons for excluding company members from the company;

19. grounds for dissolution that differ from the statutory grounds. 2 In order to be binding, provisions on the following matters that differ from the statutory regulations must also be included in the articles of association:

1. resolutions on the subsequent creation of new preferential capital contributions;

2. the transfer of capital contributions; 3. the convening of the members’ general meeting; 4. the allocation of voting rights to company members; 5. resolutions passed in the members’ general meeting; 6. decisions made by the managing director; 7. management and the representation; 8. prohibition of competition clauses applicable to the managing

directors.

278

220Federal Act on the Amendment of the Swiss Civil Code

2. Establishment I. Certificate of incorporation

II. Subscription for capital contributions

III. Documents

Art. 777 1 The company is established when the founder members declare in public deed that they are founding a limited liability company, lay down the articles of association and appoint the management bodies. 2 In the certificate of incorporation, the founder members subscribe for the capital contributions and state that:

1. all capital contributions are validly subscribed for; 2. the capital contributions correspond to their total issue price; 3. the statutory requirements and requirements of the articles of

association for the payment of the capital contributions are ful- filled;

4. they accept the obligations in terms of the articles of associa- tion to make additional financial or material contributions.

Art. 777a 1 In order to be valid, the subscription deed for the capital contribu- tions must indicate the number, nominal value and issue price as well as the class of capital contribution if applicable. 2 In the subscription deed, reference must be made to the provisions of the articles of association on:

1. obligations to make additional financial contributions; 2. obligations to make further material contributions; 3. prohibition of competition clauses applicable to company

members; 4. first option, pre-emption and purchase rights of company

members or the company; 5. contractual penalties.

Art. 777b 1 In the certificate of incorporation, the notary must specify the foun- dation documents individually and confirm that they have been laid before him and the founder members. 2 The following documents must be appended to the certificate of incorporation:

1. the articles of association; 2. the incorporation report; 3. the audit confirmation; 4. confirmation that the capital contributions have been deposited

in cash;

279

220 Code of Obligations

IV. Capital contributions

H. Entry in the commercial register I. Company

II. Branch offices

J. Acquisition of legal personality I. Time; Failure to meet require- ments

II. Obligations entered into before registra- tion

5. the agreements on contributions-in-kind; 6. existing agreements on acquisitions-in-kind.

Art. 777c 1 On foundation, a cash deposit corresponding to the full issue price must be made for each capital contribution. 2 In addition, the provisions on companies limited by shares apply to:

1. the specification of contributions in kind, acquisitions in kind and the special privileges in the articles of association;

2. the entry of details of contributions in kind, acquisitions in kind and of special privileges in the commercial register;

3. the payment and audit of capital contributions.

Art. 778 The company must be entered in the commercial register at the place where it has its seat.

Art. 778a Branch offices must be entered in the commercial register of the place where they are located.

Art. 779 1 The company acquires legal personality through entry in the com- mercial register. 2 It also acquires legal personality even if the requirements for registra- tion are not in fact fulfilled. 3 Where the requirements of the law or the articles of association are not fulfilled on establishment and if the interests of creditors or com- pany members are substantially jeopardised or harmed thereby, the court may order the dissolution of the company at the request of a creditor or member. 4 The right to take legal action lapses three months after notice is published of the establishment of the company in the Swiss Official Gazette of Commerce.

Art. 779a 1 Persons who act on behalf of the company before it is entered in the commercial register are personally and jointly and severally liable for their acts.

280

220Federal Act on the Amendment of the Swiss Civil Code

K. Amendment of the articles of association

L. Increase in the nominal capital

M. Reduction of the nominal capital

2 Where the company accepts obligations within three months of its registration that were expressly entered into in its name, the persons so acting are relieved of liability and only the company is liable.

Art. 780 A resolution of the members’ general meeting on an amendment to the articles of association must be publicly certified and entered in the commercial register.

Art. 781 1 The members’ general meeting may resolve to increase the nominal capital. 2 The implementation of the resolution is the responsibility of the managing directors. 3 Subscription and the capital contributions are governed by the regu- lations on the establishment of the company. The relevant regulations on increasing the capital of a company limited by shares also apply to the subscription form. A public invitation to subscribe to the capital contributions is not permitted. 4 An application to register the increase in the nominal capital must be filed with the commercial register within three months of the resolu- tion of the members’ general meeting, otherwise the resolution be- comes invalid. 5 In addition, the corresponding provisions on an ordinary increase in capital for a company limited by shares apply to:

1. the form and content of the resolution of the members' general meeting;

2. the subscription rights of company members; 3. an increase in the company capital from equity capital; 4. the report on the increase in capital and the audit confirmation; 5. the amendment of the articles of association and the declara-

tions made by the managing directors; 6. the registration of the increase in nominal capital in the com-

mercial register and the nullity of official documents issued previously.

Art. 782 1 The members’ general meeting may resolve to reduce the nominal capital. 2 Under no circumstances may the nominal capital be reduced below 20,000 francs.

281

220 Code of Obligations

N. Acquisition of own capital contributions

A. Capital contributions I. Official document

II. Transfer 1. Assignment a. Form

3 In order to eliminate a deficit balance caused by losses, the nominal capital may be reduced only if the company members have paid the additional financial contributions provided for in the articles of asso- ciation in full. 4 In addition, the relevant regulations on the reduction of the capital of a company limited by shares apply.

Art. 783 1 A company may acquire its own capital contributions only if freely disposable equity capital of a value equivalent to the required funds is available and the total nominal value of these capital contributions does not exceed ten per cent of the nominal capital. 2 Where capital contributions are acquired in connection with a restric- tion on transfer or the departure or exclusion of a member, the maxi- mum amount that may be acquired is 35 per cent. The capital contribu- tions in excess of 10 per cent of the nominal capital must be sold within two years or cancelled by means of a reduction in capital. 3 Where the capital contributions that are to be acquired are tied to an obligation to make additional financial or material contributions, this must be cancelled before acquisition. 4 In addition, the relevant regulations on the acquisition by a company limited by shares of its own shares apply to the acquisition by a limited liability company of its own capital contributions.

Section Two: Rights and Obligations of CompanyMembers

Art. 784 1 Where an official document is issued in respect of capital contribu- tions, this may only take the form of a document in proof or registered security. 2 The official document must bear the same information on rights and obligations under the articles of association as the document on sub- scription to the capital contribution.

Art. 785 1 The assignment of a capital contribution as well as an obligation to assign must be done in writing. 2 The contract of assignment must contain the same information on rights and obligations under the articles of association as the document on subscription to the capital contribution.

282

220Federal Act on the Amendment of the Swiss Civil Code

b. Consent requirements

c. Transfer of rights

2. Special forms of acquisition

Art. 786 1 An assignment of a capital contribution requires the consent of the members’ general meeting. The members’ general meeting may refuse consent without stating its reasons. 2 The articles of association made deviate from the foregoing by:

1. waiving the requirement of consent to the assignment; 2. stating the grounds justifying refusal of consent to the assign-

ment; 3. providing that consent to the assignment may be refused if the

company offers to acquire the capital contribution from the seller at its true value;

4. prohibiting any assignment; 5. providing that consent to the assignment may be refused if

there is doubt that obligations under the articles of association to make additional financial or material contributions will be fulfilled and security requested by the company is not pro- vided.

3 Where the articles of association prohibit assignment or the members' general meeting refuses to consent to the assignment, the right to resign for good cause is reserved.

Art. 787 1 Where the consent of the members’ general meeting is required for the assignment of capital contributions, assignment becomes legally effective only when this consent is granted. 2 If the members’ general meeting fails to refuse consent to the as- signment within six months of its receipt, consent is deemed to have been granted.

Art. 788 1 Where capital contributions are acquired through inheritance, distri- bution of an estate, matrimonial property law or enforcement proceed- ings, all related rights and obligations are transferred to the acquirer without requiring the consent of the members’ general meeting. 2 In order to exercise voting rights and related rights, however, the acquirer requires the recognition of the members’ general meeting as a company member who is eligible to vote. 3 The members’ general meeting may refuse such recognition only if the company offers to acquire the capital contributions from the ac- quirer at their true value. The offer may be made for the company's own account or for the account of other company members or third

283

220 Code of Obligations

3. Determining the true value

4. Usufruct

5. Charge

III. Register of contributions

parties. Unless the acquirer rejects the offer within a month of receiv- ing notice of the true value, the offer is deemed to be accepted. 4 Unless the members’ general meeting rejects the request for recogni- tion within six months of its receipt, recognition is deemed to be granted. 5 The articles of association may waive the requirement of recognition.

Art. 789 1 If the law or the articles of association stipulate that the true value of the capital contributions should be determined, the parties may request the court to make the valuation. 2 The court allocates the costs of the proceedings and the valuation at its discretion.

Art. 789a 1 The creation of a usufruct over capital contributions is governed by the regulations on the transfer of capital contributions. 2 If the articles of association prohibit assignment, then the creation of a usufruct over capital contributions is also prohibited.

Art. 789b 1 The articles of association may provide that the creation of a charge over capital contributions requires the consent of the members’ general meeting. This may refuse its consent only for good cause. 2 If the articles of association prohibit assignment, then the creation of a charge over capital contributions is also prohibited.

Art. 790 1 The company keeps a register of capital contributions. 2 The following information must be entered in the register of contri- butions:

1. the names and addresses of the company members; 2. the number, the nominal value and, if applicable, the class of

the capital contributions of each company member; 3. the names and addresses of usufructuaries; 4. the names and addresses of charge creditors.

3 Company members not entitled to exercise voting rights and related rights must be specifically indicated as company members without the right to vote.

284

220Federal Act on the Amendment of the Swiss Civil Code

IV. Entry in the commercial register

V. Common property

B. Payment of capital contribu- tions

C. Liability the company members

D. Additional financial and material contributions I. Additional financial contributions 1. Principle and amount

4 Company members have the right to inspect the register of contribu- tions.

Art. 791 1 The name, address and place of origin of company members, to- gether with the number and the nominal value of their capital contribu- tions must be entered in the commercial register. 2 The company must give notice of registration.

Art. 792 Where a capital contribution has two or more holders:

1. they must designate one person as their representative; they may exercise the rights conferred by the capital contribution only through this person;

2. they are jointly and severally liable in respect of obligations to make additional financial and material contributions.

Art. 793 1 The company members are obliged to make a payment correspond- ing to the issue price of their capital contributions. 2 The payments may not be refunded.

Art. 794 The company is liable for its obligations to the extent of the company assets only.

Art. 795 1 The articles of association may require the company members to make additional capital contributions. 2 If the articles of association provide for an obligation to make addi- tional financial contributions, they must stipulate the amount of addi- tional capital that may be required to be paid for each capital contribu- tion. This may not exceed twice the nominal value of the capital contribution. 3 The company members are liable only to the extent of the additional financial contributions to be made on their own capital contributions.

285

220 Code of Obligations

2. Call for additional financial contributions

3. Repayment

4. Reduction

5. Continuation

II. Further material contributions

Art. 795a 1 Additional financial contributions are called in by the managing directors. 2 They may be called in only if:

1. the sum of the nominal capital and statutory reserves is no longer covered;

2. the company is unable to continue its business affairs in the proper manner without the additional funds;

3. the company requires equity capital for reasons specified in the articles of association.

3 Additional financial contributions fall due for payment if the com- pany is declared bankrupt.

Art. 795b Additional financial contributions may only be refunded in full or in part if the amount is covered by freely disposable equity capital and a licensed audit expert confirms the same in writing.

Art. 795c 1 An obligation under the articles of association to make additional financial contributions may be reduced or abolished only if the nomi- nal capital and the statutory reserves are fully covered. 2 The relevant regulations on the reduction of the nominal capital apply.

Art. 795d 1 Company members who resign from the company remain subject to the obligation to make additional financial contributions for three further years subject to the following conditions. The time of resigna- tion is determined by the entry in the commercial register. 2 Company members who have been excluded must only make addi- tional financial contributions if the company is declared bankrupt. 3 Their obligation to make additional financial contributions lapses insofar as it has been fulfilled by a legal successor. 4 The extent of the obligation of company members who have resigned to make additional financial contributions may not be increased.

Art. 796 1 The articles of association may require company members to make further material contributions.

286

220Federal Act on the Amendment of the Swiss Civil Code

III. Retrospec- tive introduction

E. Dividends, interest, shares of profits I. Dividends

II. Interest

2 They may require further material contributions only if this serves the objects of the company, the maintenance of its independence or the preservation of the composition of the groups of company members. 3 The object and extent and other essential points according to circum- stances of any obligation to make further material contributions related to a capital contribution must be specified in the articles of association. Reference may be made to the regulations of the members' general meeting for more precise details. 4 Obligations under the articles of association to pay money or provide other assets are subject to the provisions on additional financial contri- butions if no appropriate consideration is provided for and the call for additional contributions serves to cover equity capital requirements.

Art. 797 The retrospective introduction or amendment of obligations to make additional financial or material contributions under the articles of association requires the consent of all the company members con- cerned.

Art. 798 1 Dividends may only be paid from the balance sheet profit and from reserves formed for that purpose. 2 The dividend may only be determined once the allocations to the reserves required by law and by the articles of association have been deducted. 3 The dividends must be determined in proportion to the nominal value of the capital contributions; if additional financial contributions have been made, this amount must be added to the nominal value in order to determine the dividends; the articles of association may provide for a different arrangement.

Art. 798a 1 No interest may be paid on the nominal capital and additional finan- cial contributions made. 2 The payment of interest to company members prior to commence- ment of the company’s operations is permitted. The corresponding provisions of the law on companies limited by shares on interest paid to company members prior to commencement of the company’s opera- tions apply

287

220 Code of Obligations

III. Shares of profits

F. Preferential capital contribu- tions

G. Refund of payments

H. Reserves

J. Notification of the annual report

K. Right to information and to inspect documents

Art. 798b The articles of association may provide for the payment of shares of profits to managing directors. The corresponding provisions of the law on companies limited by shares on the payment of shares of profits to managing directors apply.

Art. 799 The corresponding provisions of the law on companies limited by shares on preference shares apply to preferential capital contributions.

Art. 800 The corresponding provisions of the law on companies limited by shares apply to the refund of payments made by the company to com- pany members, managing directors and persons closely related thereto.

Art. 801490

The relevant provisions of the law on companies limited by shares apply to the reserves.

Art. 801a 1 The annual report and the audit report must be sent to company members at the latest together with the invitation to the annual mem- bers’ general meeting. 2 The company members may request that they be sent the version of the annual report that they have approved after members' general meeting.

Art. 802 1 Any company member may request the managing directors to pro- vide information on any company matter. 2 Unless the company has an auditor, company members have unre- stricted access to the company books and files. If the company has an auditor, the books and files may be inspected only if a legitimate interest is credibly demonstrated. 3 If there is a risk that a company member may use the information obtained for non-company purposes that may be detrimental to the company, the managing directors may refuse to provide information and allow access to the extent required; if the company member so requests, the members’ general meeting decides on the matter.

490 Amended by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

288

220Federal Act on the Amendment of the Swiss Civil Code

L. Duty of loyalty and prohibition of competition

A. Members' general meeting I. Responsibili- ties

4 If the members’ general meeting refuses to provide information or allow access without justification, the court may issue the relevant order at the request of the company member.

Art. 803 1 Company members are obliged to safeguard business secrets. 2 They must refrain from doing anything detrimental to the interests of the company. In particular, they may not carry on business that brings them a special advantage but which adversely affects the objects of the company. The articles of association may provide that company mem- bers be prohibited from carrying on any activities in competition with the company. 3 The company members may carry on any activities that are contrary to the duty of loyalty or a prohibition of competition provided all the other company members consent in writing. The articles of association may provide that the consent of the members' general meeting be required instead. 4 The special regulations on prohibition of competition clauses appli- cable to managing directors are reserved.

Section Three: Organisation of the Company

Art. 804 1 The supreme governing body of the company is the members’ gen- eral meeting. 2 The members’ general meeting has the following inalienable powers:

1. to amend the articles of association; 2. to appoint and the remove the managing directors; 3. to appoint and remove the members of the auditor; 4.491 to approve the management report and the consolidated ac-

counts; 5. to approve the annual accounts and the resolution on the allo-

cation of the balance sheet profit, and in particular to set the dividend and the shares of profits paid to managing directors;

6. to determine the fees paid to managing directors; 7. to discharge the managing directors;

491 Amended by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

289

220 Code of Obligations

II. Convening and conduct of the meeting

8. to consent to the assignment of capital contributions or to recog- nise companymembers as having the right to vote;

9. to consent to the creation of a charge over capital contributions where the articles of association so provide;

10. to pass resolutions on the exercise under the articles of associa- tion of rights of first option, pre-emption or purchase;

11. to authorise the managing director to acquire the company's own capital contributions for the company or to approve such an acquisition;

12. to issue detailed regulations on obligations to make additional material contributions where the articles of association make reference to such regulations;

13. to consent to the activities of the managing directors or com- pany members that are contrary to the duty of loyalty or the prohibition of competition, where the articles of association waive the requirement of the consent of all company members;

14. to decide on whether an application should be made to the court to exclude a company member for good cause;

15. to exclude a company member on grounds provided for in the articles of association;

16. to dissolve the company; 17. to approve transactions carried out by the managing directors

that require the consent of the members’ general meeting under the articles of association;

18. to decide on matters that are reserved to the members’ general meeting by law or by the articles of association or which are placed before it by the managing directors.

3 The members’ general meeting appoints the managers, the authorised signatories and authorised officers. The articles of association may also grant these powers to the managing directors.

Art. 805 1 The members’ general meeting is convened by the managing direc- tors, or if necessary by the auditors. The liquidators also have the right to convene a members' general meeting. 2 The annual meeting is held every year within six months of the end of the financial year. Extraordinary meetings are convened in accor- dance with the articles of association or as required. 3 The members’ general meeting must be convened 20 days at the latest before the date of the meeting. The articles of association may

290

220Federal Act on the Amendment of the Swiss Civil Code

III. Voting rights 1. Determination

2. Exclusion of the right to vote

extend this period or reduce it to no less than ten days. The possibility of a universal meeting is reserved. 4 Resolutions may also be done in writing unless a company members requests an oral discussion. 5 In addition, the relevant provisions on the company limited by shares apply to:

1. convening the meeting; 2. the right of company members to convene a meeting and table

motions; 3. the business to be discussed; 4. motions; 5. universal meetings; 6. preparatory measures; 7. the minutes; 8. the representation of company members; 9. the participation of unauthorised persons.

Art. 806 1 The voting rights of company members are determined by the nomi- nal value of their capital contributions. Each company member has at least one vote. The articles of association may limit the number of votes allocated to the owner of several capital contributions. 2 The articles of association may specify that voting rights are not dependent on nominal value with the result that each capital contribu- tion carries one vote. In this case, the capital contributions with the lowest nominal value must be worth at least one tenth of the nominal value of the other capital contributions. 3 The determination of the voting rights according to the number of capital contributions does not apply to:

1. the appointment of the members of the auditor; 2. the appointment of experts to inspect management practices or

individual parts thereof; 3. the resolution on raising a liability action.

Art. 806a 1 In the case of resolutions on the discharge of the managing directors, persons who have participated in management in any way are not permitted to vote.

291

220 Code of Obligations

3. Usufruct

IV. Right of veto

V. Resolutions 1. In general

2. Casting vote

3. Important resolutions

2 In the case of resolutions on the acquisition of its own capital contri- bution by the company, company members who are relinquishing their capital contributions are not permitted to vote. 3 In the case of resolutions on consenting to activities of a company member that are contrary to the duty of loyalty or the prohibition of competition, the person concerned is not permitted to vote.

Art. 806b In the case of a usufruct over a capital contribution, the usufructuary has the right to vote and related rights. He is liable to the owner in damages if he fails to give due consideration to the interests of the owner when exercising his rights.

Art. 807 1 The articles of association may grant company members a right of veto over certain resolutions of the members’ general meeting. They must the detail the decisions to which the right of veto applies. 2 The retrospective introduction of a right of veto requires the consent of all company members. 3 The right of veto may not be transferred.

Art. 808 The members’ general meeting passes resolutions and conducts its elections by an absolute majority of the votes represented, unless the law or articles of association provide otherwise.

Art. 808a The chair of the members’ general meeting has the casting vote. The articles of association may provide otherwise.

Art. 808b 1 A resolution of the members’ general meeting passed by a majority of at least two thirds of the votes represented and an absolute majority of the entire nominal capital in respect of which a right to vote may be exercised is required in the case of:

1. the amendment of the objects of the company; 2. the introduction of capital contributions with preferential vot-

ing rights; 3. an increase in or easing of the restrictions on or the prohibition

of the transferability of capital contributions;

292

220Federal Act on the Amendment of the Swiss Civil Code

VI. Contesting resolutions of the members' general meeting

B. Management and representa- tion I. designation the managing director and organisation

II. Duties of the managing directors

4. consent to the assignment of capital contributions or recognition as a companymember who is entitled to vote;

5. an increase in the nominal capital; 6. the restriction or revocation of subscription rights; 7. consent to activities of the managing director or company

members that are contrary to the duty of loyalty or the prohibi- tion of competition;

8. an application to the court to exclude a company member for good cause;

9. the exclusion of a company member on the grounds specified in the articles of association planned;

10. the relocation of the seat of the company; 11. the dissolution the company.

2 Provisions of the articles of association stipulating larger majorities than those required by law for certain resolutions may only be intro- duced if approved by the planned majority.

Art. 808c The relevant provisions on companies limited by shares apply to the contesting of resolutions of the members’ general meeting.

Art. 809 1 The company members are jointly responsible for the management of the company. The articles of association may adopt alternative provi- sions on management. 2 Only natural persons may be appointed as managing directors. Where a legal entity or a commercial enterprise is a participant in the com- pany, if applicable it appoints a natural person to exercise this function in its stead. The articles of association may require the consent of the members' general meeting for this. 3 Where a company has two or more managing directors, the members' general meeting must appoint a chairman. 4 Where a company has two or more managing directors, they decide by a majority of the votes cast. The chairman has the casting vote. The articles of association may adopt alternative provisions on decision making by the managing directors.

Art. 810 1 The managing directors are responsible for all matters not assigned by law or the articles of association to the members’ general meeting.

293

220 Code of Obligations

III. Approval by the members' general meeting

IV. Duty of care and of loyalty; prohibition of competition

2 Subject to the reservation of the following provisions, the managing directors have the following inalienable and irrevocable duties:

1. the overall management of the company and issuing the re- quired directives;

2. determining the organisation in accordance with the law and the articles of association;

3. organising the accounting, financial control and financial plan- ning systems as required for the management of the company;

4. supervising of the persons who are delegated management re- sponsibilities, in particular with regard to compliance with the law, articles of association, regulations and directives;

5. the preparation of the annual report (annual accounts, man- agement report and if applicable consolidated accounts);

6. the preparation for the members’ general meeting as well as the implementation of its resolutions;

7. the notification of the court in the event that the company is overindebted.

3 The chairman of the management board or if applicable the sole managing director has the following duties:

1. to convene and chair the members’ general meeting; 2. to issue communications to the company members; 3. to ensure the required notifications are made to the commercial

Art. 811 1 The articles of association may provide that the managing directors:

1. submit certain decisions to the members' general meeting for approval;

2. may submit individual matters to the members' general meet- ing for approval.

2 Approval by the members’ general meeting does not restrict the liability of the managing directors.

Art. 812 1 The managing directors and third parties who are involved in man- agement must carry out their duties with all due care and safeguard the interests of the company in good faith. 2 They are subject to the same duty of loyalty as the company mem- bers.

294

220Federal Act on the Amendment of the Swiss Civil Code

V. Equal treatment

VI. Representa- tion

VII. Removal of managing directors; Revocation of the right to represent the company

3 They may not carry on any activities in competition with the com- pany unless the articles of association provide otherwise or all other company members consent to the activity in writing. The articles of association may provide that the consent of the members’ general meeting be required.

Art. 813 The managing directors and third parties who are involved in man- agement must treat company members equally under the same circum- stances.

Art. 814 1 Each managing director has the right to represent the company. 2 The articles of association may adopt alternative provisions on repre- sentation, but at least one managing director must be authorised to represent the company. The articles of association may refer to regula- tions that set out the details. 3 The company must be able to be represented by a person who is resident in Switzerland. This requirement may be fulfilled by a manag- ing director or a manager. 4 The relevant provisions on companies limited by shares apply to the extent of and restrictions on the right to act as a representative and to contracts between the company and the person that is representing it. 5 The persons authorised to represent the company must sign on its behalf by appending their signature to the business name. 6 They must be entered in the commercial register. They must enter their own signatures in person at the office of the commercial registrar or submit these in a duly authenticated form.

Art. 815 1 The members’ general meeting may remove managing directors that it has appointed at any time. 2 Any company member may request the court to revoke or restrict the right of a managing director to manage or represent the company where there is good cause, and in particular if the person concerned has seriously breached his obligations or is no longer able to manage the company competently. 3 The managing directors may at any time suspend managers, author- ised signatories or authorised officers in their capacity. 4 If these persons have been appointed by the members’ general meet- ing, a members’ general meeting must be convened without delay.

295

220 Code of Obligations

VIII. Nullity of decisions

IX. Liability

C. Auditor

D. Defects in the organisation the company

E. Loss of capital and overindebtedness

A. Dissolution I. Grounds

5 Claims for compensation made by persons who have been removed or suspended are reserved.

Art. 816 Decisions made by the managing directors are subject mutatis mutan- dis to the same grounds for nullity as resolutions of the general meet- ing of a company limited by shares.

Art. 817 The company is liable for losses or damage caused by unauthorised acts carried out in the exercise of his business activities by a person authorised to manage or represent the company.

Art. 818 1 The relevant provisions on companies limited by shares apply to the auditor. 2 A company member subject to an obligation to make additional financial contributions may request an ordinary audit of the annual accounts.

Art. 819 The relevant provisions on companies limited by shares apply to defects in the organisation the company.

Art. 820 1 The relevant provisions on companies limited by shares apply to the duty to notify in the event of a loss of capital or the overindebtedness of the company and to the commencement and stay of bankruptcy proceedings. 2 The court may stay bankruptcy proceedings at the request of the managing directors or of a creditor, in particular if outstanding addi- tional capital contributions will be paid without delay and there is a prospect of restructuring.

Section Four: Dissolution and Resignation

Art. 821 1 A limited liability company must be dissolved:

1. if ground for dissolution stated in the articles of association applies;

296

220Federal Act on the Amendment of the Swiss Civil Code

II. Consequences

B. Resignation of company members I. Resignation

II. Follow-up resignations

2. if the members’ general meeting so resolves; 3. if bankruptcy proceedings are commenced; 4. in the other cases provided for by the law.

2 If the members’ general meeting resolves to dissolve the company, the resolution must be in the form of a public deed. 3 Any company member may request the court to dissolve the com- pany for good cause. Instead of dissolution, the court may opt for an alternative solution that is appropriate and reasonable for the persons concerned, such as the payment of a financial settlement to the com- pany member requesting dissolution commensurate with the true value of his capital contribution.

Art. 821a 1 The relevant provisions on companies limited by shares apply to the consequences of dissolution. 2 The dissolution of a company must be entered in the commercial register. Where dissolution is ordered by the court, the court must notify the commercial register without delay. Where dissolution is on other grounds, the company must notify the Commercial Register.

Art. 822 1 A company member may apply to the court to for leave to resign for good cause. 2 The articles of association may grant company members the right to resign and make this subject to certain conditions.

Art. 822a 1 Where a company member files an action for leave to resign for good cause or a company member tenders his resignation based on a right of resignation under the articles of association, the managing directors must notify the other company members without delay. 2 If other company members within three months of receipt of such notice file an action for leave to resign for good cause or exercise a right of resignation under the articles of association, all departing company members must be treated equally in proportion to the nomi- nal value of their capital contributions. Where additional financial contributions have been made, the value thereof must be added to the nominal value.

297

220 Code of Obligations

III. Exclusion

IV. Interim measures

V. Financial settlement 1. Entitlement and amount

2. Payment

Art. 823 1 Where there is good cause, the company may apply to the court for the exclusion of a company member. 2 The articles of association may provide that the members’ general meeting company may exclude members from the company on spe- cific grounds. 3 The regulations on follow-up resignations do not apply.

Art. 824 In proceedings relating to the withdrawal of a company member, the court may at the request of a party order that individual or all member- ship rights and obligations the person concerned be suspended.

Art. 825 1 Where a company member leaves the company, he is entitled to a financial settlement that reflects the true value of his capital contribu- tions. 2 Where the company member leaves by exercising a right of resigna- tion under the articles of association, the articles of association may adopt different provisions on compensation.

Art. 825a 1 The financial settlement becomes due for payment when the com- pany members leaves, provided the company:

1. has disposable equity capital; 2. is able to dispose of the capital contributions of the departing

member; 3. is entitled to reduce its nominal capital in compliance with the

relevant provisions. 2 A licensed audit expert must establish the extent of the disposable equity capital. If this is insufficient to pay the financial settlement, he must state his opinion on the extent to which the nominal capital could be reduced. 3 The former company member holds a non-interest-bearing subordi- nate ranking claim in respect of any portion of the financial settlement that is not paid out. This becomes due for payment to the extent that disposable equity capital is declared to be available in the annual annual report. 4 For as long as the financial settlement has not been paid in full, the former company member may request that the company appoint an auditor and arrange for an ordinary audit of the annual accounts.

298

220Federal Act on the Amendment of the Swiss Civil Code

C. Liquidation

A. Cooperatives under the Code of Obligations

B. Cooperatives under public law

C. Establishment I. Requirements 1. In general

Art. 826 1 Each company member has the right to a share of the proceeds of liquidation corresponding to fraction that nominal value of his capital contribution represents of the nominal capital. Where additional finan- cial contributions have been made and not refunded, their value must be added to the capital contributions of the company member con- cerned and to the nominal capital. The articles of association may adopt an alternative provision. 2 The relevant provisions on companies limited by shares apply to the dissolution of a company with liquidation.

Section Five: Liability

Art. 827 The relevant provisions on companies limited by shares apply to the liability of persons who are involved in the establishment, manage- ment, auditing or liquidation of a limited liability company.

Title Twenty-Nine: The Cooperative Section One: Definition and Establishment

Art. 828 1 A cooperative is a corporate entity consisting of an unlimited number of persons or commercial enterprises who join together for the primary purpose of promoting or safeguarding the specific economic interests of the society’s members by way of collective self-help. 2 Cooperatives with a predetermined nominal capital are not permitted.

Art. 829 Associations of persons under public law are governed by federal and cantonal public law even where formed to pursue cooperative pur- poses.

Art. 830 The cooperative is established by entry in the commercial register once the articles of association have been drawn up and approved by the constituent assembly.

299

220 Code of Obligations

Art. 831 2. Number of 1 At least seven members must be involved in the establishment of a members cooperative.

2 Where the number of members subsequently drops below the mini- mum number, the provisions of the law on companies limited by shares on defects in the organisation of a company apply.492

Art. 832 II. Articles of The articles of association must contain provisions concerning: association 1. Content 1. the name (business name) and seat of the cooperative; prescribed by law 2. the objects of the cooperative;

3. any obligation on members to make cash or other contributions and the nature and amount thereof;

4.493 the governing bodies for the administration and for auditing and the manner in which it is to be represented;

5. the form of the cooperative’s external communications.

Art. 833 2. Further In order to be binding, provisions on the following matters must be provisions included in the articles of association:

1. creation of the cooperative’s nominal capital by means of co- operative shares (share certificates);

2. contributions in kind to the cooperative’s nominal capital, the nature and imputed value thereof and the requirements pertain- ing to the person of the contributor;

3. assets taken over on establishment of the society, the remu- neration for such assets and the requirements pertaining to the person of their owner;

4. accession to the cooperative and loss of membership, where such rules differ from the statutory provisions;

5. members’ personal liability and their liability to make addi- tional contributions;

492 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

493 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

300

220Federal Act on the Amendment of the Swiss Civil Code

III. Constituent assembly

IV. Entry in the commercial register 1. Cooperative

2. Branch offices

6. the organisation and representation of the society, amendment of its articles of association and the adoption of resolutions by the general assembly, where such rules differ from the statu- tory provisions;

7. restrictions on or extensions of the exercise of members’ vot- ing rights;

8. the calculation and allocation of net profit and the liquidation surplus.

Art. 834 1 The articles of association are drawn up in writing and submitted to an assembly convened by the founder members for consultation and approval. 2 Further, a written report by the founder members on any contribu- tions in kind and assets to be taken over is made available to the as- sembly for consultation. 3 This assembly also appoints the necessary governing bodies. 4 Until the cooperative has been entered in the commercial register, the membership may be established only by signing the articles of associa- tion.

Art. 835494

The cooperative is entered in the commercial register of the place at which it has its seat.

Art. 836495

Branch offices are entered in the commercial register of the place where they are located.

494 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

495 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

301

220 Code of Obligations

3. List of members

V. Acquisition of legal personality

A. General principle

B. Declaration of accession

Art. 837496

Cooperatives whose articles of association provide for personal liabil- ity or the liability to make additional contributions must file a list of members with the commercial registry. The list is not entered in the commercial register but is open for public inspection.

Art. 838 1 The cooperative acquires legal personality only through entry in the commercial register. 2 A person acting in the name of the cooperative prior to entry in the commercial register is liable personally and jointly and severally for his actions. 3 Where such obligations were entered into expressly in the name of the cooperative to be established and are assumed by the latter within three months of its entry in the commercial register, the persons who contracted them are released and only the cooperative is liable.

Section Two: Acquisition of Membership

Art. 839 1 New members may be accepted into a cooperative at any time. 2 Providing the principle of unlimited membership is respected, the articles of association may lay down more detailed provisions govern- ing accession; however, they must not impose excessive obstacles to accession.

Art. 840 1 Accession requires a written declaration. 2 Where, in addition to being liable with its assets, a cooperative provides for personal liability or the liability to make additional con- tributions on the part of the individual members, the declaration of accession must state such obligations expressly. 3 The directors decide on acceptance of new members, unless under the articles of association, a mere declaration of accession is sufficient or a resolution of the general assembly is required.

496 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

302

220Federal Act on the Amendment of the Swiss Civil Code

C. In connection with an insur- ance policy

A. Departure I. Freedom to leave

II. Restriction of departure

III. Notice and timing of departure

IV. Exercise in bankruptcy and attachment

Art. 841 1 Where membership of the cooperative is linked with taking out an insurance policy with such society, membership is acquired upon acceptance of the insurance application by the competent governing body. 2 Insurance policies concluded by a licensed insurance cooperative with its members are subject to the Federal Act of 2 April 1908497 on Insurance Policies in the same manner as insurance policies concluded with third parties.

Section Three: Loss of Membership

Art. 842 1 Provided no resolution has been made to dissolve the cooperative, every member is free to leave. 2 The articles of association may provide that the departing member is obliged to pay an appropriate severance penalty where in the circum- stances his departure causes the cooperative significant losses or jeopardises its continued existence. 3 Any permanent ban on or excessive obstacle to departure imposed by the articles of association or by agreement is void.

Art. 843 1 A member may be barred from leaving by the articles of association or by agreement for no more than five years. 2 Even during this period a member may leave for good cause. The obligation to pay an appropriate severance penalty on the same condi- tions as apply to members with an unrestricted right of departure is reserved.

Art. 844 1 Members may leave only as of the end of the financial year and on expiry of one year’s notice. 2 The articles of association may stipulate a shorter notice period and may permit departures in the course of the financial year.

Art. 845 Where the articles of association grant a departing member a share of the cooperative’s assets, a bankrupt member’s right to leave may be

SR 221.229.1

303

497

220 Code of Obligations

B. Exclusion

C. Death of a member

D. Lapse of office, employ- ment or contract

E. Transfer of membership I. In general

exercised by the bankruptcy administrators or, if his share has been attached, by the debt collection office.

Art. 846 1 The articles of association may stipulate the grounds on which a member may be excluded. 2 Moreover, a member may be excluded at any time for good cause. 3 Exclusions are decided by the general assembly. The articles of association may stipulate that the directors are responsible, in which case the excluded member has right of recourse to the general assem- bly. A member may appeal against his exclusion to the courts within three months. 4 The excluded member may be required to pay an appropriate sever- ance penalty on the same conditions as apply to members with an unrestricted right of departure.

Art. 847 1 Membership lapses on the death of the member. 2 However, the articles of association may stipulate that his heirs automatically become members of the cooperative. 3 Further, the articles of association may stipulate that the heirs or one of two or more heirs must, on written request, be recognised as mem- ber in place of the deceased member. 4 The community of heirs must appoint a joint representative to act as a member of the cooperative.

Art. 848 Where membership of a cooperative is linked to the holding of an office or an employment relationship or is the result of a contractual relationship, as in the case of an insurance cooperative, unless the articles of association provide otherwise, membership lapses on termi- nation of such office, employment or contract.

Art. 849 1 The assignment of shares in the cooperative and, where a certificate is issued as proof of membership or such share, the transfer of this certificate do not automatically make the acquirer a member. He becomes a member only after the existing members have passed a resolution of acceptance as required by law and the articles of associa- tion.

304

220Federal Act on the Amendment of the Swiss Civil Code

II. By transfer of land or commer- cial exploitation

F. Departure of the legal successor

A. Proof of membership

B. Share certificates

2 Until such time as the acquirer becomes a member, the alienator is entitled to exercise his personal membership rights. 3 Where membership of a cooperative is linked with a contract, the articles of association may stipulate that, if the contract is subsequently taken over, membership automatically passes to the legal successor.

Art. 850 1 The articles of association may make membership of a cooperative conditional on ownership or commercial exploitation of a property. 2 In such cases the articles of association may stipulate that, in the event that the property or commercial operations change hands, mem- bership automatically passes to the acquirer. 3 A transfer of membership resulting from the alienation of property is valid as against third parties only if entered under priority notice in the land register.

Art. 851 In the case of transfer and inheritance of membership, the conditions for leaving the society are the same for the legal successor as for the former member.

Section Four: Rights and Obligations of the Members

Art. 852 1 The articles of association may stipulate that a certificate be issued as proof of membership. 2 Such proof may also be provided as part of the member’s share certificate.

Art. 853 1 Where a cooperative has shares, each member joining it must take at least one. 2 The articles of association may stipulate that multiple shares may be acquired, up to a specified maximum. 3 Share certificates are made out in the member’s name. However, they may not be made out in the form of negotiable securities, but only as documents in proof.

305

220 Code of Obligations

C. Equality

D. Rights I. Voting right

II. Control by the members 1. Disclosure of the balance sheet

2. Release of information

Art. 854 The members all have equal rights and obligations, unless the law makes an exception.

Art. 855 The rights of members to participate in the affairs of the cooperative, in particular with regard to the management of its business and the promotion of the society’s interests, are exercised by taking part in the general assembly of members or, where prescribed by law, in ballots.

Art. 856 1 No later than ten days prior to the general assembly of members or the ballot to decide on approval of the management report, the con- solidated accounts and the annual accounts, these documents together with the audit report must be made available at the seat of the coopera- tive for inspection by its members.498 2 The articles of association may stipulate that each member is entitled, at his own expense, to request a copy of the profit and loss account and the balance sheet from the cooperative.

Art. 857 1 The members may draw the attention of the auditor to dubious pro- cedures and request the necessary information.499 2 The society’s ledgers and business correspondence may be inspected only with the express authorisation of the general assembly of mem- bers or by resolution of the directors and if measures are taken to safeguard trade secrets. 3 The court may order the cooperative to provide the members with information on significant matters relevant to the exercise of their right of control in the form of authenticated copies from its ledgers or corre- spondence. The court order must not jeopardise the interests of the cooperative. 4 The members’ right of control may not be excluded or restricted either by the articles of association or by resolutions made by a gov- erning body of the society.

498 Amended by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

499 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

306

220Federal Act on the Amendment of the Swiss Civil Code

III. Rights to share the net profit 1.

2. Profit distribution principles

3. Duty to form and accumulate a reserve fund

4. Net profit at credit coopera- tives

Art. 858500

Art. 859 1 Unless the articles of association provide otherwise, any net profit on the cooperative’s business operations passes in its entirety to the society’s assets. 2 Where distribution of the net profit among the members is provided for, unless the articles of association dictate otherwise, it is distributed according to the use of the society’s facilities by individual members. 3 Where share certificates exist, the portion of the net profit paid out on them must not exceed the usual rate of interest for long-term loans without special security.

Art. 860 1 Where the net profit is used for a purpose other than to build up the society’s assets, each year one twentieth of it must be allocated to a reserve fund. Such allocations must be made for at least 20 years; where share certificates exist, they must in any event be made until the reserve fund is equal to one-fifth of the society’s capital. 2 The articles of association may stipulate that the reserve fund must be accumulated more rapidly. 3 To the extent that the reserve fund does not exceed one-half of the society’s other assets or, where share certificates exist, one-half of the society’s capital, it may be used only to cover losses or for measures designed to sustain the society’s pursuit of its objects in difficult times.

5014 ...

Art. 861 1 Credit cooperatives may lay down articles of association that dero- gate from the provisions governing distribution of net profit contained in the previous articles, but they too are obliged to form a reserve fund and to use it in accordance with the above provisions. 2 Each year at least one-tenth of the net profit must be allocated to the reserve fund until it equals one-tenth of the cooperative’s nominal capital.

500 Repealed by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), with effect from 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

501 Repealed by Annex No II 1 of the Insurance Oversight Act of 17 Dec. 2004, with effect from 1 Jan. 2006 (SR 961.01).

307

220 Code of Obligations

5. Welfare funds

6. Further allocations to reserves

IV. Entitlement to settlement 1. Under the articles of association

3 Where a portion of the net profit is paid out to holders of shares in the cooperative and that portion exceeds the usual rate of interest for long-term loans without special security, one-tenth of the amount by which it exceeds the usual interest rate must likewise be allocated to the reserve fund.

Art. 862 1 The articles of association may also provide for allocations to estab- lish and finance other funds, in particular funds dedicated to the wel- fare of employees of the company and related workers and for mem- bers of the cooperative. 2–4 ...502

Art. 863 1 Allocations to the reserve fund and other funds in accordance with the law and the articles of association are deducted in the first instance from the net profit available for distribution. 2 Where it is deemed appropriate in order to secure the long-term health of the cooperative, the general assembly of members may also resolve to create reserves which are not envisaged by or meet higher requirements than are specified by the law or the articles of associa- tion. 3 Similarly, contributions may be deducted from the net profit for the purpose of creating and financing welfare funds for employees, other workers and members or for other welfare purposes even where these are not envisaged in the articles of association; such contributions are subject to the provisions governing welfare funds established by the articles of association.

Art. 864 1 The articles of association determine whether the departing members or their heirs have claims on the society’s assets and, if so, what those claims are. Such claims must be calculated on the basis of the net balance sheet assets excluding reserves at the time the member leaves the cooperative. 2 The articles of association may grant the departing member or his heirs the right to the full or partial repayment of the value of his share certificate excluding the entry fee. They may stipulate that this repay- ment be deferred for up to three years after the member’s departure.

502 Repealed by No I let.. b of the Federal Act of 21 March 1958 (AS 1958 379; BBl 1956 II 825).

308

220Federal Act on the Amendment of the Swiss Civil Code

2. By law

E. Duties I. Duty of loyalty

II. Duty to make contributions

III. Liability 1. Of the cooperative

3 Even where the articles of association make no such provision, the cooperative remains entitled to defer the repayment for up to three years where it would cause the society considerable losses or jeopard- ise its continued existence. Any entitlement of the cooperative to a severance penalty paid by the departing member is unaffected by this provision. 4 The claims of the departing member or his heirs become time-barred three years after the time at which the settlement becomes payable by the cooperative.

Art. 865 1 Where the articles of association make no provision for a settlement entitlement, departing members or their heirs have no such entitle- ment. 2 Where the cooperative is dissolved within one year of the member’s departure or death and the assets are distributed, the departed member or his heirs have the same entitlement as the members present upon dissolution.

Art. 866 The members are obliged to safeguard the interests of the cooperative loyally and in good faith.

Art. 867 1 The articles of association define the obligatory contributions. 2 Where the members are obliged to pay in contributions on share certificates or to make other contributions, the cooperative must call them in by registered letter with an appropriate time limit for perform- ance. 3 Where no payment is forthcoming on first request and the member fails to comply within one month of a second call for payment, he may be declared to have forfeited his rights as member of the cooperative, providing he was previously warned of this consequence by registered letter. 4 Unless the articles of association provide otherwise, the declaration of forfeiture does not release the member from obligations already due or falling due by virtue of his exclusion.

Art. 868 The cooperative is liable with its assets for its obligations. It is liable exclusively, unless the articles of association provide otherwise.

309

220 Code of Obligations

2. Of the members a. Unlimited liability

b. Limited liability

c. Liability to make additional contributions

d. Inadmissible restrictions

Art. 869 1 Except in the case of licensed insurance cooperatives, the articles of association may provide that, after the society’s assets, the members have unlimited personal liability. 2 Where this is the case and creditors suffer losses on the insolvency of the cooperative, the members are jointly and severally liable with their entire assets for all obligations of the society. Claims in respect of this liability are brought by the insolvency administrators until the insol- vency proceedings are complete.

Art. 870 1 Except in the case of licensed insurance cooperatives, the articles of association may provide that, after the society’s assets, the members have limited personal liability for the cooperative’s obligations above and beyond their membership contributions and the value of their cooperative shares, although only up to a specified amount. 2 Where shares are held in the society, the amount for which the indi- vidual members are liable is determined by the value of their share. 3 Claims in respect of this liability are brought by the insolvency administrators until the insolvency proceedings are complete.

Art. 871 1 Instead of or in addition to such liability, the articles of association may require the members to make additional contributions, which may be used only to cover net losses for the year. 2 The liability to make additional contributions may be unlimited or else limited to specified amounts or to a specified proportion of the member’s contribution or share in the society. 3 Where the articles of association make no provision on how addi- tional contributions are to be shared among the members, the amount due from each is determined according to the value of his share in the society or, where no such shares exist, on a per capita basis. 4 The additional contributions may be called in at any time. If the cooperative is insolvent, the right to call in additional contributions accrues to the insolvency administrators. 5 In other respects the provisions governing the calling-in of contribu- tions and declaration of forfeiture are applicable.

Art. 872 Any provisions made in the articles of association which limit liability to a specific time or to particular obligations or groups of members are void.

310

220Federal Act on the Amendment of the Swiss Civil Code

e. Procedure in insolvency

f. Amendment of liability provi- sions

g. Liability of new members

Art. 873 1 In the event of the insolvency of a cooperative in which the members are personally liable or liable to make additional contributions, at the same time as they draw up the schedule of claims the insolvency administrators must determine and call in the provisional personal liability of each individual member or the additional contributions he must make. 2 Irrecoverable amounts must be spread equally among the other members, and surpluses repaid once the final distribution plan has been formulated. The members’ right of recourse against each other is reserved. 3 The provisional determination of members’ obligations and the distribution plan are subject to challenge by appeal on procedural grounds pursuant to the Debt Collection and Bankruptcy Act of 11 April 1889503. 4 The procedure is determined by Federal Council ordinance.504

Art. 874 1 The provisions governing the personal liability or liability to make additional contributions of the members and the reduction or cancella- tion of share certificates may be amended only by amending the arti- cles of association. 2 Furthermore, the provisions governing reductions of share capital by companies limited by shares are applicable to any reduction or cancel- lation of share certificates. 3 Any reduction of a member’s personal liability or liability to make additional contributions has no effect on obligations that arose prior to publication of the amendment to the articles of association. 4 Where a member’s personal liability or liability to make additional contributions is established or increased, on entry of the resolution in the commercial register it works in favour of all creditors of the coop- erative.

Art. 875 1 A person joining a cooperative in which the members are personally liable or liable to make additional contributions has the same liability as the other members for the society’s obligations, including those that arose before he joined.

SR 281.1 504 Amended by No II 10 of the Federal Act of 20 March 2008 on the Formal Revision of

Federal Legislation, in force since 1 Aug. 2008 (AS 2008 3437 3452; BBl 2007 6121).

311

503

220 Code of Obligations

h. Liability after departure or dissolution

i. Notification of accessions and departures for entry in the commercial register

k. Limitation periods for liability

2 Any contrary provision made in the articles of association or by agreement between the members has no effect as against third parties.

Art. 876 1 Where a member with limited or unlimited liability leaves the society as a result of his death or some other reason, he remains liable for the obligations arising prior to his departure if the cooperative becomes insolvent within one year or any longer period stipulated in the articles of association of the date on which his departure was entered in the commercial register. 2 Any liability to make additional contributions remains effective on the same conditions and subject to the same time limits. 3 Where a cooperative is dissolved, the members likewise remain liable or obliged to make additional contributions if insolvency pro- ceedings are commenced in respect of the cooperative within one year or any longer period stipulated in the articles of association of the date on which such dissolution was entered in the commercial register.

Art. 877 1 Where the members have limited or unlimited liability for the soci- ety’s debts or are liable to make additional contributions, the directors must notify every accession or departure of a member for entry in the commercial register within three months. 2 Further, every departing or excluded member and the heirs of a member have the right to have the member’s departure, exclusion or death entered in the register on their initiative. The commercial regis- try must immediately notify the society’s directors of any such notifi- cation. 3 Licensed insurance cooperatives are exempt from the duty to notify their members for entry in the commercial registrar.

Art. 878 1 Creditors’ claims in respect of the personal liability of individual members may be brought by any creditor at any time up to one year after completion of insolvency proceedings, unless the law provides for their extinction at an earlier juncture. 2 The members’ right of recourse against each other likewise becomes time-barred one year after the date of the payment to which the claim relates.

312

220Federal Act on the Amendment of the Swiss Civil Code

A. General assembly of members I. Powers

II. Ballot

III. Convening the general assembly 1. Right and duty

Section Five: Organisation of the Cooperative

Art. 879 1 The supreme governing body of a cooperative is the general assem- bly of members. 2 It has the following inalienable powers:

1. to determine and amend the articles of association; 2.505 to elect the directors and the auditor; 3.506 to approve the management report and the consolidated ac-

counts; 4. to discharge the directors; 5. to make resolutions concerning the matters reserved to the

general assembly of members by law or the articles of associa- tion.

Art. 880 In the case of cooperatives with more than 300 members or in which the majority of members are themselves cooperatives, the articles of association may stipulate that all or some of the powers of the general assembly of members be exercised by ballot.

Art. 881 1 The general assembly of members is convened by the board of direc- tors or any other governing body on which the articles of association confer such authority, and where necessary by the auditor.507 The liquidators and the representatives of bond creditors also have the right to convene a general assembly. 2 The general assembly of members must be convened at the request of at least one-tenth of the members or, in the case of cooperatives with fewer than 30 members, at least three members. 3 Where the board of directors fails to grant such a request within a reasonable delay, on application the court must order that a general assembly be convened.

505 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

506 Amended by No I 3 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589).

507 First sentence Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

313

220 Code of Obligations

2. Form

3. Agenda items

4. Universal meeting

IV. Voting rights

V. Representa- tion

VI. Exclusion of voting rights

Art. 882 1 The general assembly of members must be convened in the form prescribed by the articles of association but in any event no later than five days before the date for which it is scheduled. 2 In the case of cooperatives with more than 30 members, the convoca- tion is effective as soon as it is publicly announced.

Art. 883 1 The notice convening the meeting must include the agenda items to be discussed and the essential content of any proposed amendments to the articles of association. 2 No resolutions may be made on motions relating to agenda items that were not duly notified, except by means of a motion to convene a further general assembly. 3 No advance notice is required to propose motions on duly notified agenda items and to debate items without passing resolutions.

Art. 884 Where all the society’s members are present they may, if no objection is raised, pass resolutions without needing to comply with the formal convocation requirements.

Art. 885 Every member has one vote at the general assembly of members or in the ballot.

Art. 886 1 A member may exercise his right to vote at the general assembly of members by appointing another member to act as proxy, but no proxy may represent more than one member. 2 In the case of cooperatives with more than 1,000 members the arti- cles of association may stipulate that each member may represent more than one other member but never more than nine. 3 The articles of association reserve the right to permit representation of members by relatives with capacity to act.

Art. 887 1 In the case of resolutions concerning the discharge of the board of directors, persons who have participated in any manner in the man- agement of the society’s business have no voting right.

314

220Federal Act on the Amendment of the Swiss Civil Code

VII. Resolutions 1. In general

2. Increase of members’ obligations

VIII. Dismissal of the directors and the audi- tor510

508.2 ..

Art. 888 1 Unless otherwise provided by law or the articles of association, the general assembly of members passes resolutions and decides elections by absolute majority of the votes cast. The same applies to resolutions and elections by ballot. 2 The dissolution of the cooperative and any amendment of the articles of association require a majority of two-thirds of the votes cast. The articles of association may stipulate more restrictive conditions for such resolutions.509

Art. 889 1 Resolutions to introduce or increase the members’ personal liability or their liability to make additional contributions require the consent of three-quarters of all members. 2 Members who did not vote in favour are not bound by such resolu- tions providing they give notice of their departure from the society within three months of the publication of the resolution in question. Such departure takes effect as of the date on which the resolution comes into force. 3 In such cases, departure may not be made conditional on payment of a severance penalty.

Art. 890 1 The general assembly of members is entitled to dismiss the members of the board of directors and the auditor and any registered attorneys or commercial agents appointed by them.511 2 On application by at least one-tenth of the members, the court may order such dismissals where good cause exists and, in particular, where the persons in question neglected their duties or were unable to fulfil

508 Repealed by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), with effect from 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

509 Amended by Annex No 2 of the Mergers Act of 3 Oct. 2003, in force since 1 July 2004 (SR 221.301).

510 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

511 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

315

220 Code of Obligations

IX. Challenging resolutions of the general assembly

X. Assembly of delegates

XI. Exceptions for insurance cooperatives

them. In such cases the court must, where necessary, order that fresh elections be held by the competent body of the cooperative and take appropriate measures for the interim. 3 The claims for compensation of persons thus dismissed are reserved.

Art. 891 1 The board of directors or any member may challenge resolutions made by the general assembly of members or by ballot which violate the law or the articles of association by bringing action against the cooperative before the court. Where the board of directors is the claimant, the court appoints a representative for the cooperative. 2 The right of challenge lapses where the action is not brought within two months of the adoption of the resolution. 3 A court judgment that annuls a resolution is effective for and against all the members.

Art. 892 1 Cooperatives with more than 300 members or in which the majority of the members are cooperatives may delegate all or some of the powers of the general assembly of members to an assembly of dele- gates by means of the articles of association. 2 Rules governing the composition, election and convocation of the assembly of delegates are laid down in the articles of association. 3 Every delegate has one vote in the assembly of delegates, unless different provision for voting rights is made in the articles of associa- tion. 4 In other respects the statutory provisions governing the general assembly of members apply to the assembly of delegates.

Art. 893 1 Licensed insurance cooperatives with more than 1,000 members may delegate all or some of the powers of the general assembly of members to the board of directors by means of the articles of association. 2 The powers of the general assembly of members to introduce or increase the members’ liability to make additional contributions and to dissolve, merge, split and modify the legal form of the cooperative are not transferable.512

512 Amended by Annex No 2 of the Mergers Act of 3 Oct. 2003, in force since 1 July 2004 (SR 221.301).

316

220Federal Act on the Amendment of the Swiss Civil Code

B. Directors I. Eligibility 1. Membership

2....

II. Term of office

III. Administra- tive committees

IV. Business management and representation 1. Delegation

Art. 894 1 The board of directors of the cooperative consists of at least three persons; a majority of them must be members. 2 Where a legal entity or commercial company holds a participation in the cooperative, it is not eligible as such to serve as a member of the board of directors; however, its representative may be elected in its stead.

Art. 895513

Art. 896 1 The directors are elected for a maximum term of office of four years, but may be re-elected unless the articles of association provide other- wise. 2 The provisions governing companies limited by shares apply to terms of office of directors of licensed insurance cooperatives.

Art. 897 The articles of association may delegate some of the duties and powers of the board of directors to one or more committees elected by the directors.

Art. 898514 1 The articles of association may authorise the general assembly of members or the directors to delegate responsibility for managing the society’s business or parts thereof and for representing the society to one or more persons, business managers or executive officers, who need not be members of the cooperative. 2 A cooperative must be able to be represented by a person who is resident in Switzerland. This requirement may be fulfilled by a direc- tor, a business manager or an executive officer.

513 Repealed by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), with effect from 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

514 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

317

220 Code of Obligations

Art. 899 2. Scope and 1 The persons with authority to represent the cooperative may carry out restriction in its name any transactions conducive to the achievement of the

cooperative’s objects. 2 Any restriction of such authority has no effect in relation to bona fide third parties, subject to any provisions entered in the commercial register that govern exclusive representation of the head office or a branch office or joint management of the society. 3 The cooperative is liable for any damage resulting from unauthorised acts carried out in the exercise of his function by a person authorised to manage the cooperative’s business or to represent it.

Art. 899a515 3. Contracts If the cooperative is represented in the conclusion of a contract by the between the cooperative and same person with whom it is concluding the contract, the contract must its representa- be done in writing. This requirement does not apply to contract relat- tives ing to everyday business where the value of the cooperative's goods or

services does not exceed 1,000 francs.

Art. 900 3. Signatures516 The persons with authority to represent the cooperative must sign by

appending their signature to the society’s business name.

Art. 901 4. Entry517 The board of directors must apply to have persons with authority to

represent the cooperative entered in the commercial register and sub- mit an authenticated copy of the relevant resolution. These persons must enter their own signatures in person at the commercial registry or submit these in a duly authenticated form.

515 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

516 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

517 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

318

220Federal Act on the Amendment of the Swiss Civil Code

V. Duties 1. In general

2. Duty to notify capital loss and overindebtedness

Art. 902 1 The directors must conduct the business of the cooperative with all diligence and employ their best endeavours to further the cooperative’s cause. 2 In particular, they have a duty:

1. to prepare the business of the general assembly of members and implement its resolutions;

2. to supervise the persons entrusted with the cooperative’s busi- ness management and representation with regard to compli- ance with the law, the articles of association and any applica- ble regulations and to keep themselves regularly informed of the society’s business performance.

3 The directors are responsible for ensuring that the minutes of their meetings, the minutes of the general assembly, the necessary account- ing records and the membership list are kept properly, that the profit and loss account and the annual balance sheet are drawn up and sub- mitted to the auditor for examination in accordance with the statutory provisions and that the prescribed notifications concerning accessions and departures of members are made to the commercial registry.518

Art. 903 1 Where there is good cause to suspect overindebtedness, the directors must immediately draw up an interim balance sheet at sale values. 2 Where the last annual balance sheet and subsequent liquidation balance sheet or an interim balance sheet show that the claims of the society’s creditors are no longer covered, the board of directors must notify the court. The court must commence insolvency proceedings, unless the requirements for a stay of such proceedings are fulfilled. 3 In the case of cooperatives with share certificates, where the last annual balance sheet shows that one-half of the nominal capital is no longer covered, the directors must convene a general assembly of members without delay and inform the assembly of the situation. 4 In the case of cooperatives whose members are liable to make addi- tional contributions, the court need not be notified if the balance sheet loss is covered within three months by additional contributions from the members. 5 On application by the board of directors or by a creditor, the court may grant a stay of insolvency proceedings where there is a prospect of financial restructuring. In this case, the court orders measures to

518 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

319

220 Code of Obligations

VI. Return of payments to members

VII. Dismissal and suspension

C. Auditor I. In general

preserve the society’s assets, such as the taking of an inventory and the appointment of an administrative receiver. 6 In the case of licensed insurance cooperatives, the members’ claims under insurance policies count as creditors’ rights.

Art. 904 1 In the event that the cooperative becomes insolvent, the members of the board of directors are obliged to reimburse the cooperative's credi- tors for all payments received in the three years prior to the onset of insolvency in the form of shares in the profit or under any other desig- nation to the extent such payments exceed adequate remuneration for the consideration rendered and should not have been made under a prudent accounting regime. 2 Such reimbursement is excluded to the extent that no claim for it exists under the provisions governing unjust enrichment. 3 The court decides at its discretion, taking due account of all the circumstances.

Art. 905 1 The board of directors may at any time dismiss the committees, business managers, executive officers and other registered attorneys and commercial agents that it has appointed. 2 The registered attorneys and commercial agents appointed by the general assembly of members may be suspended from their duties at any time by the board of directors, providing a general meeting is convened immediately. 3 Claims for compensation made by persons dismissed or suspended are reserved.

Art. 906519 1 The auditor is governed by the corresponding provisions on compa- nies limited by shares. 2 An ordinary audit of the annual accounts may be requested by:

1. 10 per cent of the members; 2. members who together represent at least 10 per cent of the

nominal capital;

519 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability

320

220 Code of Obligations

3. members who personally liable or under an obligation to make additional capital contributions.

Art. 907520 II. Verification 1 In the case of cooperatives in which the members are personally of the member- ship list liable or liable to make additional capital contributions, the auditor

must verify that the membership list521 has been kept correctly. If the cooperative has no auditor, the directors must arrange for the member- ship list522 to be verified by a licensed auditor.

Art. 908523 2. Defects in In the case of defects in the organisation of a cooperative, the corre- organisation sponding provisions on companies limited by shares apply.

Art. 909 and 910524

Section Six: Dissolution of the Cooperative

Art. 911 A. Grounds for The cooperative is dissolved: dissolution

1. in accordance with the articles of association; 2. by resolution of the general assembly of members; 3. by commencement of insolvency proceedings; 4. in the other cases provided for by law.

520 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

521 Revised by the Federal Assembly Drafting Committee (Art. 58 para. 1 ParlA – SR 171.10).

522 Revised by the Federal Assembly Drafting Committee (Art. 58 para. 1 ParlA – SR 171.10).

523 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

524 Repealed by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability

322

220Federal Act on the Amendment of the Swiss Civil Code

B. Notification for entry in the commercial register

C. Liquidation, distribution of assets

D. ...

E. Takeover by a public sector corporation

Art. 912 Where the company is dissolved for reasons other than insolvency, the board of directors notifies the dissolution for entry in the commercial register.

Art. 913 1 The cooperative is liquidated in accordance with the provisions governing companies limited by shares, subject to the following provi- sions. 2 The assets of the dissolved cooperative remaining after payment of all its debts and repayment of any shares may be distributed among the members only where the articles of association provide for such distri- bution. 3 Unless the articles of association provide otherwise, in this case the assets are distributed among the members as at the time of dissolution or their legal successors on a per capita basis. The statutory entitlement of departed members or their heirs to a financial settlement is reserved. 4 Where the articles of association make no provision for such distribu- tion among the members, the liquidation surplus must be used for the society’s purpose or to promote charitable causes. 5 Unless the articles of association provide otherwise, the general assembly of members decides on this matter.

Art. 914525

Art. 915 1 Where the assets of a cooperative are taken over by the Confedera- tion, by a canton or, under guarantee from the canton, by a district or commune, with the consent of the general assembly of members it may be agreed that no liquidation will take place. 2 The resolution of the general assembly of members must be made in accordance with the provisions governing dissolution and notified to the commercial registry. 3 On entry of such resolution in the commercial register, the transfer of the cooperative’s assets and debts is complete and the cooperative's name must be deleted.

Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), with effect from 1 Jan. 2 08525 Repealed by Annex No 2 of the Mergers Act of 3 Oct. 2003, with effect from 1 July 20004

(SR 221.301).(AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

321

220 Code of Obligations

A. Liability to the cooperative

B. Liability to the cooperative, members and creditors

C. Joint and several liability and recourse

D. Time limits

E. Liability in credit and insurance cooperatives

Section Seven: Liability

Art. 916526

All persons engaged in the administration, business management or auditing or liquidation of the cooperative are liable to the cooperative for the losses arising from any wilful or negligent breach of their duties.

Art. 917 1 Any director or liquidator who wilfully or negligently breaches his statutory duties with regard to the overindebtedness of the cooperative is liable to the cooperative, the individual members and the creditors for the losses arising. 2 Claims for compensation for losses suffered by the members and the creditors only indirectly through harm done to the cooperative must be brought in accordance with the provisions governing companies lim- ited by shares.

Art. 918 1 Where two or more persons are responsible for the same loss, they are jointly and severally liable. 2 The right of recourse among several defendants is determined by the court with due regard to the degree of fault.

Art. 919 1 The claim for damages against any person held liable under the above provisions becomes time-barred five years after the date on which the injured party learned of the loss and of the person liable for it but in any event ten years after the date of the action which caused the loss. 2 Where the action stems from a criminal act for which criminal law envisages a longer time limit, the latter also applies to the civil claim.

Art. 920 In the case of credit cooperatives and licensed insurance cooperatives, liability is determined according to the provisions governing compa- nies limited by shares.

526 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability

324

220Federal Act on the Amendment of the Swiss Civil Code

A. Requirements

B. Organisation I. Assembly of delegates

II. Board of directors

III. Monitoring, challenge

IV. Exclusion of new obligations

Section Eight: Cooperative Unions

Art. 921 Three or more cooperatives may form a cooperative union and consti- tute it as a cooperative.

Art. 922 1 Unless the articles of association provide otherwise, the supreme governing body of the cooperative union is the assembly of delegates. 2 The articles of association determine the number of delegates from the affiliated societies. 3 Unless the articles of association provide otherwise, each delegate has one vote.

Art. 923 Unless the articles of association provide otherwise, the board of directors is made up of members from the affiliated cooperatives.

Art. 924 1 The articles of association may grant the directors of the union the right to monitor the business activities of the affiliated cooperatives. 2 They may the grant the directors of the union the right to challenge in court the resolutions made by the individual affiliated societies.

Art. 925 Accession to a cooperative union may not bring with it any obligations for the members of the acceding society which they do not already have by law or under the articles of association of their own coopera- tive.

Section Nine: Involvement of Public Sector Corporations

Art. 926 1 Where public sector corporations such as the Confederation or a canton, district or commune have a public interest in a cooperative, the cooperative’s articles of association may grant that corporation the

323

220Federal Act on the Amendment of the Swiss Civil Code

right to appoint representatives to the board of directors or the audi- tor.527 2 These directors and auditors appointed by a public sector corporation have the same rights and duties as those elected by the cooperative. 3 Only the public sector corporation has the right to dismiss the repre- sentatives it appointed to the board of directors and the auditor.528 The public sector corporation is liable to the cooperative, its members and creditors for the actions of these representatives, subject to rights of recourse under federal and cantonal law.

Division Four:529 The Commercial Register, Business Names and Commercial Accounting Title Thirty: The Commercial Register

Art. 927 A. Purpose and 1 A commercial register is kept in each canton. establishment I. In general 2 The cantons are free to keep district-based commercial registers.

3 The cantons determine the official bodies responsible for keeping the commercial register and a cantonal supervisory authority.

Art. 928 II. Liability 1 The commercial registrars and the supervisory authorities to which

they directly report are personally liable for all losses caused through their own fault or that of the employees they appoint. 2 …530 3 Where the loss is not covered by the liable civil servant, the canton must bear the shortfall.

527 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

528 First sentence Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

529 Amended by the Federal Act of 18 Dec. 1936, in force since 1 July 1937 (AS 53 185; BBl 1928 I 205, 1932 I 217). See the Final and Transitional Provisions to Title. XXIV– XXXIII at the end of the CO.

530 Repealed by Annex No 10 of the Federal Act of 19 Dec. 2008 (Adult Protection, Law of Persons and Law of Children), with effect from 1 Jan. 2013 (AS 2011 725; BBl 2006 7001).

325

220 Code of Obligations

III. Federal Council ordi- nances 1. In general531

2. Electronic commercial registers

IV. Public register

V. Swiss Official Gazette of Commerce

Art. 929 1 The Federal Council enacts provisions governing the establishment, keeping and supervision of commercial registers and the related pro- cedures, applications for entry, the documents to be filed and their verification, the content of entries, fees and complaint processing.532 2 The fees should reflect the economic dimensions of the business registered.

Art. 929a533 1 The Federal Council enacts provisions governing the use of informa- tion technology to keep the commercial register and governing elec- tronic data exchange between the commercial registry authorities. In particular, the Federal Council may instruct the cantons to use infor- mation technology to keep the commercial register, to accept support- ing documents filed electronically, to enter supporting documents in electronic format and to transmit electronic data. 2 The Federal Council determines whether and on what conditions notifications for entry and supporting documents may be filed elec- tronically to the commercial registry. It may enact provisions govern- ing the electronic archiving of supporting documents and instruct the cantons to issue authenticated excerpts from the commercial register in electronic format.

Art. 930 The commercial register, including all applications for entry and supporting documents, is public.

Art. 931 1 The entries in the commercial register are published in full without delay in the Swiss Official Gazette of Commerce, unless an act or ordinance prescribes the publication of only part or an excerpt thereof. 2 Similarly, all public announcements prescribed by law are made by publication in the Swiss Official Gazette of Commerce.

531 Amended by Annex No 2 of the Federal Act of 19 Dec. 2003 on Electronic Signatures, in force since 1 Jan. 2005 (SR 943.03).

532 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

533 Inserted by Annex No 2 of the Federal Act of 19 Dec. 2003 on Electronic Signatures, in force since 1 Jan. 2005 (SR 943.03).

326

220Federal Act on the Amendment of the Swiss Civil Code

2bis The Federal Council may also make the data published in the Swiss Official Gazette of Commerce available to the public in other ways.534 3 The Federal Council enacts the provisions governing the establish- ment of the Swiss Official Gazette of Commerce.

Art. 931a535 B. Entries 1 In the case of legal entities, the supreme executive or management I. Application body must apply for entry in the commercial register, subject to the

provisions of special legislation on public corporations and institu- tions. 2 The application must be signed by two members of the supreme executive or management body or by one member who is authorised to sign alone. The application must be signed at the commercial registry or must be filed with legalised signatures.

Art. 932 1 The timing of the entry in the commercial register is determined by

II. Entry into the time at which the entry was made in the journal.force536 2 An entry in the commercial register does not take effect in relation to third parties until the working day after the date of publication printed on the issue of the Swiss Official Gazette of Commerce in which the entry is published. That working day is also the key date for determin- ing the start of any time limit described as beginning on publication of the entry. 3 Special provisions according to which legal effects attach, including those in relation to third parties, or time limits begin to run immedi- ately on entry in the register are reserved.

534 Inserted by Annex No 2 of the Federal Act of 19 Dec. 2003 on Electronic Signatures, in force since 1 Jan. 2005 (SR 943.03).

535 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

536 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

327

220 Code of Obligations

III. Effects537

IV. Entry in the commercial register 1. Right and duty

2. Branch offices

3. Implementing provisions

Art. 933 1 Ignorance of an entry that has become effective in relation to third parties is no defence. 2 Where the entry of a fact is prescribed but such fact was not entered in the register, it may be relied upon in relation to third parties only if it can be shown that they were aware of the said fact.

Art. 934538 1 A person operating a trading, manufacturing or other type of com- mercial business is obliged to have it entered in the commercial regis- ter for the place in which its head office is located. 2 A person operating a business under a business name for which entry in the commercial register is not compulsory has the right to have its business name entered in the commercial register for the place in which its head office is located.

Art. 935 1 Swiss branch offices of firms whose head office is in Switzerland must be entered in the register for the place in which they are located once the entry for the head office has been made. 2 Swiss branch offices of firms whose head office is abroad must be entered in the same manner as branch offices of Swiss firms, providing the applicable foreign law does not require a different approach. A commercial agent resident in Switzerland and with the right of com- mercial representation must be appointed for such branch offices.

Art. 936 The Federal Council enacts more detailed provisions governing com- pulsory entry in the commercial register.

537 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

538 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

328

220Federal Act on the Amendment of the Swiss Civil Code

Art. 936a539 4. Business 1 Sole proprietorships, general partnerships and partnerships limited by Identification number shares, companies, cooperatives, associations, foundations and public

sector institutions entered in the commercial register are each given an identification number in accordance with the Federal Act of 18 June 2010540 on the Business Identification Number. 2 This identification number remains unchanged throughout the en- tity’s existence and, in particular, is not affected by any relocation of the entity’s seat, reorganisation of the entity or change of name. 3 The Federal Council enacts implementing provisions. It may provide that the identification number be indicated in addition to the business name on letters, order forms and invoices.

Art. 937 V. Changes541 Where a fact is entered in the commercial register, any change to that

fact must likewise be entered.

Art. 938542 VI. Deletion Where the business whose business name is entered in the register 1. Duty to delete ceases to exist or passes into the ownership of another person, the

previous owners or their heirs are obliged to have the business name deleted from the register.

Art. 938a543

2. Ex officio 1 Where a company ceases it business activity and if it no longer has deletion realisable assets, the commercial registrar, having made three calls on

creditors without response, may delete it from the commercial register. 2 If a company member, shareholder, cooperative member or creditor claims an interest in maintaining the entry, the court decides.

539 Inserted by Annex No 2 of the Mergers Act of 3 Oct. 2003, in force since 1 July 2004 (SR 221.301). Amended by Annex No 1 of the Federal Act of 18 June 2010 on the Business Identification Number, in force since 1 Jan. 2011 (AS 2010 4989; BBl 2009 7855).

540 SR 431.03 541 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability

542 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

543 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

329

220 Code of Obligations

3. Executive officers and powers of representation

VII. Insolvency of commercial enterprises and cooperatives545

VIII. Duties of the registrar 1. Duty of verification546

3 The Federal Council regulates the details.

Art. 938b544 1 Where persons entered in the commercial register as an executive officer leave their office, the legal entity concerned must request their deletion of their name without delay. 2 The persons leaving may also request the deletion of their name themselves. The commercial registrar notifies the legal entity of the deletion without delay. 3 The foregoing provisions also apply to the deletion of the names of registered authorised signatories.

Art. 939 1 Where insolvency proceedings have been commenced in respect of a commercial company or a cooperative, on receipt of the official decla- ration of insolvency, the commercial registrar must enter the resultant dissolution of the company or cooperative in the commercial register. 2 Where the declaration is revoked, on receipt of the official notice of its revocation, the entry is deleted from the commercial register. 3 On receipt of the official notice of completion of insolvency proceed- ings, the company or cooperative is deleted from the commercial register.

Art. 940 1 The registrar must verify whether the statutory requirements for entry are fulfilled. 2 When entering legal entities he must, in particular, check that the articles of association do not contradict provisions of mandatory law and that they have the content required by law.

544 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

545 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

546 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

330

220Federal Act on the Amendment of the Swiss Civil Code

2. Reminder, ex officio entry

3. Application to the court or supervisory authority

IX. Failure to comply with provisions 1. Liability for losses548

2. Administra- tive fines

Art. 941 The registrar must hold the interested parties to their obligations to notify facts for entry in the commercial register and, where necessary, must carry out the prescribed entries ex officio.

Art. 941a547 1 In the event of any defects in the provisions of mandatory law on the organisation of a company, the registrar applies to the court to take the required measures. 2 In the event of any defects in the provisions of mandatory law on the organisation of a foundation, the registrar applies to the supervisory authority to take the required measures. 3 If the provisions of mandatory law on the auditor of an association are infringed, the registrar applies to the court to take the required measures

Art. 942 Any person obliged to notify a fact for entry in the commercial register who wilfully or negligently fails to do so is liable for the resultant losses.

Art. 943 1 Where by law a person shares a duty to notify a fact for entry in the commercial register, the registry authority of its own accord penalises any failure to do so by imposing administrative fines in amounts ranging from 10 to 500 francs. 2 The same fines are imposed on the directors of a company limited by shares who fail to comply with a call to submit the profit and loss account and balance sheet to the commercial registry.

547 Inserted by Annex No 1 of the Federal Act of 8 Oct. 2004 (Law on Foundations), in force since 1 Jan. 2006 (AS 2005 4545 4549; BBl 2003 8153 8191).

548 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

331

220 Code of Obligations

A. General principles of business name composition I. General provisions

II. Names of sole proprietorships 1. Essential content549

2. Exclusivity of the registered business name

Title Thirty-One: Business Names

Art. 944 1 In addition to the essential content required by law, each business name may contain information which serves to describe the persons mentioned in greater detail, an allusion to the nature of the company or an invented name provided that the content of the business name is truthful, cannot be misleading and does not run counter to any public interest. 2 The Federal Council may enact provisions regulating the permissible scope for use of national and territorial designations in business names.

Art. 945 1 A person operating a business as sole proprietor must use his family name, with or without first name, as the essential content of his busi- ness name.

5502 ... 3 The business name must not have any kind of suffix or ending which suggests constitution as a company or partnership.

Art. 946 1 The name of a sole proprietorship551 entered in the commercial register may not be used by another business proprietor in the same location even if he has the same first name and family name from which the older business name is formed. 2 In such a case, the owner of the newer business must add a suffix or ending to his own name to produce a business name which is clearly distinct from the older business name. 3 Claims in respect of unfair competition against sole proprietor- ships552 registered in other locations are reserved.

549 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

550 Repealed by No I of the Federal Act of 4 Oct. 1991 (AS 1992 733; BBl 1983 II 745). 551 Footnote relevant to German version. 552 Footnote relevant to German version.

332

220Federal Act on the Amendment of the Swiss Civil Code

III. Business names of companies, partnerships and cooperatives 1. General partnerships, limited partner- ships and partnerships limited by shares a. Composition of the business name

b. Changing the business name

3. Companies limited by shares, limited liability compa- nies and cooperatives

Art. 947 1 Where the business name of a general partnership does not contain the names of all the partners, it must include the family name of at least one of the partners, together with an addition that alludes to its status as a partnership. 2 Where further partners join later, the general partnership may retain its business name without change. 3 The business name of a limited partnership or partnership limited by shares must include the family name of at least one of the partners with unlimited liability, together with an addition that alludes to its status as a partnership. 4 The names of persons other than the partners with unlimited liability must not feature in the business name of a general partnership, limited partnership or partnership limited by shares.

Art. 948 1 Where a person whose family name features in the business name of a general partnership, limited partnership or partnership limited by shares leaves the partnership, with the consent of such person or his heirs his name may be removed from the partnership’s business name. 2 Exceptions may be authorised where the partnership status is ex- pressed through kinship, provided at least two partners with unlimited liability are still related by blood or marriage and one of them bears the family name that features in the business name.

Art. 949553

Art. 950554 1 Companies limited by shares, limited liability companies and coop- eratives may choose their business names freely, subject to the general principles of business name composition. The business name must however indicate the legal form.

553 Repealed by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), with effect from 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

554 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

333

220 Code of Obligations

4. Exclusivity of the registered business name

IV. Branch offices

V. Takeover of a business

VI. Change of name

Art. 951555 1 The provisions governing the exclusivity of the registered business names for sole proprietorships also apply to the business names of general partnerships, limited partnerships, partnerships limited by shares. 2 The business names of companies limited by shares, limited liability companies and cooperatives must be clearly distinct from every other business name of businesses in any of these legal forms already regis- tered in Switzerland.

Art. 952 1 A branch office must have the same business name as the head office; however, it may append a special addition to its business name providing this applies only to that particular branch office. 2 The business name of the branch office of a company whose seat is outside Switzerland must also indicate the location of the head office, the location of the branch office and the express designation of branch office.

Art. 953 1 Any person taking over a business is bound by the provisions gov- erning the composition and adoption of business names. 2 However, with the express or tacit consent of the former owners or their heirs, the acquirer may retain the previous business name, pro- vided that an addition is appended to indicate the change of ownership and the new owner is named.

Art. 954 The previous business name may be retained where the name of the business owner or partner contained therein has been changed by operation of law or by the competent authority.

555 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

334

220Federal Act on the Amendment of the Swiss Civil Code

Art. 954a556 B. Obligation to 1 In correspondence, on order forms and invoices and in official com- use business and other names munications, the business or other name entered in the commercial

must be given in full and unamended. 2 Shortened names, logos, trade names, brand names and similar may also be used.

Art. 955 B. Monitoring557 The registrar is obliged ex officio to ensure that the interested parties

comply with the provisions governing the composition of business names.

Art. 956 C. Protection of 1 The business name of a sole proprietor or commercial company or business names558 cooperative entered in the commercial register and published in the

Swiss Official Gazette of Commerce is for the exclusive use of the party that registered it. 2 A party whose interests are injured by the unauthorised use of a business name may apply for an injunction banning further abuse of the business name and sue for damages if the unauthorised user is at fault.

Title Thirty-Two:559 Commercial Accounting and Financial Reporting Section One: General Provisions

Art. 957 A. Duty to keep 1 The duty to keep accounts and file financial reports in accordance accounts and file financial reports with the following provisions applies to:

556 Inserted by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

557 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

558 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

559 Amended by No I 2 of the Federal Act of 23 Dec. 2011 (Financial Reporting Law), in force since 1 Jan. 2013 (AS 2012 6679; BBl 2008 1589). See also the Transitional Provision to this Amendment at the end of the text.

335

220 Code of Obligations

B. Accounting

1. sole proprietorships and partnerships that have achieved sales revenue of at least 500,000 francs in the last financial year;

2. legal entities. 2 The following need only keep accounts on income and expenditure and on their asset position:

1. sole proprietorships and partnerships with less than 500,000 francs sales revenue in the last financial year;

2. associations and foundations which are not required to be en- tered in the commercial Register;

3. foundations that are exempt from the requirement to appoint an auditor under Article 83b paragraph 2 Swiss Civil Code560.

3 For undertakings in accordance with paragraph 2, recognised ac- counting principles apply mutatis mutandis.

Art. 957a 1 Accounting forms the basis for financial reporting. It records the transactions and circumstances that are required to present the asset, financing and earnings position of the undertaking (the economic position). 2 It follows the recognised accounting principles. Particular note must be taken of the following:

1. the complete, truthful and systematic recording of transactions and circumstances;

2. documentary proof for individual accounting procedures; 3. clarity; 4. fitness for purpose given the form and size of the undertaking; 5. verifiability.

3 An accounting voucher is any written record on paper or in electronic or comparable form that is required to be able to verify the business transaction or the circumstances behind an accounting entry. 4 Accounting is carried out in the national currency or in the currency required for business operations. 5 It is carried out in one of the official Swiss languages or in English. It may be carried out in writing, electronically or in a comparable man- ner.

SR 210

336

560

220Federal Act on the Amendment of the Swiss Civil Code

C. Financial reporting I. Aim and constituent elements

II. Principles of financial reporting 1. Going- concern assump- tion

2. Chronological and material distinction

III. Recognised financial reporting principles

Art. 958 1 Financial reporting is intended to present the economic position of the undertaking in such a manner that third parties can make a reliable assessment of the same. 2 The accounts are filed in the annual report. This contains the annual accounts (the financial statements of the individual entity), comprising the balance sheet, the profit and loss account and the notes to the accounts. The regulations for larger undertakings and corporate groups are reserved. 3 The annual report must be prepared within six months of the end of the financial year and submitted to the responsible management body or the responsible persons for approval. It must be signed by the chair- person of the supreme management or administrative body and the person responsible for financial reporting within the undertaking.

Art. 958a 1 Financial reporting is based on the assumption that the undertaking will remain a going concern for the foreseeable future. 2 If it is intended or probably inevitable that all or some activities will cease in the next twelve months from the balance sheet date, then the financial reports for the relevant parts of undertaking must be based on realisable values. Provisions must be made for expenditures associated with ceasing activities. 3 Derogations from the going-concern assumption must be specified in the notes to the accounts; their influence on the economic position must be explained.

Art. 958b 1 Expenditure and income must be entered separately depending on the date and nature of the transaction. 2 Provided the net proceeds from the sale of goods or services or financial income does not exceed 100,000 francs, accruals based on time may be dispensed with and instead based on expenditure and income.

Art. 958c 1 The following principles in particular apply to financial reports:

1. they must be clear and understandable. 2. they must be complete. 3. they must be reliable. 4. they must include the essential information.

337

220 Code of Obligations

IV. Presentation, currency and language

D. Publication and inspection

E. Keeping and retaining accounting records

5. they must be prudent. 6. the same rules must be applied in presentation and valuation . 7. assets and liabilities and income and expenditure may not be

offset against each other. 2 The sum entered for the individual items on the balance sheet and in the notes to the account must be proven by an inventory or by some other method. 3 Financial reports must be adapted to the special features of the under- taking and the sector while retaining the statutory minimum content.

Art. 958d 1 The balance sheet and the profit and loss account may be presented in account or in report form. Items that have no or a negligible value need not be shown separately. 2 In the annual accounts, the corresponding values of the previous year must be shown alongside the figures for the relevant financial year. 3 Financial reports are presented in the national currency or in the currency required for business operations. If the national currency is not used, the values must also be shown in the national currency. The exchange rates applied must be published in the notes to the accounts and if applicable explained. 4 Financial reports are presented in one of the official Swiss languages or in English.

Art. 958e 1 Following their approval by the competent management body, the annual accounts and consolidated accounts together with the audit reports must either be published in the Swiss Official Gazette of Commerce or sent as an official copy to any person who requests the same within one year of their approval at his or her expense where the undertaking:

1. has outstanding debentures; or 2. has equity securities listed on a stock market.

2 Other undertakings must allow creditors who prove a legitimate interest to inspect the annual report and the audit reports. In the event of a dispute, the court decides.

Art. 958f 1 The accounting records and the accounting vouchers together with the annual report and the audit report must be retained for ten years. The retention period begins on expiry of the financial year.

338

220Federal Act on the Amendment of the Swiss Civil Code

A. Balance sheet I. Purpose of the balance sheet, duty to prepare a balance sheet and balance sheet eligibility

2 The annual report and the audit report must be retained in a written form and signed. 3 The accounting records and the accounting vouchers may be retained on paper, electronically or in a comparable manner, provided that correspondence with the underlying business transactions and circum- stances is guaranteed thereby and provided they can be made readable again at any time. 4 The Federal Council shall issue regulations on the accounting records that must be kept, the principles for keeping and retaining them and on the information carriers that may be used.

Section Two: Annual Accounts

Art. 959 1 The balance sheet shows the asset and financing position of the undertaking on the balance sheet date. It is structured into assets and liabilities. 2 Items must be entered on the balance sheet as assets if due to past events they may be disposed of, a cash inflow is probable and their value can be reliably estimated. Other assets may not be entered on the balance sheet. 3 Cash and cash equivalents and other assets that will probably become cash or cash equivalents assets or otherwise be realised within one year of the balance sheet date or within the normal operating cycle must be entered on the balance sheet as current assets. All other assets are entered on the balance sheet as capital assets. 4 Borrowed capital and shareholders’ equity must be entered on the balance sheet as liabilities. 5 Liabilities must be entered on the balance sheet as borrowed capital if they have been caused by past events, a cash outflow is probable and their value can be reliably estimated. 6 Liabilities must be entered on the balance sheet as current liabilities if they are expected to fall due for payment within one year of the balance sheet date or within the normal operating cycle. All other liabilities must be entered on the balance sheet as long-term liabilities. 7 The shareholders’ equity must be shown and structured in the re- quired legal form.

Art. 959a 1 Among the assets, the liquidity ratio must be shown based on at least the following items, both individually and in the specified order:

II. Minimum structure

339

220 Code of Obligations

1. current assets: a. cash and cash equivalents and current assets with a stock

exchange price, b. trade receivables, c. other current receivables, d. inventories and non-invoiced services, e. accrued income and prepaid expenses;

2. capital assets: a. financial assets, b. shareholdings, c. tangible fixed assets, d. intangible fixed assets, e. non-paid up basic, shareholder or foundation capital.

2 The due date of liabilities must be shown based on at least the fol- lowing items, both individually and in the specified order:

1. current borrowed capital: a. trade creditors, b. current interest-bearing liabilities, c. other current liabilities, d. deferred income and accrued expenses;

2. long-term borrowed capital: a. long-term interest-bearing liabilities, b. other long-term liabilities, c. provisions and similar items required by law;

3. shareholders’ equity: a. basic, shareholder or foundation capital, if applicable

separately according to participation classes, b. statutory capital reserves, c. statutory retained earnings, d. voluntary retained earnings or accumulated losses as

negative items, e. own capital shares as negative items.

3 Other items must be shown individually on the balance sheet or in the notes to the accounts, provided this is essential so that third parties can assess the asset or financing position or is customary as a result of the activity of the company. 4 Receivables and liabilities vis-à-vis direct or indirect participants and management bodies and vis-à-vis undertakings in which there is a direct or indirect participation must in each case be shown separately on the balance sheet or in the notes to the accounts.

340

220Federal Act on the Amendment of the Swiss Civil Code

B. Profit and loss account; minimum structure

Art. 959b 1 The profit and loss account presents the earnings of the company over the financial year. It may be prepared according to the period- based accounting method or the cost of sales method. 2 If the period-based accounting method is used (nature of expense method), a minimum of the following items must be shown individu- ally and in the specified order:

1. net proceeds from sales of goods and services; 2. changes in inventories of unfinished and finished goods and in

non-invoiced services; 3. cost of materials; 4. staff costs; 5. other operational costs; 6. depreciation and valuation adjustments on fixed asset items; 7. financial costs and financial income; 8. non-operational costs and non-operational income; 9. extraordinary, non-recurring or prior-period costs and income; 10. direct taxes; 11. annual profit or annual loss.

3 If the cost of sales method is used (activity-based costing method), a minimum of the following items must be shown individually and in the specified order:

1. net proceeds from sales of goods and services; 2. acquisition or manufacturing costs of goods and services sold; 3. administrative costs and distribution costs; 4. financial costs and financial income; 5. non-operational costs and non-operational income; 6. extraordinary, non-recurring or prior-period costs and income; 7. direct taxes; 8. annual profit or annual loss.

4 If the cost of sales method is used, the notes to the accounts must also show the staff costs and, as a single item, depreciation and valua- tion adjustments to fixed asset items. 5 Other items must been shown individually in the profit and loss account or in the notes to the accounts to the extent that this is essen- tial in order that third parties can assess the earning power or is cus- tomary as a result of the activity of the company.

341

220 Code of Obligations

C. Notes to the accounts

Art. 959c 1 The notes to the annual accounts supplement and explain the other parts of the annual accounts. They contain:

1. details of the principles applied in the annual accounts where these are not specified by law;

2. information, breakdowns and explanations relating to items on the balance sheet and in the profit and loss account;

3. the total amount of replacement reserves used and the addi- tional hidden reserves, if this exceeds the total amount of new reserves of the same type where the result achieved thereby is considerably more favourable;

4. other information required by law. 2 The notes to the accounts must also include the following informa- tion, unless it is already provided on the balance sheet or in the profit and loss account:

1. the business name or name of the undertaking as well as its le- gal form and registered office;

2. a declaration as to whether the number of full-time positions on annual average is no more than 10, 50 or 250;

3. the business name, legal form and registered office of under- takings in which direct or substantial indirect shareholdings are held, stating the share of the capital and votes held;

4. the number of its own shares that the undertaking itself holds and that are held by undertakings in which it has sharehold- ings;

5. acquisitions and sales of its own shares and the terms on which they were acquired or sold;

6. the residual amount of the liabilities from sale-like leasing transactions and other leasing obligations, unless these expire or may be terminated within twelve months of the balance sheet date expiry or be terminated may;

7. liabilities vis-à-vis pension schemes; 8. the total amount of collateral for third party liabilities; 9. the total amount of assets used to secure own liabilities and as-

sets under reservation of ownership; 10. legal or actual obligations for which a cash outflow either ap-

pears unlikely or is of an amount that cannot be reliably esti- mated (contingent liabilities);

11. the number and value of shares or options on shares held by management or administrative bodies and by employees;

342

220Federal Act on the Amendment of the Swiss Civil Code

D. Valuation I. Principles

II. Assets 1. In general

12. explanations of exceptional, non-recurring or prior-period items in the profit and loss account;

13. significant events occurring after the balance sheet date; 14. in the event of the auditor's premature resignation: the reasons

therefor. 3 Sole proprietorships and partnerships may dispense with notes to the accounts if they are not required to file financial reports under the regulations for larger undertakings. If additional information is re- quired in the regulations on the minimum structure of the balance sheet and profit and loss account and the notes to the accounts are dispensed with, this information must be shown directly on the balance sheet or in the profit and loss account. 4 Undertakings with outstanding debentures must provide information on the amounts concerned, interest rates, maturity dates and other conditions.

Art. 960 1 Assets and liabilities are normally valued individually, provided they are significant and not normally consolidated as a group for valuation purposes due to their similarity. 2 Valuation must be carried out prudently, but this must not prevent the reliable assessment of the economic position of the undertaking. 3 If there are specific indications that assets have been overvalued or that provisions are too low, the values must be reviewed and adjusted if necessary.

Art. 960a 1 When first recorded, assets must be valued no higher than their acquisition or manufacturing costs. 2 In any subsequent valuation, assets must not be valued higher than their acquisition or manufacturing costs. Provisions on individual types of assets are reserved. 3 Loss in value due to usage or age must be taken into account through depreciation, while other losses in value must be taken into account through valuation adjustments. Depreciation and valuation adjustments must be applied in accordance with generally recognised commercial principles. They must be deducted directly or indirectly from the relevant assets and charged to the profit and loss account and may not be shown under liabilities. 4 For replacement purposes and to ensure the long-term prosperity of the undertaking, additional depreciation and valuation adjustments may be made. For the same purposes, the cancellation of depreciation

343

220 Code of Obligations

2. Assets with observable market prices

3.Inventories and non-invoiced services

4. Capital assets

III. Liabilities

and valuation adjustments that are no longer justified may be dis- pensed with.

Art. 960b 1 In the subsequent valuation, assets with a stock exchange price or another observable market price in an active market may be valued at that price as of the balance sheet date, even if this price exceeds the nominal value or the acquisition value. Any person who exercises this right must value all assets in corresponding positions on the balance sheet that have an observable market price at the market price as of the balance sheet date. In the notes to the accounts, reference must be made to this valuation. The total value of the corresponding assets must be disclosed separately for securities and other assets with ob- servable market price. 2 If assets are valued at the stock exchange price or at the market price as of the balance sheet date, a value adjustment to be charged to the profit and loss account may be made in order to take account of fluc- tuations in the price development. Such valuation adjustments are not permitted, however, if they would result in both the acquisition value and the lower market value being undercut. The total amount of fluc- tuation reserves must be shown separately on the balance sheet or in the notes to the accounts.

Art. 960c 1 If the realisable value in the subsequent valuation of inventories and non-invoiced services taking account of expected costs is less than the acquisition or manufacturing costs on balance sheet date, this value must be entered. 2 Inventories comprise raw materials, work in progress, finished goods and resale merchandise.

Art. 960d 1 Capital assets are assets that are acquired with the intention of using or holding them for the long-term. 2 Long-term means a period of more than twelve months. 3 Shareholdings are shares in the capital of another undertaking that are held for the long-term and confer a significant influence. This is presumed if the shares confer at least 20 per cent of the voting rights.

Art. 960e 1 Liabilities must be entered at their nominal value.

344

220Federal Act on the Amendment of the Swiss Civil Code

A. Additional requirements for the annual report

B. Additional information in the notes to the annual accounts

C. Cash flow statement

D. Management report

2 If past events lead to the expectation of a cash outflow in future financial years, the provisions probably required must be made and charged to the profit and loss account. 3 Provisions may also be made in particular for:

1. regularly incurred expenditures from guarantee commitments; 2. renovations to tangible fixed assets; 3. restructuring; 4. securing the long-term prosperity of the undertaking.

4 Provisions that are no longer required need not be cancelled.

Section Three: Financial Report for Larger Undertakings

Art. 961 Undertakings that are required by law to have an ordinary audit must:

1. provide additional information in the notes to the annual ac- counts;

2. prepare a cash flow statement as part of the annual accounts; 3. draw up a management report.

Art. 961a The notes to the annual accounts must also contain the following information:

1. long-term interest-bearing liabilities, arranged according to due date within one to five years or after five years;

2. on the fees paid to the auditor, with separate items for audit services and other services.

Art. 961b The cash flow statement presents separately changes in cash and cash equivalents from business operations, investment activities and financ- ing activities.

Art. 961c 1 The management report presents the business performance and the economic position of the undertaking and, if applicable, of the corpo- rate group at the end of the financial year from points of view not covered in the annual accounts. 2 The management report must in particular provide information on:

345

220 Code of Obligations

E. Simplification due to consoli- dated accounts

A. General

1. the number of full-time positions on annual average; 2. the conduct of a risk assessment; 3. orders and assignments; 4. research and development activities; 5. extraordinary events; 6. future prospects.

3 The management report must not contradict the economic position presented in the annual accounts.

Art. 961d 1 The additional information in the notes to the annual accounts, the cash flow statement and the management report may be dispensed with if the undertaking itself or a legal entity controlling the undertaking prepares consolidated accounts in accordance with a recognised finan- cial reporting standard. 2 The following persons may request financial reports in accordance with the regulations in this Section:

1. company members who represent at least 10 per cent of the basic capital;

2. 10 per cent of cooperative members or 20 per cent of the members of an association;

3. any company member or any member subject to personal li- ability or a duty to pay in further capital.

Section Four: Financial Statements in accordance with Recognised Financial Reporting Standards

Art. 962 1 In addition to annual accounts under this Title, the following must prepare financial statements in accordance with a recognised financial reporting standard:

1. companies whose equity securities are listed on a stock market, if the stock market so requires;

2. cooperatives with a minimum of 2000 members; 3. foundations that are required by law to have an ordinary audit.

2 The following may also request financial statements in accordance with a recognised standard:

1. company members who represent at least 20 per cent of the basic capital;

346

220Federal Act on the Amendment of the Swiss Civil Code

B. Recognised financial reporting standards

A. Duty to prepare

2. 10 per cent of cooperative members or 20 per cent of the members of an association;

3. any company member or any member subject to personal li- ability or a duty to pay in further capital.

3 The duty to prepare financial statements in accordance with a recog- nised standard ceases to apply if consolidated accounts are prepared in accordance with a recognised standard. 4 The supreme management or administrative body is responsible for choosing the recognised standard, unless the Articles of Association, the by-laws or the foundation deed provide otherwise or the supreme management body fails to specify the recognised standard.

Art. 962a 1 If financial statements are prepared in accordance with a recognised financial reporting standard, details of the standard must be given in the financial statements. 2 The chosen recognised standard must be applied in its entirely and for the financial statements as a whole. 3 Compliance with the recognised standard must be verified by a qualified audit specialist. An ordinary audit must be made of the financial statements. 4 Financial statements in accordance with a recognised standard must be submitted to the supreme management body when the annual ac- counts are submitted for approval, although they do not require ap- proval. 5 The Federal Council shall specify the recognised standards. It may stipulate requirements that must be met when choosing a standard or when changing from one standard to another.

Section Five: Consolidated accounts

Art. 963 1 Where a legal entity that is required to file financial reports controls one or more undertakings that are required to file financial reports, the entity must prepare consolidated annual accounts (consolidated ac- counts) in the annual report for all the undertakings controlled. 2 A legal entity controls another undertaking if it:

1. directly or indirectly holds a majority of votes in the highest management body;

347

220 Code of Obligations

B. Exemption from the duty to prepare accounts

2. directly or indirectly has the right to appoint or remove a ma- jority of the members of the supreme management or adminis- trative body; or

3. it is able to exercise a controlling influence based on the arti- cles of association, the foundation deed, a contract or compa- rable instruments.

3 A recognised standard under Article 963b may define the group of undertakings. 4 Associations, foundations and cooperatives may delegate the duty to prepare consolidated accounts to a controlled undertaking provided the controlled undertaking concerned brings all the other undertakings together under a single management by holding a voting majority or in any other way and proves that it actually exercises control.

Art. 963a 1 A legal entity is exempt from the duty to prepare consolidated ac- counts if it:

1. together with the controlled undertaking has not exceeded two of the following thresholds in two successive financial years: a. a balance sheet total of 20 million francs, b. sales revenue of 40 million francs, c. 250 full-time positions on annual average;

2. is controlled by an undertaking whose consolidated accounts have been prepared and audited in accordance with Swiss or equivalent foreign regulations; or

3. it has delegated the duty to prepare consolidated accounts to a controlled undertaking in accordance with Article 963 para- graph 4.

2 Consolidated accounts must nonetheless be prepared where: 1. this is necessary in order to make the most reliable assessment

of the economic position; 2. company members who represent at least 20 per cent of the

basic capital or 10 per cent of the members of a cooperative or 10 per cent of the members of an association so require;

3. a company member or an association member subject to per- sonal liability or a duty to pay in further capital so requires; or

4. the foundation supervisory authority so requires. 3 If a legal entity in accordance with paragraph 1 number 2 dispenses with preparing the consolidated accounts for the subsidiary group, it must disclose the consolidated accounts of the parent group in accor- dance with the regulations for its own annual accounts.

348

220Federal Act on the Amendment of the Swiss Civil Code

C. Recognised financial reporting standards

A. Definition of negotiable security

Art. 963b 1 The consolidated accounts of the following undertakings must be prepared in accordance with a recognised financial reporting standard:

1. companies whose equity securities are listed on a stock market, if the stock market so requires;

2. cooperatives with a minimum of 2000 members; 3. foundations that are required by law to have an ordinary audit.

2 Article 962a paragraphs 1–3 and 5 apply mutatis mutandis. 3 The consolidated accounts of other undertakings are governed by recognised financial reporting principles. In the notes to the consoli- dated accounts, the undertaking shall specify the valuation principles. If it derogates from such rules, it shall give notice thereof in the notes to the accounts and provide the information required for assessing the asset, financing and earnings of the corporate group in a different form. 4 Consolidated accounts must nonetheless be prepared in accordance with a recognised financial reporting standard where:

1. company members who represent at least 20 per cent of the basic capital or 10 per cent of the members of a cooperative or 20 per cent of the members of an association so require;

2. a company member or an association member subject to per- sonal liability or a duty to pay in further capital so requires; or

3. the foundation supervisory authority so requires.

Art. 964561

Division Five:562 Negotiable Securities Title Thirty-Three: Registered Securities, Bearer Securities and Instruments to Order Section One: General Provisions

Art. 965 A negotiable security is any instrument to which a right attaches in such a manner that it may not be exercised or transferred to another without the instrument.

561 Repealed by No I of the Federal Act of 22 Dec. 1999, with effect from 1 June 2002 (AS 2002 949; BBl 1999 5149).

562 Amended by the Federal Act of 18 Dec. 1936, in force since 1 July 1937 (AS 53 185; BBl 1928 I 205, 1932 I 217). See the Final and Transitional Provisions to Title XXIV- XXXIII at the end of the CO.

349

220 Code of Obligations

B. Obligation under the security

C. Transfer of the security I. General form

II. Endorsement 1. Form

2. Effect

D. Conversion

Art. 966 1 The obligor under a negotiable security is obliged to render perform- ance only against surrender of the instrument. 2 By rendering the performance due at maturity to the creditor as indicated by the instrument, the obligor is released from the obligation unless he is guilty of malice or gross negligence.

Art. 967 1 The transfer of any negotiable security conferring title or a limited right in rem requires the transfer of possession of the instrument in all cases. 2 In addition, the transfer of instruments to order requires endorsement and that of registered securities requires a written declaration, which must not be made on the instrument itself. 3 By law or agreement, the transfer may require the participation of other persons, in particular the obligor.

Art. 968 1 In all cases, endorsement must be done in accordance with the provi- sions governing bills of exchange. 2 The formal requirements for transfer are satisfied once the endorse- ment is completed and the instrument handed over.

Art. 969 In the case of all transferable securities, unless the content or nature of the instrument dictate otherwise, on endorsement and transfer of the instrument the rights of the endorser pass to the acquirer.

Art. 970 1 A registered security or instrument to order may be converted into a bearer security only with the consent of all the beneficiaries and obli- gors concerned. Such consent must be declared on the instrument itself. 2 The same general principle applies to conversion of bearer securities into registered securities or instruments to order. In this case, where the consent of a beneficiary or obligor is lacking, conversion is effec- tive but only as between the creditor who undertook it and his immedi- ate legal successor.

350

220Federal Act on the Amendment of the Swiss Civil Code

E. Cancellation I. Party request- ing cancellation

II. Procedure, effect

F. Special provisions

G. Collective custody, global certificate and uncertificated securities I. Collective custody of negotiable securities

II. Global certificate

Art. 971 1 A negotiable security that has been lost may be cancelled by the court. 2 Cancellation may be requested by the beneficiary of the instrument at the time it was lost or its loss was discovered.

Art. 972 1 Following cancellation of the instrument, the beneficiary may exer- cise his right even without the instrument or request the issue of a new instrument. 2 In other respects, the provisions governing the individual types of securities apply to the procedure for and effect of cancellation.

Art. 973 The special provisions governing negotiable securities, such as bills of exchange, cheques and mortgage bonds, are reserved.

Art. 973a563 1 A bailee has the power to hold fungible negotiable securities from two or more bailors together in safe custody unless a bailor expressly requests that his securities be held separately. 2 If fungible negotiable securities are entrusted to a bailee for collec- tive custody, the bailor acquires on deposit joint fractional title to the negotiable securities of the same class belonging to the collective holding. In order to determine the fractional share, the nominal value or in the case of securities without nominal value, the number of securities, is decisive. 3 A bailor has the right at any time, irrespective of the involvement or consent of the other bailors to withdraw negotiable securities from the collective holding to the extent of his share.

Art. 973b564 1 The obligor may issue global certificates or to replace two or more fungible negotiable securities entrusted to a single bailee with a global certificate, provided the conditions for issue or the articles of associa- tion of the company provide therefor or the bailors have consented thereto.

563 Inserted by Annex No 3 of the Uncertificated Securities Act of 3 Oct. 2008, in force since 1 Jan. 2010 (SR 957.1).

564 Inserted by Annex No 3 of the Uncertificated Securities Act of 3 Oct. 2008, in force since 1 Jan. 2010 (SR 957.1).

351

220 Code of Obligations

III. Uncertifi- cated securities

A. Definition

B. Evidence of creditor’s right I. As a general rule

2 The global certificate is a negotiable security in the same form as the individual rights that it represents. It is jointly owned by the participant bailors, in proportion to their shares. The status and rights of the joint owners in relation to the global certificate are governed by Arti- cle 973a paragraph 2 mutatis mutandis.

Art. 973c565 1 The obligor may issue rights with the same function as negotiable securities (uncertificated securities) or replace fungible negotiable securities or global certificates that have been entrusted to a single bailee with uncertificated securities provided the conditions for issue or the articles of association of the company provide therefor or the bailors have consented thereto. 2 The obligor shall keep a book on the uncertificated securities that he has issued in which details of the number and denomination of the uncertificated securities issued and of the creditors are recorded. The book is not open for public inspection. 3 The uncertificated securities are created on entry in the book and continue to exist only in accordance with such entry. 4 The transfer of uncertificated securities requires a written declaration of assignment. Their pledging is governed by the provisions on the pledging of claims.

Section Two: Registered Securities

Art. 974 A negotiable security is deemed a registered security if it is made out to a named person but is neither made out to order nor legally declared to be an instrument to order.

Art. 975 1 The obligor is obliged to render performance only to a person who is the bearer of the instrument and who can show that he is the person in whose name the instrument is registered or the legal successor of such person. 2 Where the obligor renders performance without such evidence, he is not released from his obligation towards a third party who can demon- strate his entitlement.

565 Inserted by Annex No 3 of the Uncertificated Securities Act of 3 Oct. 2008, in force since 1 Jan. 2010 (SR 957.1).

352

220Federal Act on the Amendment of the Swiss Civil Code

II. With qualified bearer securities

C. Cancellation

A. Definition

B. Obligor’s defences I. In general

Art. 976 Where the obligor under the registered security has reserved the right to render performance to any bearer of the instrument, he is released from his obligation by rendering performance in good faith to such a bearer even if he did not request evidence of the creditor’s entitlement; however, he is not obliged to render performance to the bearer.

Art. 977 1 Where no special provision has been made, registered securities are cancelled in accordance with the provisions governing bearer securi- ties. 2 The obligor may make provision in the instrument for a simplified form of annulment consisting in a reduction of the number of public calls for presentation or a curtailment of the time limits, or may re- serve the right to make valid performance even without presentation or annulment of the instrument, providing the creditor declares the bor- rower’s note void and the debt redeemed by public deed or authenti- cated document.

Section Three: Bearer Securities

Art. 978 1 A negotiable security is deemed a bearer security if the wording or form of the instrument shows that the current bearer is recognised as the beneficiary. 2 However, the obligor is no longer permitted to pay if subject to an attachment order served by a court or the police.

Art. 979 1 Against a claim deriving from a bearer security, the obligor may plead only such defences as contest the validity of the instrument or arise from the instrument itself and those available to him personally against the respective obligee. 2 Defences based on the direct relations between the obligor and a former bearer are admissible where the bearer intentionally acted to the detriment of the obligor when acquiring the security. 3 The obligor may not plead the defence that the instrument entered circulation against his will.

353

220 Code of Obligations

II. In the case of bearer coupons

C. Cancellation I. In general 1. Application566

2. Attachment order

3. Public call for presentation, time limit

Art. 980 1 Against a claim deriving from a bearer coupon, the obligor may not plead the defence that the debt principal has been redeemed. 2 However, when redeeming the debt principal, the obligor is entitled to retain an amount corresponding to the interest payable on coupons falling due in the future which are not handed in with the debt instru- ments until the limitation periods applicable to such coupons have expired, unless the coupons not handed in have been cancelled or the amount thereof has been secured.

Art. 981 1 Bearer securities, such as shares, bonds, dividend rights certificates, coupon sheets, subscription warrants for coupon sheets, but not indi- vidual coupons, are cancelled by the court at the request of the benefi- ciary.

5672 ... 3 The applicant must satisfy the court that he possessed and lost the instrument. 4 Where the bearer of a security with a coupon sheet or subscription warrant has merely lost the coupon sheet or subscription warrant, presentation of the security in question is sufficient to establish grounds for the application.

Art. 982 1 At the applicant’s request, the obligor under the negotiable security may be forbidden to honour the security on presentation and warned of the danger of double payment. 2 Where a coupon sheet is to be annulled, the provision governing cancellation of bearer coupons applies mutatis mutandis to the indi- vidual coupons falling due during the proceedings.

Art. 983 Where the court is satisfied that the applicant was in possession of the security but has since lost it, it issues a public notice calling on the unknown bearer to come forward and present the security within a specified time limit, failing which it will declare the security cancelled. The time limit must be at least six months; it commences on the date of the first public notice.

566 Amended by Annex No 5 of the Civil Jurisdiction Act of 24 March 2000, in force since 1 Jan. 2001 (SR 272).

567 Repealed by Annex No 5 of the Civil Jurisdiction Act of 24 March 2000 (SR 272).

354

220Federal Act on the Amendment of the Swiss Civil Code

4. Form of public notice

5. Effect a. Where the security is presented

b. Where the security is not presented

II. Of coupons in particular

III. In the case of banknotes and the like

Art. 984 1 The call for presentation of the security must be published three times in the Swiss Official Gazette of Commerce. 2 In special cases, the court may adopt other means of publicising the call for presentation.

Art. 985 1 Where the lost bearer security is presented, the court sets the appli- cant a time limit within which to bring an action for recovery thereof. 2 Where the applicant fails to bring action within such time limit, the court returns the instrument and lifts the garnishee order.

Art. 986 1 Where the lost bearer security is not presented within the time limit, the court may cancel it or order further measures, depending on the circumstances. 2 Notice of the cancellation of a bearer security must be published immediately in the Swiss Official Gazette of Commerce, and else- where at the court’s discretion. 3 Following cancellation, the applicant is entitled at his expense to request the issue of a new bearer security or performance of the obliga- tion due.

Art. 987 1 Where individual coupons have been lost, at the request of the bene- ficiary the court must order that the amount be deposited with the court at maturity or immediately if the coupon is already due. 2 Where three years have elapsed since the maturity date and no bene- ficiary has come forward in the interim, the court must order the amount deposited to be released to the applicant.

Art. 988 Banknotes and other bearer securities issued in large numbers and payable on sight which are intended for circulation as replacement for money and made out in fixed denominations may not be cancelled.

355

220 Code of Obligations

D. Mortgage certificates

1. Requirements

2. Required content lacking

Art. 989568

The special provisions governing mortgage certificates made out to the bearer are reserved.

Section Four: Bills and Notes A. Capacity to incur Liability as a party to a Bill

Art. 990 A person with capacity to enter into contracts has capacity to incur liability as a party to a bill of exchange.

B. The Bill of Exchange

I. Drawing and Formal Requirements of Bills of Exchange

Art. 991 A bill of exchange contains:

1. the designation ‘bill of exchange’ in the text of the instrument and in the language in which it is issued;

2. the unconditional instruction to pay a certain sum of money; 3. the name of the person who is to pay (drawee); 4. the due date; 5. the bill domicile; 6. the name of the person to whom or to whose order payment is

to be made; 7. the date and the place of issue; 8. the drawer’s signature.

Art. 992 1 An instrument missing one of the elements stipulated in the previous article is not deemed a bill of exchange, except in the cases described in the following paragraphs. 2 A bill of exchange containing no indication of the due date is deemed a sight bill.

568 Amended by No II 2 of the Federal Act of 11 Dec. 2009 (Register Mortgage Certificates and other amendments to Property Law), in force since 1 Jan. 2012 (AS 2011 4637; BBl 2007 5283).

356

220Federal Act on the Amendment of the Swiss Civil Code

3. Types

4. Payment of domiciled bills

5. Promise of interest

6. Discrepancy in specification of bill amount

7. Signatures of persons lacking capacity

3 Where no other specific place is mentioned, the place indicated together with the name of the drawee is deemed both the bill domicile and the domicile of the drawee. 4 A bill of exchange containing no indication of the place of issue is deemed drawn at the place indicated together with the name of the drawer.

Art. 993 1 A bill of exchange may be made out to the drawer’s own order. 2 It may be drawn on the drawer himself. 3 It may be drawn for the account of a third party.

Art. 994 A bill of exchange may be domiciled with a third party, at the drawee’s domicile or at another place.

Art. 995 1 In a bill of exchange payable on sight or at a stated period after presentation for acceptance, the drawer may stipulate that the bill amount will bear interest. For all other bills, the interest rate comment is deemed unwritten. 2 The interest rate must be indicated on the bill of exchange; where there is no such indication, the interest rate comment is deemed un- written. 3 The interest accrues as of the date on which the bill of exchange was drawn, unless some other date is specified.

Art. 996 1 Where the bill amount is given in both letters and numbers, in the event of any discrepancy the amount given in letters is the valid amount. 2 Where the bill amount is given more than once in both letters and numbers, in the event of any discrepancy the lowest amount is the valid amount.

Art. 997 Where a bill of exchange bears a signature of a person lacking capacity to enter into liabilities on a bill of exchange, a forged signature, the signature of a bogus person or a signature which for whatever other reason is not binding on the person who signed or in whose name the

357

220 Code of Obligations

8. Unauthorised signature

9. Liability of the drawer

10. Blank bill

1. Transferability

2. Requirements

bill was signed, this fact has no effect on the validity of the other signatures.

Art. 998 A person who signs a bill of exchange as a representative of another without being authorised so to do is himself liable on the bill and, if he honours the bill, has the same rights as the party he purported to repre- sent would have. The same applies to a representative who exceeds his power of representation.

Art. 999 1 The drawer is liable for the acceptance and payment of the bill of exchange. 2 He may disclaim liability for acceptance; any comment whereby he disclaims liability for payment is deemed unwritten.

Art. 1000 Where a bill of exchange that was incomplete when it was negotiated is completed in a manner contrary to the agreed terms, such non- compliance with the agreed terms may not be invoked against the bearer unless he acquired the bill in bad faith or was guilty of gross negligence when he acquired it.

II. Endorsement

Art. 1001 1 Any bill of exchange may be transferred by endorsement even if it is not expressly made out to order. 2 Where the drawer has included the words “not to order” or a com- ment to that effect in the bill of exchange, the bill may be transferred only subject to the formal requirements and with the effects of a nor- mal assignment. 3 The endorsement may also be made out to the drawee, regardless of whether he has accepted the bill or not, to the drawer or to any other party liable on it. Such persons may endorse the bill further.

Art. 1002 1 The endorsement must be unconditional. Conditions attached to the endorsement are deemed unwritten. 2 A partial endorsement is void.

358

220Federal Act on the Amendment of the Swiss Civil Code

3 An endorsement to the bearer is deemed a blank endorsement.

Art. 1003 3. Form 1 The endorsement must be written on the bill of exchange itself or on

a sheet attached thereto (annex, rider). It must be signed by the en- dorser. 2 The endorsement need not designate the endorsee and may consist merely of the signature of the endorser (blank endorsement). In the latter case the endorsement is valid only if written on the reverse of the bill or on the annex.

Art. 1004 4. Effects 1 The endorsement transfers all rights arising from the bill of ex- a. Transfer change.function

2 If it is a blank endorsement, the bearer may 1. add his name or the name of another person to the endorse-

ment; 2. endorse the bill further by blank endorsement or endorsement

to a specified person; 3. negotiate the bill further without completing the blank en-

dorsement and without endorsing it.

Art. 1005 b. Guarantee 1 Unless the bill contains a comment to the contrary, the endorser is function liable for acceptance and payment.

2 He may forbid further endorsement of the bill; in this case he is not liable to persons to whom the bill is further endorsed.

Art. 1006 c. Proof of 1 A person possessing the bill is the holder in due course providing he bearer’s entitlement can demonstrate his entitlement by means of an uninterrupted se-

quence of endorsements, even where the last is a blank endorsement. Deleted endorsements are deemed unwritten. Where a blank endorse- ment is followed by a further endorsement, it is presumed that the person who issued this endorsement acquired the bill by means of the blank endorsement. 2 Where the bill of exchange was somehow lost by a former holder, a new holder who can demonstrate his entitlement in accordance with the provisions of the previous paragraph is obliged to surrender the bill only if he acquired the bill in bad faith or was guilty of gross negli- gence when he acquired it.

359

220 Code of Obligations

5. Defences

6. Procuration endorsement

7. Pledging endorsement

8. Subsequent endorsement

Art. 1007 A person to whom a bill of exchange is presented for collection may not plead against the holder such defences as are based on his direct relations with the drawer or a previous holder unless the current holder intentionally acted to the detriment of the obligor when acquiring the bill.

Art. 1008 1 Where the endorsement contains the comment “value for collection”, “for collection”, “per pro.” or some other comment expressing no more than authorisation, the holder may exercise all the rights under the bill of exchange; however, he may transfer it only by means of a further procuration endorsement. 2 In this case, the parties liable on a bill may plead against the holder only such defences as are available to them against the endorser. 3 The authority conferred by the procuration endorsement is not extin- guished on the death or incapacity of the person conferring it.

Art. 1009 1 Where the endorsement contains the comment “value for security”, “value for pledge” or some other comment expressing a pledge, the holder may exercise all the rights under the bill of exchange; however, any endorsement issued by him only has the effect of a procuration endorsement. 2 The parties liable on a bill may not plead against the holder such defences as are based on his direct relations with the endorser unless the holder intentionally acted to the detriment of the obligor when acquiring the bill.

Art. 1010 1 An endorsement after maturity has the same effects as an endorse- ment prior to maturity. However, where the bill of exchange was endorsed only after protest for non-payment or after expiry of the time limit for protest, the endorsement only has the effects of a normal assignment. 2 Until the opposite is proven, it is presumed that an undated endorse- ment was made on the bill of exchange before the time limit for protest expired.

360

220Federal Act on the Amendment of the Swiss Civil Code

1. Right to present bill

2. Presentation compulsory or prohibited

3. Duty to present after- sight bills

4. Repeat presentation

5. Form of acceptance

III. Acceptance

Art. 1011 The holder or any person merely in possession of the bill of exchange may present it to the drawee at his domicile for acceptance at any time prior to maturity.

Art. 1012 1 The drawer may stipulate on any bill of exchange that it must be presented for acceptance, with or without a time limit for such presen- tation. 2 He may prohibit presentation of the bill of exchange for acceptance where it is not domiciled with a third party or at a place other than the domicile of the drawee and is not an after-sight bill. 3 He may also stipulate that the bill of exchange must not be presented for acceptance prior to a specified date. 4 Unless the drawer has prohibited presentation for acceptance, any endorser may stipulate that the bill of exchange must be presented for acceptance, with or without a time limit.

Art. 1013 1 An after-sight bill must be presented for acceptance within one year of the date on which it was drawn. 2 The drawer may stipulate a shorter or longer time limit. 3 The endorser may stipulate a shorter time limit for presentation.

Art. 1014 1 The drawee may request that the bill of exchange be presented to him again on the day after the first presentation. The parties may invoke any failure to comply with this requirement only if the request is mentioned in the protest. 2 The holder is not obliged to leave a bill of exchange presented for acceptance in the drawee’s possession.

Art. 1015 1 The declaration of acceptance is made on the bill of exchange. It is expressed through the word “accepted” or words to the same effect; it must be underlined by the drawee. The drawee is deemed to have declared his acceptance by merely appending his signature to the obverse of the bill of exchange.

361

220 Code of Obligations

6. Restrictions on acceptance

7. Domiciliate and bill domicile

8. Effect of acceptance a. In general

b. In the case of deletion

2 Where the bill of exchange is an after-sight bill or must be presented for acceptance within a specified time limit owing to a special com- ment to that effect, the declaration of acceptance must indicate the date on which it is made, unless the holder requires that the date of presen- tation be indicated. Where no date is indicated, the holder must draw attention to this omission by timely protest in order to safeguard his right of recourse against the endorser and the drawer.

Art. 1016 1 The acceptance must be unconditional; however, the drawee may limit it to a portion of the bill amount. 2 Where the declaration of acceptance contains any terms that deviate from the provisions of the bill of exchange, acceptance is deemed to have been refused. However, the acceptor is liable according to the terms of his declaration of acceptance.

Art. 1017 1 Where the drawer has indicated on the bill of exchange a bill domi- cile other than the domicile of the drawee but without designating a third party by whom payment is to be made, the drawee may designate a third party when he declares acceptance. In the absence of such designation it is presumed that the acceptor himself has undertaken to pay the bill at its domicile. 2 Where the bill of exchange is domiciled with the drawee himself, he may designate in his declaration of acceptance an agent at the bill domicile by whom the payment will be made.

Art. 1018 1 Due to his acceptance, the drawee is obliged to pay the bill of ex- change at maturity. 2 In the event of non-payment, the holder, even if he is the drawer, has a claim against the acceptor under the bill of exchange to any sums to which he is entitled pursuant to Articles 1045 and 1046.

Art. 1019 1 Where the drawee has struck out the declaration of acceptance made on the bill of exchange prior to returning the bill, acceptance is deemed to have been refused. Until the opposite is proven, it is pre- sumed that such deletion was made prior to the return of the bill. 2 However, where the drawee has informed the holder or a person whose signature has been appended to the bill in writing of his accep- tance, he is liable to such persons in accordance with the terms of his declaration of acceptance.

362

220Federal Act on the Amendment of the Swiss Civil Code

1. Bill guarantor

2. Form

3. Effects

1. In general

IV. Bill Guarantees

Art. 1020 1 Payment of the bill amount may be secured in part or in full by means of a bill guarantee. 2 Security may be provided by a third party or even by a person whose signature has already been appended to the bill of exchange.

Art. 1021 1 The guarantee commitment is inscribed on the bill of exchange or an annex (rider) thereto. 2 It is expressed by the words “as guarantor” or a comment to that effect; it must be signed by the bill guarantor. 3 The mere act of signing the obverse of the bill of exchange is deemed a guarantee commitment, providing the signature is not that of the drawee or the drawer. 4 The guarantee commitment must indicate for whom the guarantee is given; where there is no such indication, it is deemed to be given for the drawer.

Art. 1022 1 The bill guarantor is liable in the same manner as the person for whom he has given the guarantee. 2 His commitment is valid even if the guaranteed obligation is void for any reason other than formal defect. 3 A bill guarantor who pays the bill of exchange acquires all rights thereunder against the person for whom he has given the guarantee and against all those who are liable to such person under the bill.

V. Maturity

Art. 1023 1 A bill of exchange may be drawn: on sight; for a specified time after sight; for a specified time after drawing; on a specified date. 2 Bills of exchange with other maturity dates or with several consecu- tive maturity dates are void.

363

220 Code of Obligations

2. In the case of sight bills

3. In the case of after-sight bills

4. Computation of time limits

5. Computation by the old method

Art. 1024 1 A sight bill is due on presentation. It must be presented for payment within one year of being drawn. The drawer may stipulate a shorter or longer time limit. The endorser may stipulate a shorter time limit for presentation. 2 The drawer may stipulate that the sight bill may not be presented for payment before a specified date. In this case the time limit for presen- tation commences on that date.

Art. 1025 1 The maturity date of an after-sight bill is determined by the date indicated in the declaration of acceptance or the protest date. 2 Where no date is indicated in the declaration of acceptance and no protest is made, the bill is deemed to have been accepted on the last date of the time limit envisaged for presentation for acceptance as against the acceptor.

Art. 1026 1 A bill of exchange made out for one or more months after it was drawn or after sight falls due on the corresponding day of the payment month. If there is no such day, the bill falls due on the last day of the month. 2 Where the bill of exchange is made out for one or more months plus half a month after it was drawn or after sight, the full months are counted first. 3 Where the maturity date is expressed as the beginning, middle or end of a month, such expression is deemed to mean the first, fifteenth or last day of the month. 4 The expressions ‘eight days’ or ‘fifteen days’ mean not one or two weeks but a full eight or fifteen days. 5 The expression ‘half-month’ means fifteen days.

Art. 1027 1 Where a bill of exchange is payable on a certain date at a place where the calendar is different from that of the place of issue, the maturity date is determined according to the calendar of the bill domicile. 2 Where a bill drawn between two places with different calendars becomes payable when a specified time has elapsed since it was drawn, the date on which it was drawn is converted to the equivalent date in the calendar of the domicile and the maturity date computed according to the latter.

364

220Federal Act on the Amendment of the Swiss Civil Code

1. Presentation for payment

2. Right to receipt, part payment

3. Payment before and at maturity

4. Payment in foreign currency

3 The provision set out in the previous paragraph applies mutatis mutandis to the computation of time limits for presentation of bills of exchange. 4 The provisions of this Article do not apply where a comment on the bill of exchange or any other term reveals that the parties intended otherwise.

VI. Payment

Art. 1028 1 The holder of a bill of exchange payable on a specific date or a specified time after it was drawn or after sight must present the bill for payment on the payment date or one of the two subsequent working days. 2 Delivery of the bill to a clearing house recognised by the Swiss National Bank is equivalent to presentation for payment.569

Art. 1029 1 The drawee may require the holder to surrender the receipted bill of exchange against payment. 2 The holder may not refuse part payment. 3 Where a part payment is made, the drawee may insist that it be noted on the bill of exchange and that a receipt be issued for it.

Art. 1030 1 The holder of the bill of exchange is not obliged to accept payment before maturity. 2 The drawee pays before maturity at his own risk. 3 A person paying at maturity is released from his obligations provided he is not guilty of malice or gross negligence. He is obliged to check that the sequence of endorsements is correct but is not required to verify the signatures of the endorsers.

Art. 1031 1 Where the bill of exchange is denominated in a currency other than that of the bill domicile, the bill amount may be paid in the national currency at its value as at the maturity date. Where the obligor delays in making the payment, the holder is free to choose whether the bill

569 Amended by Annex No II 2 of the National Bank Act of 3 Oct. 2003, in force since 1 May 2004 (SR 951.11).

365

220 Code of Obligations

5. Deposit

1. Recourse of the holder

amount is converted into the national currency at the rate that applies on the maturity date or the rate that applies on the payment date. 2 The value of the foreign currency is determined according to custom- ary commercial practice at the bill domicile. However, the drawer may stipulate an exchange rate for the bill amount on the bill of exchange. 3 The provisions of the two previous paragraphs do not apply if the drawer has stipulated payment in a specified currency (actual currency clause). 4 Where the bill of exchange is denominated in a currency which has the same name but a different value in the country in which the bill was drawn and that in which it is payable, the presumption is that the currency meant is that of the bill domicile.

Art. 1032 Where the bill of exchange is not presented for payment within the time limit laid down in Article 1028, the obligor may deposit the bill amount with the competent authority at the risk and expense of the holder.

VII. Recourse in the event of Non-Acceptance and Non-Payment

Art. 1033570 1 In the event of non-payment of a bill at maturity, the holder has right of recourse against the endorser, the drawer and the other parties liable on the bill. 2 The holder has the same right even before maturity:

1. where acceptance has been refused in part or in full; 2. where the assets of the drawee are subject to insolvency pro-

ceedings, regardless of whether he has accepted the bill or not, or where only payments by the drawee have been suspended, or where compulsory execution has been levied on his assets without success;

3. where the assets of the drawer of a bill of exchange whose presentation for acceptance is prohibited are subject to insol- vency proceedings.

570 This Article consists of a single paragraph in the French and Italian texts.

366

220Federal Act on the Amendment of the Swiss Civil Code

2. Protest a. Time limits and requirements

b. Responsibility

c. Content

Art. 1034 1 Any refusal of acceptance or of payment must be declared by public deed (protest for non-acceptance or for non-payment). 2 Protest for non-acceptance must be made within the time limit appli- cable for presentation for acceptance. Where, in the case of Article 1014 paragraph 1, the bill of exchange was presented for the first time on the last day of the time limit, protest may still be made on the following day. 3 In the case of bills of exchange payable on a specific day or for a certain time after they were drawn or after sight, protest for non- payment must be made on one of the two working days following the payment date. Protest for non-payment of sight bills must be made within the same time limits for protest for non-acceptance as envisaged in the previous paragraph. 4 Where protest for non-acceptance has been made, neither presenta- tion for payment nor protest for non-payment is required. 5 Where the drawee has suspended his payments, regardless of whether he has accepted the bill of exchange or not, or compulsory execution has been levied on his assets without success, the holder may have recourse only once the bill has been presented to the drawee for pay- ment and protest has been made. 6 Where the assets of the drawee, regardless of whether he has ac- cepted the bill of exchange or not, or the assets of the drawer of a bill of exchange whose presentation for acceptance is prohibited are sub- ject to insolvency proceedings, presentation of the court order com- mencing such proceedings is sufficient to exercise the right of re- course.

Art. 1035 Such protest must be made by a specially authorised notary or official body.

Art. 1036 1 The protest contains:

1. the name of the person or of the business for whom and against whom the protest is made;

2. a statement that a request was made without success to the per- son or company against whom the protest is made to perform his or its obligation under the bill of exchange or that such per- son or company could not be reached or that their business premises or address could not be traced;

367

220 Code of Obligations

d. Form

e. For partial acceptance

f. Against several persons

g. Copy of the protest document

3. an indication of the place at which and date on which the re- quest was made or attempted without success;

4. the signature of the person or official body making the protest. 2 Where a part payment is made, this must be noted in the protest. 3 If the drawee to whom the bill of exchange has been presented for acceptance insists that it be presented again on the following day, this must also be noted in the protest.

Art. 1037 1 The protest is made on a separate sheet attached to the bill of ex- change. 2 Where the protest involves the presentation of several duplicates of the same bill of exchange or presentation of the original instrument and a copy of it, it is sufficient if the protest is attached to one of the duplicates or to the original bill. 3 A note to the effect that the protest is attached to one of the dupli- cates or to the original instrument must be made on the remaining duplicates or the copy.

Art. 1038 Where the bill of exchange is accepted for only part of the bill amount and protest is made for that reason, a copy must be made of the bill of exchange and the protest made on such copy.

Art. 1039 Where performance of a bill obligation is required of several liable parties, only one instrument is required for the protests involved.

Art. 1040 1 The notary or official body making the protest must make a copy of the protest document. 2 The following must be indicated on this copy:

1. the amount of the bill of exchange; 2. the maturity date; 3. the place at which and date on which it was drawn; 4. the drawer of the bill of exchange, the drawee and the name of

the person or company to whose the order the payment is to be made;

5. the name of the person or company through which the payment is to be made, where this is different from the drawee;

368

220Federal Act on the Amendment of the Swiss Civil Code

h. Defective protest

3. Notification

4. Waiver of protest

6. the emergency contact details and acceptors for honour. 3 Copies of protest documents must be archived in chronological order by the notary or official body making the protest.

Art. 1041 A protest signed by the competent notary or official body is valid even if not made in accordance with the regulations or if the information it contains is inaccurate.

Art. 1042 1 The holder must notify the immediately preceding endorser and the drawer of the lack of acceptance or payment within four working days of the date on which the protest was made or, in the case of the com- ment “No protest”, within four working days of the date of presenta- tion. Within two working days of receipt of such notification, every endorser must pass on the news received to the immediately preceding endorser and give him the names and addresses of the persons from whom he received it, and so on in sequence until the drawer. All time limits run as of receipt of the previous notification. 2 Where notification is made pursuant to the previous paragraph to a person whose signature is appended to the bill of exchange, the same notification must be made within the same time limit to his bill guaran- tor. 3 Where an endorser has omitted to give his address or has written it illegibly, it is sufficient if his immediately preceding endorser is noti- fied. 4 The notification may be made in any form, including the mere return of the bill of exchange. 5 Persons under a duty to notify must show that they complied with it within the prescribed time limit. The time limit is deemed observed where a letter containing such notification was posted within the time limit. 6 A person who fails to notify in good time does not forfeit his right of recourse; he is liable for any losses arising from his failure to notify, but only up to the bill amount.

Art. 1043 1 By appending and signing the comment “No protest” or words to the same effect on the bill of exchange, the drawer and any endorser or bill guarantor may release the holder from his obligation to arrange protest for non-acceptance or non-payment in order to exercise his right of recourse.

369

220 Code of Obligations

5. Joint and several liability of the parties

6. Nature of recourse a. By the holder

b. By the party honouring the bill

2 The comment does not release the holder from the obligation to present the bill of exchange in good time and to make the requisite notification. The burden of proving that the time limit was not ob- served lies with any party relying on such point against the holder. 3 Where the comment was appended by the drawer, it is effective as against all parties liable on the bill; where it was appended by an endorser or a bill guarantor, it is effective only as against them. If the holder arranges for protest to be made in spite of the comment ap- pended by the drawer, he must bear the costs. Where the comment was appended by an endorser or a bill guarantor, all parties liable on the bill must bear the costs of any protest made in spite of it.

Art. 1044 1 All parties who have drawn, accepted, endorsed or guaranteed a bill of exchange are liable as or-obligors towards the holder. 2 The holder may resort to any of them individually, severally or all together without being bound by the order in which they assumed their obligations. 3 The same right accrues to every party who has honoured the bill of exchange. 4 In asserting his claim against one party liable on a bill, the holder does not surrender his rights against the others or against the endorsers subsequent to such party.

Art. 1045 1 By way of recourse the holder may claim:

1. the bill amount, provided the bill has not been accepted or honoured, with any agreed interest;

2. interest at a rate of six per cent since the maturity date; 3. the costs of the protest and notifications and any other ex-

penses; 4. a commission of no more than one-third of one per cent.

2 Where recourse is had before maturity, interest is deducted from the bill amount. Such interest is calculated on the basis of the official (Swiss National Bank) discount rate obtaining at the domicile of the holder on the date on which recourse is had.

Art. 1046 A party that has honoured the bill of exchange may claim from his preceding endorsers:

1. the full amount he paid;

370

220Federal Act on the Amendment of the Swiss Civil Code

c. Right to take possession of bill, protest and receipt

d. In respect of partial accep- tance

e. Re-exchange bill

7. Invalidation a. In general

2. the interest on such amount at a rate of six per cent since the date on which the bill was honoured;

3. his expenses; 4. a commission of no more than 2 thousandths.

Art. 1047 1 Any party liable on a bill against whom a recourse claim is or may be made is entitled to insist that the bill of exchange together with the protest and a receipted invoice be handed over to him against payment of the recourse amount. 2 Any endorser who has honoured the bill may delete his endorsement and those of the subsequent endorsers.

Art. 1048 Where recourse is had following a partial acceptance, the party paying the unaccepted portion of the bill amount may insist that this be noted on the bill of exchange and a receipt for such portion be issued to him. Further, the holder must provide him with an authenticated copy of the bill of exchange and the protest to make further recourse possible.

Art. 1049 1 A party with right of recourse may, where no comment to the con- trary exists, exercise such right by drawing a new bill of exchange (re- exchange bill) on one of his preceding endorsers which is payable on sight and domiciled at the place of residence of the preceding endorser. 2 In addition to the amounts specified in Articles 1045 and 1046, the re-exchange bill includes the brokerage fee and the stamp duty for the re-exchange bill. 3 Where the re-exchange bill is drawn by the holder, the bill amount is dependent on the rate applicable to a sight bill drawn from the bill domicile of the original bill of exchange at the domicile of the preced- ing endorser. Where the re-exchange bill is drawn by an endorser, the bill amount is dependent on the rate applicable to a sight bill drawn from the domicile of the drawer of the re-exchange bill at the domicile of the preceding endorser.

Art. 1050 1 In the event that the holder fails to comply with the time limits for presentation of a sight bill or an after-sight bill, for protest for non-acceptance or for non-payment,

371

220 Code of Obligations

b. Force majeure

c. Unjust enrichment

for presentation for payment of bills bearing the comment “No pro- test”, he forfeits his rights against the endorser, the drawer and all other parties liable on the bill, with the exception of the acceptor. 2 In the event that the holder fails to comply with the time limit for presentation for acceptance prescribed by the drawer, he forfeits his right of recourse for non-acceptance and for non-payment, unless the wording of the comment shows that the drawer intended to exclude only liability for acceptance. 3 Where the time limit for presentation is indicated in an endorsement, only the endorser may rely on it.

Art. 1051 1 Where insuperable obstacles (statutory provisions enacted by a state or some other instance of force majeure) militate against the timely presentation of the bill of exchange or timely protest, the time limits for such actions are extended. 2 The holder is obliged to notify the immediately preceding endorser of the force majeure event without delay and to note such notification together with the date and place and his signature on the bill of ex- change or an annex thereto; in other respects, the provisions set out in Article 1042 are applicable. 3 Once the force majeure ceases to apply, the holder must present the bill for acceptance or for payment without delay and, where necessary, make protest. 4 In the event that the force majeure lasts for longer than 30 days after maturity, recourse may be had without need for presentation or protest. 5 In the case of sight bills or after-sight bills, the thirty-day time limit commences on the date on which the holder notified the immediately preceding endorser of the force majeure event; such notification may be made even before expiry of the time limit for presentation. In the case of after-sight bills, the thirty-day time limit is extended by the fixed period after sight indicated on the bill of exchange. 6 Facts pertaining purely to the person of the holder or a person charged with the task of presenting the bill of exchange or making protest do not count as force majeure events.

Art. 1052 1 To the extent that the drawer of a bill of exchange and the acceptor are unjustly enriched to the detriment of the holder, they remain obliged to the holder even where their bill liability has become time- barred or extinguished on account of failure to take the actions re- quired by law to sustain the entitlement under the bill of exchange.

372

220Federal Act on the Amendment of the Swiss Civil Code

1. General provisions

2. Acceptance for honour a. Requirements, position of the holder

2 The claim for unjust enrichment also exists against the drawee, the domiciliate and the person or company for whose account the drawer issued the bill. 3 By contrast, no such claim exists against the endorsers whose bill liability is extinguished.

VIII. Devolution of Cover

Art. 1053 1 Where the drawer of a bill of exchange has been declared insolvent, any claim he holds under civil law against the drawee for restitution of cover or reimbursement of amounts paid devolves on the holder of the bill. 2 Where the drawer declares on the bill of exchange that he assigns his claims in respect of the cover provided, these devolve on the current holder of the bill. 3 Once the declaration of insolvency has been published or the assign- ment has been notified to him, the drawee may make payment only to the duly established holder against surrender of the bill of exchange.

IX. Act of Honour

Art. 1054 1 The drawer and any endorser or bill guarantor may indicate a person to act as acceptor or payer in case of need. 2 Subject to the conditions set out below, the bill of exchange may be accepted or paid for honour by any party liable on it against whom recourse may be had. 3 Any third party, even the drawee, and any party already liable on the bill, with the exception of the acceptor, may accept or pay a bill of exchange for honour. 4 A person accepting or paying a bill for honour is obliged to notify the liable party for whom he is intervening of his action within two work- ing days. Should he fail to do so, he is liable for any losses caused by the omission, albeit only up to the bill amount.

Art. 1055 1 Acceptance for honour is permitted in all cases in which the holder has a right of recourse before maturity, except where presentation of the bill for acceptance is prohibited.

373

220 Code of Obligations

b. Form

c. Liability of the acceptor for honour, effect on right of recourse

3. Payment for honour a. Requirements

b. Obligation of the holder

2 Where the bill of exchange indicates a person to act as acceptor or payer at the bill domicile in case of need, the holder has a right of recourse before maturity against the person who appended such emer- gency address and against subsequent endorsers only if he has pre- sented the bill to the person indicated under such address and, in the event that acceptance for honour is refused, has had such refusal noted by means of protest. 3 In all other cases the holder may refuse acceptance for honour. How- ever, if he admits it, he forfeits his right of recourse before maturity against the person in whose honour acceptance was declared and against subsequent endorsers.

Art. 1056 The acceptance for honour is noted on the bill of exchange; it must be signed by the acceptor for honour. The declaration of acceptance must indicate the person for whom the acceptance for honour is made; absent such indication, it is deemed made for the drawer.

Art. 1057 1 A person accepting a bill for honour is liable to the holder and the subsequent endorsers of the person for whom he intervened in the same manner as said person. 2 In spite of the acceptance for honour the party in whose honour the bill of exchange was accepted and his preceding endorsers may insist that the holder surrender the bill of exchange and the protest made, if any, together with a receipted invoice against reimbursement of the amount specified in Article 1045.

Art. 1058 1 Payment for honour is permitted in all cases in which the holder has a right of recourse at or before maturity. 2 The payment for honour must comprise the full amount payable by the party liable on the bill for whom it is made. 3 It must take place no later than the day after the day on which the time limit for protest for non-payment expires.

Art. 1059 1 Where the bill of exchange is accepted for honour by persons resi- dent at the bill domicile or the persons indicated on the bill as being willing to pay in case of need are resident at the bill domicile, the holder must present the bill to all such persons no later than the day after the day on which the time limit for protest for non-payment

374

220Federal Act on the Amendment of the Swiss Civil Code

c. Consequence of refusal

d. Right to take possession of bill, protest and receipt

e. Devolution of the holder’s rights; multiple payments for honour

1. Duplicates a. Right to make duplicates

expires and, where applicable, must arrange protest for failure to make payment for honour. 2 Any failure to make timely protest releases the person who appended the emergency address or in whose honour the bill was accepted and the subsequent endorsers.

Art. 1060 Where the holder refuses payment for honour, he forfeits his right of recourse against those who would have been released.

Art. 1061 1 A note that the payment for honour has been received must be made on the bill of exchange, indicating the party for whom the payment was made. In the absence of such an indication, the payment is deemed made for the drawer. 2 The bill of exchange and any protest made are handed over to the payer for honour.

Art. 1062 1 The payer for honour acquires the rights under the bill against the party for whom he paid and against those liable to said party under the bill. However, he is not entitled to endorse it further. 2 The subsequent endorsers of the party in whose honour payment was made are released. 3 Where several payments for honour are offered, preference is given to those resulting in release of the largest number of parties liable on the bill. A person paying in honour in contravention of this provision and in full knowledge of the situation forfeits his right of recourse against those who would otherwise have been released.

X. Production of Multiple Duplicates and Copies of Bills of Exchange

Art. 1063 1 The bill of exchange may be issued in multiple identical duplicates. 2 Such duplicates must be given serial numbers within the text on the instrument; otherwise, each duplicate counts as a separate bill of exchange. 3 Every holder of a bill of exchange may request that multiple dupli- cates be supplied to him at his own expense, provided the text of the bill of exchange does not stipulate that it was made out as a single

375

220 Code of Obligations

b. Relationship between duplicates

c. Acceptance comment

2. Copies a. Form and effect

b. Surrender of the original bill

copy. To do so, the holder must contact the preceding endorser imme- diately before him, who in turn must contact his immediately preced- ing endorser, and so on in sequence back to the drawer. The endorsers are obliged to repeat their endorsements on the newly issued dupli- cates.

Art. 1064 1 Where payment is made on one duplicate of the bill, the rights under all others are extinguished even if they do not bear a comment to the effect that payment on one renders all the others invalid. However, the drawee remains liable for any duplicate accepted that has not been returned to him. 2 Where an endorser has transferred the duplicates to a number of different persons, he and his subsequent endorsers are liable for dupli- cates bearing their signature which have not been surrendered.

Art. 1065 1 Where one duplicate has been sent for acceptance, a note must be made on the others of the name of the person now in possession of the despatched duplicate. The latter is obliged to surrender it to the rightful holder of any other duplicate. 2 Where he refuses to surrender it, the holder has a right of recourse only after arranging for protest to be made, thereby confirming:

1. that the duplicate sent for acceptance was not surrendered to him on request;

2. that neither acceptance nor payment was obtained on a differ- ent duplicate.

Art. 1066 1 Every holder of a bill of exchange is entitled to make copies of it. 2 The copy must be an exact reproduction of the original instrument with endorsements and all other notes and comments appended thereto. It must bear an indication of how far the copy extends. 3 The copy may be endorsed and have a declaration of guarantee added to it in the same manner and with the same effects as the original bill.

Art. 1067 1 The custodian of the original bill must be indicated on the copy. The custodian is obliged to surrender the original bill to the rightful holder of the copy.

376

220Federal Act on the Amendment of the Swiss Civil Code

1. Limitation periods

2. Interruption a. Grounds

b. Effects

2 Where he refuses to surrender it, the holder has right of recourse against the endorsers of the copy and against persons who have ap- pended a declaration of guarantee to it only after arranging for protest to be made, thereby confirming that the original bill was not surren- dered to him on request. 3 Where the original bill bears the comment “henceforward endorse- ments valid only if made on copy” or a comment to that effect ap- pended to the last endorsement before the copy was made, any subse- quent endorsement added to the original bill is void.

XI. Amendments to the Bill of Exchange

Art. 1068 Where the text of a bill of exchange is amended, those persons who append their signature to the bill after such amendment are liable in accordance with the amended text. Those who signed earlier are liable in accordance with the original text.

XII. Time Limits

Art. 1069 1 The claims against the acceptor under the bill of exchange become time-barred three years after the maturity date. 2 The claims of the holder against the endorser and against the drawer become time-barred one year after the date on which timely protest was made or, where the bill bears the comment “No protest”, one year after the maturity date. 3 The claims of one endorser against other endorsers and against the drawer become time-barred six months after the date on which the bill of exchange was honoured by the endorser or the claim based on the bill was asserted against him.

Art. 1070 The limitation period is interrupted by commencement of action on the bill, submission of an application for debt enforcement proceedings, service of a third party notice or petition in insolvency.

Art. 1071 1 The interruption of the limitation period is effective only against the party in regard to whom the fact causing the interruption occurred.

377

220 Code of Obligations

1. Provisional measures

2. Known holder

3. Unknown holder a. Duties of the applicant

b. Public call for presentation

c. Time limits

2 On interruption of the limitation period, a new limitation period of the same duration commences.

XIII. Cancellation

Art. 1072 1 A person who has lost a bill of exchange may request the court to prohibit the drawee from paying the bill.571 2 In serving the attachment order, the court authorises the drawee to deposit the bill amount on the maturity date and designates the place where it is to be deposited.

Art. 1073 1 Where the holder of the bill of exchange is known, the court sets the applicant an appropriate time limit within which to bring action for surrender thereof. 2 Where the applicant fails to bring such action within the time limit, the court lifts the attachment order imposed on the drawee.

Art. 1074 1 Where the holder of the bill of exchange is known, the court may be asked to cancel it. 2 The party applying for cancellation must satisfy the court that he possessed and lost the bill of exchange and produce either a copy of the bill or information on its essential terms.

Art. 1075 Where the court is satisfied that the applicant was in possession of the bill of exchange but has since lost it, it issues a public notice calling on the unknown holder to come forward and present the bill within a specified time limit, failing which it will declare the bill cancelled.

Art. 1076 1 The time limit for presentation must be at least three months and no more than one year. 2 However, the court is not bound by the minimum duration of three months if, in the case of overdue bills, the statutory limitation period would expire before three months have elapsed.

571 Amended by Annex No 5 of the Civil Jurisdiction Act of 24 March 2000, in force since 1 Jan. 2001 (SR 272).

378

220Federal Act on the Amendment of the Swiss Civil Code

d. Publication

4. Effect a. If the bill is presented

b. If the bill is not presented

5. Court orders

1. Setting time limits a. Holidays

3 The time limit for overdue bills commences on the date of the first public notice, and the time limit for bills that are not overdue com- mences on the maturity date.

Art. 1077 1 The call for presentation of the bill of exchange must be published three times in the Swiss Official Gazette of Commerce. 2 In special cases the court may adopt other appropriate means for publicising the call for presentation.

Art. 1078 1 Where the lost bill of exchange is presented, the court sets the appli- cant a time limit within which to bring action for surrender of the bill. 2 Where the applicant fails to bring action within such time limit, the court returns the bill of exchange and lifts the attachment order.

Art. 1079 1 Where the lost bill of exchange is not presented within the fixed time limit, the court must pronounce its cancellation. 2 Following cancellation of the bill of exchange, the applicant may still assert his claim on the bill against the acceptor.

Art. 1080 1 Even before the cancellation, the court may order the acceptor to deposit the bill amount or even to pay it against security. 2 Such security is liable to the bona fide acquirer of the bill of ex- change. It is released if the bill of exchange is cancelled or the claims on the bill are otherwise extinguished.

XIV. General Provisions

Art. 1081 1 Where the maturity date of a bill of exchange falls on a Sunday or a public holiday, payment may not be demanded until the following working day. Likewise, all other actions relating to the bill of ex- change, and in particular presentation for acceptance and protest, may take place only on a working day.

379

220 Code of Obligations

b. Computing time limits

c. Exclusion of days of respite

2. Place for actions in connection with bills of exchange

3. Signature by hand; blind person’s signature

1. Capacity to incur liability as a party to a bill

2 Where the last day of a time limit within which such an action must be taken falls on a Sunday or a public holiday572, the time limit is extended to include the next working day. Holidays falling within the time limit are included when computing it.

Art. 1082 When computing statutory time limits or time limits indicated on the bill of exchange, the day on which they commence is not included.

Art. 1083 Days of respite, whether statutory or by court order, are not recog- nised.

Art. 1084 1 The correct place at which to present bills of exchange for acceptance or payment, to make protest, to submit a request for issue of a dupli- cate bill and to take all other bill-related actions in respect of a specific person is that person’s business premises or, where none exist, his private address. 2 Such business premises or address must be ascertained with all due diligence. 3 However, if inquiries to the police or post office of the relevant locality are unsuccessful, no further investigation is required.

Art. 1085 1 Declarations in respect of bills of exchange must be signed by hand. 2 The signature by hand may not be replaced by a mechanical repro- duction thereof, by a mark, even if authenticated, or by any other form of authentication by notary. 3 The signature of a blind person must be authenticated.

XV. Applicable Jurisdiction

Art. 1086 1 A person's capacity to incur liability as a party to a bill is determined according to the law of the country of which he is a citizen. Where

572 In relation to the statutory time limits under federal law and the time limits fixed by authorities by virtue of federal law, Saturday is now regarded as equivalent to a public holiday (Art. 1 of the Federal Act of 21 June 1963 on the Application of Limitation Periods to Saturdays – SR 173.110.3).

380

220Federal Act on the Amendment of the Swiss Civil Code

2. Form and time limits of declaration on bills of exchange a. In general

b. Actions to exercise and safeguard rights under bills of exchange

c. Exercise of right of recourse

3. Effect of declarations on bills of exchange a. In general

such law provides that the law of a different country is definitive, the latter is applicable. 2 A person who, under the law stipulated in the previous paragraph, lacks capacity to incur liability as a party to a bill is nonetheless obliged if he appends his signature in the territory of a country under whose law he would have such capacity.

Art. 1087 1 The form of a declaration on a bill of exchange is determined accord- ing to the law of the country in whose territory the declaration was signed. 2 However, where a declaration on a bill of exchange that is invalid under the previous paragraph would be valid under the law of the country in whose territory a subsequent declaration is signed, the validity of the later declaration is not affected by any formal defects of the earlier declaration. 3 Similarly, a declaration on a bill of exchange given by one Swiss national abroad is valid in relation to another Swiss national in Swit- zerland provided it satisfies the formal requirements laid down by Swiss law.

Art. 1088 The formal requirements and time limits for protest and the formal requirements for other actions to exercise or safeguard rights under bills of exchange are determined according to the law of the country in whose territory the protest is to be made or the action to be taken.

Art. 1089 The time limits for exercising rights of recourse are determined for all interested parties by the law of the place in which the bill of exchange was drawn.

Art. 1090 1 The effects of declarations of commitment made by the acceptor of a bill of exchange and by the maker of a promissory note are determined according to the law of the bill domicile or place of payment. 2 The effects of other declarations on bills of exchange are determined according to the law of the country in whose territory the declarations were signed.

381

220 Code of Obligations

b. Partial acceptance and part payment

c. Payment

d. Claims for unjust enrich- ment

e. Devolution of cover

f. Annulment

1. Requirements

Art. 1091 The law of the bill domicile determines whether the acceptance of a bill of exchange may be limited to part of the bill amount and whether the holder is or is not obliged to accept a part payment.

Art. 1092 The payment of a bill of exchange at maturity, in particular the compu- tation of the maturity date and the payment date, and the payment of bills denominated in a foreign currency are determined according to the law of the country in whose territory the bill is domiciled.

Art. 1093 Claims for unjust enrichment against the drawee, the domiciliate and the person or firm for whose account the drawer drew the bill are determined according to the law of the country in whose territory these persons are resident.

Art. 1094 The law of the place of issue determines whether the holder of a bill of exchange acquires the underlying claim.

Art. 1095 The law of the bill domicile determines the measures to be taken in the event of the loss or theft of a bill of exchange.

C. The Promissory Note

Art. 1096 A promissory note contains:

1. the designation ‘promissory note’ in the text of the instrument and in the language in which it is issued;

2. the unconditional promise to pay a certain sum of money; 3. the due date; 4. the place of payment; 5. the name of the person to whom or to whose order payment is

to be made; 7. the date on which and place at which the note is made; 8. the maker’s signature.

382

220Federal Act on the Amendment of the Swiss Civil Code

2. Required content lacking

3. Reference to bill of exchange

Art. 1097 1 An instrument missing one of the elements stipulated in the previous Article is not deemed a promissory note, except in the cases described in the following paragraphs. 2 A promissory note containing no indication of the due date is deemed a sight bill. 3 Where no other specific place is mentioned, the place at which the note is made is deemed both the place of payment and the domicile of the maker. 4 A promissory note without any indication of the place in which it was made is deemed made at the place indicated together with the name of the maker.

Art. 1098 1 The provisions governing the following aspects of bills of exchange also apply to promissory notes, unless they run counter to the essential nature of the latter: endorsement (Art. 1001–1010); maturity (Art. 1023–1027); payment (Art. 1028–1032); recourse for non-payment (Art. 1033–1047, 1049–1051); payment for honour (Art. 1054, 1058–1062); copies (Art. 1066 and 1067); amendments (Art. 1068); time limits (Art. 1069–1071); annulment (Art. 1072–1080); public holidays, computation of time limits, exclusion of days of respite, place for actions in connection with bills of exchange, and signatures (Art. 1081–1085). 2 Further, promissory notes are subject to the provisions governing bills of exchange in relation to bills domiciled with a third party or at a place other than the drawee’s domicile (Art. 994 and 1017), the inter- est rate comment (Art. 995), discrepancies in the specification of the amount (Art. 996), the consequences of invalid signatures (Art. 997) or of signatures by persons lacking power of representation or exceeding such power (Art. 998), and blank bills (Art. 1000). 3 Likewise, promissory notes are subject to the provisions governing bills of exchange in relation to bill guarantees (Art. 1020–1022); in the case of Article 1021 paragraph 4, where the declaration does not indicate the party for whom it is made, the bill guarantee is deemed given for the maker of the promissory note.

383

220 Code of Obligations

4. Liability of the maker; presentation for sight

1. Requirements

2. Required content lacking

Art. 1099 1 The maker of a promissory note is liable in the same manner as the acceptor of a bill of exchange. 2 Promissory notes made out for a specified time after sight must be presented for sight to the maker within the time limits stipulated in Article 1013. Such sight must be confirmed by the maker on the prom- issory note together with the date and the maker’s signature. The fixed period after sight commences on the date on which the sight comment is appended. Where the maker refuses to confirm sight and the date, this fact must be established by means of protest (Art. 1015); in this case, the fixed period after sight commences on the date on which protest is made.

Section Five: The Cheque I. Issue and Formal Requirements of Cheques

Art. 1100 A cheque contains:

1. the designation ‘cheque’ in the text of the instrument and in the language in which it is issued;

2. the unconditional instruction to pay a certain sum of money; 3. the name of the person who is to pay (drawee); 4. the place of payment; 5. the date and the place of issue; 8. the drawer’s signature.

Art. 1101 1 An instrument missing one of the elements stipulated in the previous Article is not deemed a cheque, except in the cases described in the following paragraphs. 2 Where no other specific place is mentioned, the place indicated together with the name of the drawee is deemed the place of payment. Where several places are indicated together with the name of the drawee, the cheque is payable at the place mentioned first. 3 A cheque containing no indication of place of issue is deemed pay- able at the place where the drawee has his head office. 4 A cheque containing no indication of the place of issue is deemed issued at the place indicated together with the name of the issuer.

384

220Federal Act on the Amendment of the Swiss Civil Code

3. Capacity to act as drawee

4. Cover requirement

5. Exclusion of acceptance

6. Designation of payee

7. Interest comment

8. Paying agents, domiciled cheques

Art. 1102 1 On cheques payable in Switzerland, only a banker may be designated as the drawee. 2 A cheque drawn on another person is deemed to be merely an in- strument ordering payment.

Art. 1103 1 A cheque may be issued only where the drawer holds assets with the drawee and has the right to dispose of such assets by means of cheques pursuant to an explicit or tacit agreement. However, the instrument’s validity as a cheque is not affected by any failure to comply with these provisions. 2 Where the drawer has assets with the drawee covering only a portion of the cheque amount, the drawee is obliged to pay such portion. 3 A person issuing a cheque without being authorised by the drawee to dispose of the instructed amount must reimburse the bearer for any damage so caused and, in addition, five per cent of the uncovered portion of the instructed amount.

Art. 1104 The cheque may not be accepted. An acceptance comment appended to the cheque is deemed unwritten.

Art. 1105 1 The cheque may be made payable to: a specific person, with or without the explicit comment “to order”; a specific person, with the comment “not to order” or a comment to that effect; the bearer. 2 Where the cheque designates a specific person as payee with the added comment “or presenter” or a comment to that effect, the cheque is deemed made out to the bearer. 3 A cheque with no payee indicated is deemed payable to the bearer.

Art. 1106 An interest comment appended to the cheque is deemed unwritten.

Art. 1107 The cheque may be made payable by a third party, at the drawee’s domicile or at another place, providing the third party is a banker.

385

220 Code of Obligations

1. Transferability

2. Requirements

3. Proof of bearer’s entitlement

4. Bearer cheque

5. Lost cheques

II. Transfer

Art. 1108 1 A cheque made payable to a specific person with or without the explicit comment “to order” may be transferred by endorsement. 2 A cheque made payable to a specific person with or without the explicit comment “not to order” or with a comment to that effect may be transferred only subject to the formal requirements and with the effects of a normal assignment. 3 The endorsement may also be made out to the drawer or to any other party liable for it. Such persons may endorse the cheque further.

Art. 1109 1 The endorsement must be unconditional. Conditions attached to the endorsement are deemed unwritten. 2 A partial endorsement is void. 3 Likewise, an endorsement by the drawee is void. 4 An endorsement to the bearer is deemed a blank endorsement. 5 An endorsement to the drawee is deemed merely a receipt, unless the drawee has several branch offices and the endorsement is made out to a different office from that on which the cheque is drawn.

Art. 1110 A person possessing a cheque transferred by endorsement is deemed the holder in due course providing he can demonstrate his entitlement by means of an uninterrupted sequence of endorsements, even where the last is a blank endorsement. Deleted endorsements are deemed unwritten. Where a blank endorsement is followed by a further en- dorsement, it is presumed that the person who issued this endorsement acquired the bill by means of the blank endorsement.

Art. 1111 An endorsement on a bearer cheque renders the endorser liable in accordance with the provisions governing recourse, albeit without transforming the instrument into a cheque to order.

Art. 1112 Where the cheque was somehow lost by a former bearer, a new bearer who has gained possession of the cheque, whether it is a bearer cheque or a cheque transferable by endorsement and the bearer can demon- strate his entitlement in accordance with Article 1110, is obliged to

386

220Federal Act on the Amendment of the Swiss Civil Code

6. Rights stemming from subsequent endorsement

1. Maturity

2. Presentation for payment

surrender it only if he acquired it in bad faith or was guilty of gross negligence when he acquired it.

Art. 1113 1 Where the cheque was endorsed only after protest has been made or equivalent action taken or after expiry of the time limit for presenta- tion, the endorsement only has the effects of a normal assignment. 2 Until the opposite is proven, it is presumed that an undated endorse- ment was made on the cheque before protest was made or equivalent action taken or before the time limit for presentation expired.

III. Cheque Guarantees

Art. 1114 1 Payment of the cheque amount may be secured in part or in full by means of a cheque guarantee. 2 Such security may be provided by a third party, with exception of the drawee, or even by a person whose signature has already been ap- pended to the cheque.

IV. Presentation and Payment

Art. 1115 1 The cheque is payable on sight. Any contrary indication is deemed unwritten. 2 A cheque presented for payment prior to the issue date indicated on the cheque is payable on the date on which it is presented.

Art. 1116 1 A cheque payable in the country in which it was issued must be presented for payment within eight days. 2 A cheque payable in a country other than the country in which it was issued must be presented within 20 days where the place of issue and place of payment are in the same continent and within 70 days where they are on different continents. 3 For this purpose, a cheque issued in a European country and payable in a country on the Mediterranean Sea, or vice versa, counts as a cheque issued and payable in the same continent.

387

220 Code of Obligations

3. Computation by the old method

4. Delivery to clearing house

5. Revocation a. In general

b. Death, incapacity, bankruptcy

6. Verification of endorsements

7. Payment in foreign currency

4 The time limits stipulated above commence on the date indicated on the cheque as the issue date.

Art. 1117 Where a cheque is payable at a place where the calendar is different from that of the place of issue, the issue date is determined according to the calendar of the place of payment.

Art. 1118 Delivery of the cheque to a clearing house recognised by the Swiss National Bank is equivalent to presentation for payment.573

Art. 1119 1 A revocation of the cheque takes effect only after expiry of the time limit for presentation. 2 Where the cheque is not revoked, the drawee may make payment even after expiry of the time limit for presentation. 3 Where the drawer contends that he or a third party lost the cheque, he may forbid the drawee to cash it.

Art. 1120 The validity of the cheque is unaffected even where the drawer dies, loses his capacity to act or becomes bankrupt after the cheque was issued.

Art. 1121 A drawee honouring a cheque transferred by endorsement is obliged to check that the sequence of endorsements is correct but is not required to verify the signatures of the endorsers.

Art. 1122 1 Where the cheque is denominated in a currency other than that of the place of payment, the cheque amount may be paid in the national currency at its value as at the date of presentation. Where payment is not made on presentation, the bearer is free to choose whether the cheque amount is converted into the national currency at the rate applicable on the date of presentation or the rate applicable on the payment date.

573 Amended by Annex No II 2 of the National Bank Act of 3 Oct. 2003, in force since 1 May 2004 (SR 951.11).

388

220Federal Act on the Amendment of the Swiss Civil Code

1. Crossed cheques a. Definition

b. Effects

2 The value of the foreign currency is determined according to custom- ary commercial practice at the place of payment. However, the drawer may stipulate an exchange rate for the bill amount on the bill of ex- change. 3 The provisions of the two previous paragraphs are not applicable if the drawer has stipulated payment in a specified currency (actual currency clause). 4 Where the cheque is denominated in a currency which has the same name but a different value in the country in which the cheque was issued and that in which it is payable, the presumption is that the currency meant is that of the place of payment.

V. The Crossed Cheque and the Account-Payee-Only Cheque

Art. 1123 1 The drawer and any bearer may cross the cheque with the effects envisaged in Article 1124. 2 A cheque is crossed by drawing two parallel lines on its obverse. Such crossing may be general or specific. 3 The crossing is general if no indication or the comment “banker” or a comment to that effect is inserted between the two lines; it is specific if the name of a banker is inserted between the two lines. 4 A general crossing may be converted into a specific crossing, but not vice versa. 5 Any deletion of the crossing or of the name of the designated banker is deemed not done.

Art. 1124 1 A generally crossed cheque may be paid by the drawee only to a banker or a client of the drawee. 2 A specifically crossed cheque may be paid by the drawee only to the designated banker or, where the latter is himself the drawee, to his clients. However, the designated banker may entrust collection of the cheque to another banker. 3 A banker may acquire a crossed cheque only from one of his clients or from another banker. Further, he may collect such cheque only for the account of the aforementioned persons. 4 Where a cheque has been specifically crossed more than once, the drawee may honour the cheque only where it has been crossed not

389

220 Code of Obligations

2. Account- payee-only cheques a. In general

b. Bearer’s rights in the event of insolvency, suspension of payments, compulsory execution

c. Bearer’s rights in the event of refusal of account credit or settlement

more than twice and one of the crossings was done for the purpose of collection by means of delivery to a clearing house. 5 A drawee or banker acting in contravention of the above provisions is liable for any losses caused thereby, albeit only up to the cheque amount.

Art. 1125 1 The drawer and any bearer of a cheque may prohibit payment of the cheque in cash by appending the comment “account payee only” or a comment to that effect diagonally across the obverse of the cheque. 2 In this case the drawee may honour the cheque only by crediting the amount to an account (credit, transfer, debit settlement). The account credit is deemed payment. 3 Any deletion of the comment “account payee only” is deemed not to have been done. 4 A drawee acting in contravention of the above provisions is liable for any losses caused thereby, albeit only up to the cheque amount.

Art. 1126 1 However, where the drawee has been declared insolvent or has suspended its payments or debt enforcement proceedings have been brought against it without success, the bearer of an account-payee-only cheque has the right to demand cash payment of the cheque by the drawee and has a right of recourse. 2 The same applies in the event that the bearer cannot obtain the ac- count credit from the drawee as a result of measures taken pursuant to the Federal Act of 8 November 1934 on Banks and Savings Banks574.

Art. 1127 Further, the bearer of an account-payee-only cheque has a right of recourse where he can show that the drawee has refused to make the account credit unconditionally or that the cheque has been declared unfit for settlement of the bearer’s obligations by the clearing house of the place of payment.

SR 952.0

390

574

220Federal Act on the Amendment of the Swiss Civil Code

1. Bearer’s rights of recourse

2. Protest, time limits

3. Object of recourse

4. Exceptions in the case of force majeure

VI. Recourse for Non-Payment

Art. 1128 The bearer may have recourse against the endorser, the drawer and the other parties liable for the cheque if it is not honoured upon timely presentation and such refusal of payment has been established:

1. by public deed (protest), or 2. by means of a written and dated declaration made by the

drawee on the cheque, including the date of presentation, or 3. by means of a written and dated declaration made by a clearing

house to the effect that the cheque was delivered in good time and not paid.

Art. 1129 1 The protest or equivalent declaration must be made before the time limit for presentation expires. 2 Where the cheque is presented on the last day of the time limit, the protest or equivalent declaration may still be made on the following working day.

Art. 1130 By way of recourse, the bearer may claim:

1. the cheque amount, provided the cheque has not been hon- oured;

2. interest at a rate of six per cent since the date of presentation; 3. the costs of the protest or equivalent declaration and of notifi-

cations, plus other expenses; 4. a commission of not more than one-third of one per cent.

Art. 1131 1 Where insuperable obstacles (statutory provisions enacted by a state or some other instance of force majeure) militate against the timely presentation of the cheque or timely protest or equivalent declaration, the time limits for such actions are extended. 2 The bearer is obliged to notify the immediately preceding endorser of the force majeure event without delay and to note such notification together with the date and place and his signature on the cheque or an annex thereto; in other respects the provisions set out in Article 1042 are applicable.

391

220 Code of Obligations

3 Once the force majeure ceases to apply, the holder must present the cheque for acceptance or for payment without delay and, where neces- sary, make protest or similar declaration. 4 In the event that the force majeure lasts for longer than 15 days after the date on which the bearer himself notified the preceding endorser of the force majeure event prior to expiry of the time limit for presenta- tion, recourse may be had without need for presentation or protest or similar declaration. 5 Facts pertaining purely to the person of the bearer or a person charged with the task of presenting the cheque or making protest or arranging for an equivalent declaration do not count as force majeure events.

VII. Forged Cheques

Art. 1132 The losses arising from payment of a forged or falsified cheque are borne by the drawee, provided that the drawer named on the cheque is not at fault, such as through negligence in the safekeeping of blank cheque forms entrusted to him.

VIII. Duplicates of a Cheque

Art. 1133 Cheques may be issued in several identical duplicates if they are not made out to the bearer and are payable in a country other than the country of issue or in an overseas territory belonging to the country of issue, or vice versa, or are both issued and payable in an overseas territory, or are issued in one overseas territory and payable in a differ- ent overseas territory belonging to the same country. Such duplicates must be given serial numbers within the text on the instrument; other- wise, each duplicate counts as a separate cheque.

IX. Time Limits

Art. 1134 1 The bearer’s rights of recourse against the endorser, the drawer and the other parties liable become time-barred six months after the time limit for presentation expires.

392

220Federal Act on the Amendment of the Swiss Civil Code

1. Definition of ‘banker’

2. Setting time limits a. Holidays

b. Computing time limits

1. Capacity to act as drawee of a cheque

2 The rights of recourse of one liable party against another become time-barred six months after the date on which the cheque was hon- oured by such party or the claim based on the cheque was asserted against him.

X. General Provisions

Art. 1135 For the purposes of this Section, the term ‘banker’ is understood to mean any institution subject to the Federal Act of 8 November 1934575 on Banks and Savings Banks.

Art. 1136 1 The presentation and protest of a cheque must take place on a work- ing day. 2 Where the last day of a time limit within which an action in connec- tion with the cheque must be taken, in particular presentation, protest or an equivalent declaration, falls on a Sunday or a public holiday576, the time limit is extended to include the next working day. Holidays falling within the time limit are included when computing it.

Art. 1137 When computing the time limits envisaged in this law, the day on which they commence is not included.

XI. Applicable Jurisdiction

Art. 1138 1 A person's capacity to act as drawee of a cheque is determined ac- cording to the law of the country in which it is payable. 2 Where under such law the cheque is void for reasons pertaining to the person of the drawee, obligations are nonetheless binding if they arise from signatures appended to the cheque in countries where the law does not envisage nullity for such reasons.

SR 952.0 576 In relation to the statutory time limits under federal law and the time limits fixed by

authorities by virtue of federal law, Saturday is now regarded as equivalent to a public holiday (Art. 1 of the Federal Act of 21 June 1963 on the Application of Limitation Periods to Saturdays – SR 173.110.3).

393

575

220 Code of Obligations

2. Form and time limits for declarations on cheques

3. Effect of cheque declara- tions a. Law of the place of issue

b. Law of the place of payment

Art. 1139 1 The form of a declaration on a cheque is determined according to the law of the country in whose territory such declaration was signed. However, compliance with the formal requirements laid down by the law of the place of payment is sufficient. 2 Where a declaration on a cheque that is invalid pursuant to the previ- ous paragraph would be valid under the law of the country in whose territory a subsequent declaration is signed, the validity of the later cheque declaration is not affected by any formal defects of the earlier declaration. 3 Similarly, a declaration on a cheque made by one Swiss national abroad is valid as against another Swiss national in Switzerland pro- viding it satisfies the formal requirements laid down by Swiss law.

Art. 1040 1 The effects of cheque declarations are determined pursuant to the law of the country in whose territory such declarations were signed.

Art. 1141 The law of the country in whose territory the cheque is payable deter- mines:

1. whether the cheque is necessarily payable on sight or whether it may be drawn for a specified time after sight and what the effects are if a date later than the real issue date is indicated on the cheque;

2. the time limit for presentation; 3. whether a cheque may be accepted, certificated, confirmed or

given a mark of approval and what the effects of such com- ments are;

4. whether the bearer may request part payment and whether he must accept part payment;

5. whether a cheque may be crossed or have the comment “ac- count payee only” or an equivalent comment appended to it and what the effects of such crossing or comment are;

6. whether the bearer has specific rights to the cover and what the nature of such rights is;

7. whether the drawer may revoke the cheque or protest against payment of the cheque;

8. the measures to be taken in the event of the loss or theft of the cheque;

394

220Federal Act on the Amendment of the Swiss Civil Code

9. whether a protest or equivalent declaration is required to pre- serve the right of recourse against the endorser, the drawer and the other parties liable for the cheque.

Art. 1142 c. Law of A claim for unjust enrichment against the drawee or the domiciliate is domicile determined according to the law of the country in whose territory these

persons are resident.

XII. Applicability of the Law on Bills of Exchange

Art. 1143 1 The following provisions of the law on bills of exchange are also applicable to cheques:

1. Article 990 on the capacity to incur liability as party to a bill; 2. Article 993 on bills of exchange made out to own order, drawn

on the drawer and for the account of a third party; 3. Articles 996–1000 on discrepancies in the specification of the

bill amount, signatures of persons lacking capacity to incur li- ability as parties to bills, unauthorised signatures, liability of the drawer and blank bills;

4. Articles 1003–1005 on endorsements; 5. Article 1007 on defences; 6. Article 1008 on the rights under procuration endorsement; 7. Articles 1021 and 1022 on form and effects of bill guarantees; 8. Article 1029 on the right to receipts and part payments; 9. Articles 1035–1037 and 1039–1041 on protest; 10. Article 1042 on notification; 11. Article 1043 on the waiver of protest; 12. Articles 1044 on the joint and several liability of the parties; 13. Articles 1046 and 1047 on the right of recourse on payment of

the bill of exchange and the right to take possession of bills of exchange, protest and receipts;

14. Article 1052 on claims for unjust enrichment; 15. Article 1053 on devolution of cover; 16. Article 1064 on the relationship between duplicates; 17. Article 1068 on amendments;

395

220 Code of Obligations

A. In general I. Requirements

II. Defences of the obligor

18. Articles 1070 and 1071 on interruption of limitation periods; 19. Articles 1072–1078 and 1079 paragraph 1 on cancellation; 20. Articles 1083–1085 on exclusion of days of respite, the place

for actions in connection with bills of exchange and signatures by hand;

21. Articles 1086, 1088 and 1089 on applicable jurisdiction with regard to capacity to incur liability as a party to bills, actions to exercise and safeguard rights under bills of exchange and exer- cise of the right of recourse.

2 None of the provisions relating to acceptance of bills of exchange laid down in these Articles is applicable. 3 With regard to their applicability to cheques, Article 1042 paragraph 1, Article 1043 paragraph 1 and 3 and Article 1047 are supplemented in the sense that a declaration equivalent to protest as defined in Arti- cle 1128 letters 2 and 3 may substitute for protest itself.

XIII. Reservation of Specific Law

Art. 1144 The special provisions governing Swiss post office cheques are re- served.

Section Six: Bill-like Securities and Other Instruments to Order

Art. 1145 A negotiable security is deemed an instrument to order if it is made out to order or declared by law to be an instrument to order.

Art. 1146 1 Against a claim deriving from an instrument to order, the obligor may plead only such defences as contest the validity of the instrument or arise from the instrument itself and those available to him person- ally against the respective obligee. 2 Defences based on the direct relations between the obligor and a former bearer are admissible where the bearer intentionally acted to the detriment of the obligor when acquiring the security.

396

220Federal Act on the Amendment of the Swiss Civil Code

B. Bill-like securities I. Payment instructions to order 1. In general

2. No duty to accept

3. Consequences of acceptance

4. No enforce- ment of bills of exchange

II. Promise to pay to order

577 SR 281.1 578 SR 281.1

Art. 1147 Where a payment instruction is not designated as a bill of exchange in the text appearing on the instrument itself but is expressly made out to order and satisfies all the other requirements of a bill of exchange, it counts as a bill of exchange.

Art. 1148 1 The payment instruction to order must not be presented for accep- tance. 2 If it is nevertheless presented but acceptance is refused, the bearer does not have right of recourse on these grounds.

Art. 1149 1 Where the payment instruction to order is accepted voluntarily, the acceptor of the payment instruction counts as the acceptor of a bill of exchange. 2 However, the bearer may not have recourse before maturity if the instructed party has been declared insolvent or has suspended his payments or compulsory execution has been levied on his assets with- out success. 3 Similarly, the bearer may not have recourse before maturity if the instructing party has been declared insolvent.

Art. 1150 The provisions of the Debt Collection and Bankruptcy Act of 11 April 1889577 governing the enforcement of bills of exchange do not apply to payment instructions to order.

Art. 1151 1 Where a promise to pay is not designated as a promissory note in the text appearing on the instrument itself but is expressly made out to order and satisfies all the other requirements of a promissory note, it counts as a promissory note. 2 However, the provisions governing payment for honour do not apply to promises to pay to order. 3 The provisions of the Debt Collection and Bankruptcy Act of 11 April 1889578 governing the enforcement of bills of exchange do not apply to promises to pay to order.

397

220 Code of Obligations

C. Other endorsable securities

A. Requirements

B. The warrant

Art. 1152 1 Instruments whereby the signatory undertakes to pay certain sums of money or deliver certain quantities of fungibles with reference to place, time and total amount may, if they are expressly made out to order, be transferred by endorsement. 2 These and other endorsable instruments, such as warehouse warrants, bills of lading, etc., are subject to the provisions of the law on bills of exchange governing the form of the endorsement, proof of the bearer’s entitlement, annulment and the bearer’s duty to surrender the instru- ment. 3 However, the provisions governing rights of recourse on bills of exchange do not apply to such instruments.

Section Seven: Documents of Title to Goods

Art. 1153 Documents of title to goods issued by a warehouse keeper or carrier as negotiable securities must bear:

1. the place and date of issue and the signature of the issuer; 2. the name and address of the issuer; 3. the name and address of the depositor or sender of the goods; 4. an inventory of the stored or despatched goods by description,

volume and identification marks; 5. the fees and remuneration payable or paid in advance; 6. any special agreements between the parties concerning the

handling of the goods; 7. the number of duplicates of the document of title to goods; 8. the persons with power of disposal, with indication of names

or to order or as bearer.

Art. 1154 1 Where one of two or more documents of title to goods is to serve the purpose of establishing a lien, it must be designated as a warrant and in all other respects take the form of a document of title to goods. 2 The issue of the warrant must be noted on the other duplicates along with every pledge made, including the claim amount and due date.

398

220Federal Act on the Amendment of the Swiss Civil Code

C. Significance of the formal requirements

A. Requirements

Art. 1155 1 Bills and certificates issued in respect of stored goods or freight that do not satisfy the formal requirements of documents of title to goods are not recognised as negotiable securities, but are deemed to be merely receipts or other documents in proof. 2 Bills and certificates issued by warehouse keepers without the legally required approval from the competent authority are recognised as negotiable securities provided they satisfy the statutory formal re- quirements. The issuer is liable to an administrative fine of up to 1,000 francs to be imposed by the competent cantonal authority.

Title Thirty-Four: Bonds Section One: Obligation to publish a Prospectus when issuing Bonds

Art. 1156 1 Bonds may be offered for public subscription or sale on the stock exchange only on the basis of a prospectus. 2 The provisions governing prospectuses for issues of new shares apply mutatis mutandis; in addition, the prospectus must provide more detailed information on the bonds and in particular on the interest and redemption conditions, the special collateral posted for the bonds and, where applicable, representation of the bond creditors. 3 In the event that bonds are issued without a prospectus that complies with these provisions or that the prospectus contains inaccurate infor- mation or information that fails to satisfy the statutory requirements, all persons involved in such non-compliance, whether intentionally or negligently, are jointly and severally liable for the damage arising.

Section Two:579 Community of Bond Creditors

Art. 1157 1 Where bonds with uniform conditions are offered directly or indi- rectly for public subscription by a borrower whose domicile or com- mercial office is in Switzerland, by operation of law the creditors form a community of creditors.

579 Amended by No I of the Federal Act of 1. April 1949, in force since 1 Jan. 1950 (AS 1949 I 791 801; BBl 1947 III 869). See the Final Provisions on this Sec. (second Sec. of Title XXXIV) at the end of the CO.

399

220 Code of Obligations

B. Bond representative I. Appointment

II. Powers 1. In general

2. Monitoring of the borrower

2 Where several different issues are offered, the creditors of each issue form a separate community of creditors. 3 The provisions of this Chapter do not apply to bonds issued by the Confederation, cantons, municipalities and other public sector corpora- tions and entities.

Art. 1158 1 Representatives appointed under the bond issue conditions are, unless otherwise provided, deemed to be representatives of both the community of creditors and the borrower. 2 The creditors’ meeting may elect one or more representatives for the community of creditors. 3 Unless otherwise provided, multiple representatives exercise their powers of representation jointly.

Art. 1159 1 The representative has such powers as are conferred on him by law, the bond issue conditions or the creditors’ meeting. 2 His duties are to request that the borrower convene a creditors’ meeting where the conditions for such convocation obtain, to imple- ment its resolutions and to represent the community of creditors within the bounds of the powers conferred on him. 3 To the extent that the representative is authorised to assert the credi- tors’ rights, the individual creditors are not entitled to exercise their rights independently.

Art. 1160 1 Where the borrower is in arrears in the fulfilment of his obligations under the bond issue, the representative of the community of creditors is entitled to obtain from the borrower all information of interest to the community of creditors. 2 On the same conditions, where the borrower is a company limited by shares, partnership limited by shares, limited liability company or cooperative, the representative may participate in an advisory capacity in the meetings of its governing bodies to the extent that the agenda items under discussion relate to the interests of the bond creditors. 3 The representative must be invited to such meetings and is entitled to receive the background documentation to be discussed at such meet- ings in good time.

400

220Federal Act on the Amendment of the Swiss Civil Code

3. In the case of bonds secured by pledge

III. Lapse of authority

IV. Costs

C. Creditors’ meeting I. In general

Art. 1161 1 Where a representative of the borrower and the creditors has been appointed for a bond issue secured by a land charge or a charge on chattels, he has the same powers as a pledgee under a land charge. 2 The representative must safeguard the rights of the creditors, the borrower and the owner of the charged property diligently and impar- tially.

Art. 1162 1 The creditors’ meeting may revoke or modify the authority conferred on a representative at any time. 2 The authority of a representative appointed under the bond issue conditions may be revoked or modified at any time by resolution of the community of creditors with the consent of the borrower. 3 On application by a bond creditor or the borrower, the court may declare such authority extinguished for good cause. 4 Where the representative’s authority lapses for whatever reason, at the request of a bond creditor or the borrower, the court orders the measures necessary to protect the bond creditors and the borrower.

Art. 1163 1 The costs of all representative arrangements envisaged in the bond issue conditions are borne by the borrower. 2 The costs of representation appointed by the community of creditors are covered by payments made by the borrower and deducted from all bond creditors in proportion to the nominal value of the bonds they hold.

Art. 1164 1 The community of creditors is authorised within the bounds of the law to take all measures required to safeguard the collective interests of the bond creditors, in particular as regards any financial difficulties encountered by the borrower. 2 The resolutions of the community of creditors are made by the credi- tors’ meeting and are valid providing they satisfy the requirements laid down by the law in general or for specific measures. 3 The individual bond creditors are not entitled to assert their rights independently to the extent that valid resolutions on the matters in question have been made by the creditors’ meeting. 4 The costs of convening and holding the creditors’ meeting are borne by the borrower.

401

220 Code of Obligations

II. Convocation 1. In general

2. Moratorium

III. Holding the meeting 1. Voting right

Art. 1165 1 The creditors’ meeting is convened by the borrower. 2 The borrower is obliged to convene it within 20 days if so requested by bond creditors together holding at least one-twentieth of the bond capital in circulation or by the bond representative in writing with an indication of the purpose of and reasons for the meeting. 3 In the event that the borrower fails to comply with such request, the court may authorise the applicant to convene a creditors’ meeting of his own accord. The court at the current or last seat of the debtor in Switzerland has mandatory jurisdiction.580 4 If the debtor has or had only a branch office in Switzerland, the court at the location of this branch office has mandatory jurisdiction.581

Art. 1166 1 From the date on which the invitation to the creditors’ meeting is duly published until the final outcome of the composition proceedings, all due claims of the bond creditors are subject to a stay of enforce- ment. 2 Such stay is not a suspension of payments within the meaning of the Debt Collection and Bankruptcy Act of 11 April 1889582; the creditors may not apply for the commencement of insolvency proceedings without prior debt enforcement. 3 For the duration of the stay, such limitation and forfeiture periods as can be interrupted by debt enforcement are suspended for the due claims of the bond creditors. 4 Where the borrower abuses the right to obtain a stay of enforcement, at the request of a bond creditor it may be lifted by the higher cantonal composition authority.

Art. 1167 1 Each owner of a bond or his representative, or in the case of bonds under beneficial ownership either the beneficial owner or his represen- tative, has the right to vote. However, the beneficial owner is liable in damages to the owner for any failure to take due account of the latter’s interests when exercising the voting rights. 2 Bonds owned by or held in the beneficial ownership of the borrower confer no voting rights. However, where bonds belonging to the bor-

580 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

581 Amended by Annex 1 No II 5 of the Civil Procedure Code of 19 Dec. 2008, in force since 1 Jan. 2011 (AS 2010 1739; BBl 2006 7221).

582 SR 281.1

402

220Federal Act on the Amendment of the Swiss Civil Code

2. Representa- tion of individual bond creditors

IV. Procedure

D. Resolutions of the commu- nity of creditors I. Encroachment on creditors’ rights 1. Admissibility and required majority a. In the case of only one community of creditors

rower have been given in pledge, the pledgee is entitled to exercise the associated voting rights. 3 A charge or special lien held by the borrower on bonds does not preclude the voting rights of the owners of such bonds.

Art. 1168 1 Representation of bond creditors requires a written power of attor- ney, unless such representation has its basis in law. 2 The borrower is excluded from representing bond creditors with voting rights.

Art. 1169 The Federal Council enacts provisions governing convocation of the creditors’ meeting, communication of the agenda, proof of entitlement to participate in the creditors’ meeting, moderation of the general meeting and the recording and communication of its resolutions.

Art. 1170 1 A majority of at least two-thirds of the bond capital in circulation is required to pass a valid resolution in connection with the following measures:

1. moratorium on interest for up to five years, with the option of extending the moratorium twice for up to five years each time;

2. waiver of up to five years’ worth of interest within a seven- year period;

3. decrease of the interest rate by up to one-half of the rate envis- aged in the bond issue conditions or conversion of a fixed in- terest rate into a rate dependent on the business results, both measures to last for up to ten years, with the option of an ex- tension for up to five years;

4. extension of the redemption time limit by up to ten years by means of a reduction in the annual payment or an increase in the number of the redemption shares or temporary suspension of such payments, with the option of an extension for up to five years;

5. suspension of a bond issue now due or maturing within five years or of portions thereof for up to ten years, with the option of an extension for up to five years;

6. authorisation of an early redemption of the bond capital;

403

220 Code of Obligations

b. In the case of several commu- nities of creditors

c. Determining the majority

2. Restrictions a. In general

7. granting of a priority lien for new capital raised for the issuing company and changes to the collateral provided for a bond is- sue or full or partial waiver of such collateral;

8. consent to an amendment of the provisions governing restric- tions on issues of bonds in relation to the share capital;

9. consent to a full or partial conversion of bonds into shares. 2 These measures may be combined.

Art. 1171 1 Where there is more than one community of creditors, the borrower may propose one or more of the measures described in the previous Article to the different communities of creditors simultaneously, subject to the proviso that, where one such measure is proposed, it will be valid only if accepted by all the communities of creditors and that in addition, where two or more such measures are proposed, the valid- ity of each measure is conditional on acceptance of all the others. 2 Proposals are deemed accepted where they obtain the consent of persons representing at least two-thirds of the bond capital in circula- tion of all such communities of creditors combined and at the same time are accepted by a majority of the communities of creditors and, within each community of creditors, by at least a simple majority of the bond capital represented.

Art. 1172 1 When determining the total bond capital in circulation, bonds that do not confer voting rights are disregarded. 2 Where a motion put to the creditors’ meeting fails to attain the requi- site number of votes, the borrower may register votes making up the shortfall by written and authenticated declarations made within two months of the date of the meeting to the chairman of the meeting and thereby bring about a valid resolution.

Art. 1173 1 No bond creditor may be required by resolution of the community of creditors to tolerate an encroachment on the creditors’ rights other than those envisaged in Article 1170 or to make payments that were neither envisaged in the bond issue conditions nor agreed with him when the bonds were issued. 2 The community of creditors may not extend the creditors’ rights without the consent of the borrower.

404

220Federal Act on the Amendment of the Swiss Civil Code

b. Equal treatment

c. Statement and balance sheet

3. Official approval a. In general

b. Requirements

Art. 1174 1 The persons making up a community of creditors must all be equally affected by any resolution to adopt compulsory measures, unless every disadvantaged creditor expressly agrees to such measures. 2 The ranking of charge creditors must not be changed without their consent. Article 1170 letter 7 is reserved. 3 Undertakings and dispositions whereby individual creditors are favoured over others belonging to the community of creditors are void.

Art. 1175583

An application to take the measures described in Article 1170 may be made by the borrower and considered by the creditors’ meeting only on the basis of status report drawn up as at the date of the creditors’ meeting or a balance sheet drawn up as at a date no more than six months prior to the meeting in accordance with standard practice and, where applicable, certified by the auditor as true and fair.

Art. 1176 1 Resolutions involving an encroachment on creditors’ rights are effective and binding on the bond creditors who did not vote in favour of them only if they have been approved by the higher cantonal com- position authority. 2 The borrower must submit them within one month of their adoption to said authority for approval. 3 The time and date of the hearing is published together with a notice to the bond creditors informing them that they may raise objections in writing or in person at the hearing. 4 The costs of the approval procedure are borne by the borrower.

Art. 1177 Official approval may be refused only where:

1. the provisions governing the convocation of the creditors’ meeting and its adoption of resolutions were infringed;

2. it transpires that a resolution intended to avert financial hard- ship from the borrower was not necessary;

3. the collective interests of the bond creditors are not sufficiently protected;

583 Amended by No I 3 of the Federal Act of 16 Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

405

220 Code of Obligations

c. Appeal

d. Revocation

II. Other resolutions 1. Authority of the bond representative

2. On other matters

4. the resolution was brought about by dishonest means.

Art. 1178 1 Once approval has been given, it may be challenged as illegal or inappropriate within 30 days before the Federal Supreme Court by any bond creditor who did not vote for the resolution, in which case the legal procedure envisaged for matters concerning debt collection and bankruptcy is applicable. 2 Similarly, a decision to refuse approval may be challenged by bond creditors who voted in favour of the resolution or by the borrower.

Art. 1179 1 If it subsequently transpires that the resolution of the creditors’ meeting was brought about by dishonest means, at the request of a bond creditor the higher cantonal composition authority may revoke approval in part or in full. 2 An application for revocation must be filed within six months of the date on which the bond creditors learned of the grounds for challenge. 3 Revocation may be challenged as unlawful or unreasonable within 30 days before the Federal Supreme Court by the borrower and by any bond creditor, in which case the legal procedure envisaged for matters concerning debt collection and bankruptcy is applicable. Similarly, a refusal to revoke approval may be challenged by any bond creditor who requested such revocation.

Art. 1180 1 The consent of persons representing more than one-half of the bond capital in circulation is required to revoke or modify the authority conferred on a bond representative. 2 The same majority is required for a resolution to grant a bond repre- sentative authority to safeguard the rights of all the bond creditors in insolvency proceedings.

Art. 1181 1 Resolutions which neither encroach on the creditors’ rights nor impose further material contributions on the creditors require merely an absolute majority of the votes represented, unless the law stipulates otherwise or the bond issue conditions impose stricter requirements. 2 The majority is determined in all cases according to the nominal value of the bond capital conferring voting rights that is represented at the creditors’ meeting.

406

220Federal Act on the Amendment of the Swiss Civil Code

3. Challenge

E. Special cases I. Insolvency of the borrower

II. Composition agreement

III. Bonds issued by railway or inland water- ways transport companies

Art. 1182 Any resolution within the meaning of Articles 1180 and 1181 which contravenes the law or contractual provisions may be challenged in court by a member of the community of bond creditors who did not vote for it within 30 days of the date on which he learned of it.

Art. 1183 1 Where a borrower becomes insolvent, the insolvency administrators must convene a meeting of the bond creditors without delay, at which an existing representative or a representative appointed by the meeting is granted authority to safeguard the rights of all the bond creditors in insolvency proceedings. 2 Where no resolution is made to grant such authority, each bond creditor represents his rights independently.

Art. 1184 1 In composition proceedings, subject to the provisions governing bonds secured by a charge, no special resolution is made by the bond creditors on their position towards the composition agreement, and their consent is governed exclusively by the provisions of the Debt Collection and Bankruptcy Act of 11 April 1889584. 2 The provisions governing the community of creditors apply to credi- tors holding bonds secured by a charge, to the extent that any restric- tion of their creditors’ rights is to be imposed above and beyond the effects of the composition proceedings.

Art. 1185 1 The provisions of this Chapter are applicable to bond creditors of railway or inland waterways transport companies, subject to the fol- lowing special provisions. 2 A request for convocation of a creditors’ meeting must be made to the Federal Supreme Court. 3 The Federal Supreme Court is responsible for convening the credi- tors’ meeting and the recording, approval and implementation of its resolutions. 4 On receipt of a request for convocation of a creditors’ meeting, the Federal Supreme Court may order a stay of enforcement with the effects envisaged in Article 1166.

SR 281.1

407

584

220 Code of Obligations

Art. 1186 F. Mandatory 1 The rights conferred by law on the community of creditors and the law bond representative may be neither excluded nor restricted by the bond

issue conditions or other special agreements between the creditors and the borrower. 2 This does not apply to provisions made in the bond issue conditions whereby more restrictive requirements are placed on the adoption of resolutions by the creditors’ meeting.

Transitional Provisions of the Federal Act of 30 March 1911

I. The Final Title of the Civil Code585 is amended as follows: …586

II. This Act enters into force on 1 January 1912. The Federal Council is charged with making arrangements to publicise this Code on the basis of the provisions of the Federal Act of 17 June 1874587 on Referendums on Federal Acts and Federal Council De- crees.

Final Provisions on the Amendment of 23 March 1962588

Art. 1 A. Preferential …589 payments on bankruptcy

Art. 2 B. Unfair …590 competition

Art. 3 C. Transitional 1 Articles 226f, 226g, 226h, 226i and 226k591 also apply to hire pur- law chase agreements entered into prior to the commencement of this Act.

2 Only Article 226k applies to advance payment agreements entered into prior to the commencement of this Act. These agreements must

585 SR 210. The amendment below is inserted in the said enactment. 586 The amendments may be consulted under AS 27 317. 587 [BS 1 173; AS 1962 789 Art. 11 para. 3, 1978 712 Art. 89 No b] 588 Inserted by No II of the Federal Act of 23. March 1962, in force since 1 Jan. 1963

(AS 1962 1047 1056; BBl 1960 I 523). 589 The amendments may be consulted under AS 1962 1047. 590 The amendments may be consulted under AS 1962 1047. 591 These Articles have now been repealed.

408

220Federal Act on the Amendment of the Swiss Civil Code

D. Entry into force

A. General rule

B. Deadline for amendments

however be adapted to the provisions of the Article 227b within one year, failing which they lapse and the purchaser must be paid his entire credit balance with all the interest and benefits credited to him.

Art. 4 The Federal Council determines the date on which this Act enters into force.

Transitional Provisions on the Amendment of 16 December 2005592

Art. 1 1 The final title of the Civil Code applies to this Code unless the fol- lowing provisions provide otherwise. 2 The provisions of the new Code apply to existing companies from its commencement.

Art. 2 1 Limited liability companies entered in the commercial register on the commencement of this Code but which do not fulfil the new require- ments must amend their articles of association and regulations to the new provisions within two years. 2 Provisions of the articles of association and regulations that are inconsistent with the new law remain in force until their amendment but for two years at the most. 3 For limited liability companies that are entered in the commercial register when this Code comes into force, Articles 808a and 809 paragraph 4 second sentence only apply after expiry of the period allowed to amend the articles of association. 4 Companies limited by shares and cooperatives that are entered in the commercial register when this Code comes into force whose name does not comply with the new statutory requirements must adapt their name to the new provisions within two years. On expiry of this period, the commercial registry amends the name ex officio.

592 Inserted by No III of the Federal Act of 16. Dec. 2005 (Law on Limited Liability Companies and Amendments to the Law on Companies limited by Shares, Cooperatives, the Commercial Register and Business Names), in force since 1 Jan. 2008 (AS 2007 4791 4839; BBl 2002 3148, 2004 3969).

409

220 Code of Obligations

C. Payment of contributions

D. Participation certificates and dividend rights certificates

E. Own capital contributions

F. duty to pay in further capital

AS 53 185

Art. 3 1 Where in limited liability companies that are entered in the commer- cial register when this Act comes into force, allocations have not been made corresponding to the issue price of all capital contributions, these allocations must be made within two years. 2 Until the full payment of the allocation to the level of the capital contributions, the company members are liable in accordance with Article 802 of the Code of Obligations in its version of 18 December 1936593.

Art. 4 1 Shares in limited liability companies that indicate a nominal value and which are recorded under liabilities on the balance sheet, but will confer no voting rights (participation certificates), are deemed after two years to be capital contributions with the same property rights if they are not cancelled during this period by means of a reduction in capital. If the shares are cancelled, the former participants must be paid compensation corresponding to the true value of the certificates. 2 The required resolutions of the members' general meeting may be passed with an absolute majority of the votes represented, even if the articles of association provide otherwise. 3 Shares in limited liability companies that are not recorded under liabilities on the balance sheet are governed by the provisions on dividend rights certificates once this Act comes into force, even if they are designated participation certificates. They may not indicate a nominal value and must be designated dividend rights certificates. The designation of the shares and the articles of association must be amended within two years.

Art. 5 Where limited liability companies acquired their own capital contribu- tions before this Act comes into force, they must, provided they ex- ceed 10 per cent of the nominal capital, sell the same or cancel the same by means of a reduction in capital, within two years.

Art. 6 1 Obligations under the articles of association to pay additional capital contributions that were established before this Act comes into force and that exceed twice the nominal value of the capital contributions, remain legally valid and may only be reduced by following the proce- dure under Article 795c.

410

593

220Federal Act on the Amendment of the Swiss Civil Code

G. Auditor

H. Voting rights

J. Amendment of majority requirements in the articles of association

K. Cancellation of shares and capital contribu- tions in the event of restructuring

L. Exclusivity of registered business names

AS 53 185

2 Otherwise, the new provisions apply after this Act comes into force, in particular in relation to the call for additional capital contributions.

Art. 7 The provisions of this Act on the auditor apply from the first financial year that begins when this Act comes into force or thereafter.

Art. 8 1 Limited liability companies that have conferred voting rights before this Act comes into force that are not dependent on the nominal value of the capital contributions are not required to amend the correspond- ing provisions to the requirements von Article 806. 2 On the issue of new capital contributions, Article 806 paragraph 2 second sentence must be observed in every case.

Art. 9 If a limited liability company, simply by reproducing the provisions of the old law, has adopted provisions in the articles of association that require qualified majorities to pass resolutions at the members' general meeting, the members' general meeting may within two years by an absolute majority of the votes represented resolve to amend these provisions in accordance with the new law.

Art. 10 If, before this Act comes into force, the share capital or the nominal capital is reduced to zero for the purposes of restructuring and thereaf- ter increased again, the membership rights of the former shareholders or company members cease to exist when this Act comes into force.

Art. 11 The exclusivity of business names that were entered in the commercial register before this Act comes into force is assessed in accordance with Article 951 of the Code of Obligations in its version of 18 December 1936594.

Transitional Provision to the Amendment of 17 June 2011595 The provision in this amendment applies from the first financial year beginning on or after the date on which this amendment comes into force.

595 AS 2011 5863; BBl 2008 1589

411

594

220 Code of Obligations

A. General rule

B. Commercial accounting and financial reporting

Transitional Provision to the Amendment of 23 December 2011596

Art. 1 1 The provisions of the Final Title of the Civil Code597 apply to this Code unless the following provisions provide otherwise. 2 The provisions of the Amendment of 23 December 2011 apply to existing undertakings from the date on which it comes into force.

Art. 2 1 The regulations in Title Thirty Two first apply in the financial year that begins two years after this Amendment comes into force. 2 The basis for the application of the provisions on financial reporting by larger undertakings is formed by the balance sheet total, sales revenue and number of full-time positions on annual average in the two years before this Amendment comes into force 3 The provisions on consolidated accounts first apply in the financial year beginning three years after this Amendment comes into force. The two previous financial years form the basis for the exemption from the duty to prepare consolidated accounts. 4 When applying the regulations on financial reporting for the first time, it is not required to specify the figures from previous years. When applying the regulations for the second time, only the figures from the previous year need be specified. If figures from previous financial years are specified, consistency of presentation and structure are not required. Reference must be made to this in the notes to the accounts.

Final Provisions on Title Eight and Title Eightbis598

Art. 1 The Federal Decree of 30 June 1972599 on Measures against Abuses in Tenancy Law is repealed.

596 AS 2012 6679; BBl 2008 1589 597 SR 210 598 Inserted by No II of the Federal Act of 15 Dec. 1989, in force since 1 July 1990

(AS 1990 802 834; BBl 1985 I 1389). 599 [AS 1972 1502, 1977 1269, 1982 1234, 1987 1189]

412

220Federal Act on the Amendment of the Swiss Civil Code

Art. 2-4 …600

Art. 5 1 The provisions governing protection against termination in the rent- ing and leasing of residential and commercial accommodation apply to all residential and commercial leases that are terminated following the commencement of this Act. 2 However, if notice is given of the termination of a residential or commercial lease prior to the commencement of this Act, but with effect from a date thereafter, the time limits for challenging the termi- nation and the request for an extension (Art. 273) begin when this Act comes into force.

Art. 6 1 This Act is subject to an optional referendum. 2 The Federal Council determines the commencement date.

Final and Transitional Provisions on Title X601

Art. 1 Amendment …602 of the COR

Art. 2 Amendment …603 of the CC

Art. 3 Amendment of …604 the Insurance Contracts Act

Art. 4 Amendment of …605 the Agriculture Act

600 The amendments may be consulted under AS 1990 802. 601 Inserted by No II of the Federal Act of 25. June 1971, in force since 1 Jan. 1972

(AS 1971 1465 1507; BBl 1967 II 241). 602 The amendments may be consulted under AS 1971 1465. 603 The amendments may be consulted under AS 1971 1465. 604 The amendments may be consulted under AS 1971 1465. 605 The amendments may be consulted under AS 1971 1465.

413

220 Code of Obligations

Art. 5 Amendment of …606 the Employment Act

Art. 6 Repeal of federal The following provisions are repealed on the commencement of this law provisions Act:

1. Article 159 and 463 of the Code of Obligations, 2. Article 130 of the Federal Act of 13 June 1911607 on Health

and Accident Insurance, 3. Article 20 to 26, 28, 29 and 69 paragraphs 2 and 5 of the Fed-

eral Act of 18 June 1914608 on Factory Employment, 4. Article 4, 8 paragraphs 1, 2 and 5, 9 and 19 of the Federal Act

of 12 December 1940609 on Homeworking, 5. the Federal Act of 13 June 1941610 on Employment Terms for

Commercial Travellers, 6. the Federal Act of 1 April 1949611 on Restrictions on the Ter-

mination of Employment Contracts while on Military Service, 7. Articles 96 and 97 of the Agriculture Act of 3 October 1951612, 8. Article 32 of the Federal Act of 25 September 1952613 on the

System of Compensation for Loss of Earnings for Persons on Military Service or Civil Protection Duty,

9. Article 19 of the Federal Act of 28. September 1956614 on the Declaration of the General Application of Collective Employ- ment Agreements,

10. Article 49 of the Civil Defence Act615,

606 The amendments may be consulted under AS 1971 1465. 607 [BS 8 281; AS 1959 858, 1964 965 No I-III, 1968 64, 1977 2249 No I 611, 1978 1836

Annex No 4, 1982 196 1676 Annex No 1 2184 Art. 114, 1990 1091, 1991 362 No II 412, 1992 288 Annex No 37 2350, 1995 511. AS 1995 1328 Annex No 1]

608 SR 821.41 609 [BS 8 229; AS 1951 1231 Art. 14 para. 2, 1966 57 Art. 68. AS 1983 108 Art. 21 No 3] 610 [BS 2 776; AS 1966 57 Art. 69] 611 [AS 1949 II 1293] 612 [AS 1953 1073, 1954 1364 Art. 1, 1958 659, 1959 588, 1960 1279, 1962 203 1144 Art. 14

1412, 1967 722, 1968 92, 1974 763, 1975 1088, 1977 2249 No I 921 942 931, 1979 2058, 1982 1676 Annex No 6, 1988 640, 1989 504 Art. 33 No c, 1991 362 No II 51 857 Annex No 25 2611, 1992 1860 Art. 75 No 5 1986 Art. 36 para. 1, 1993 1410 Art. 92 No 4 1571 2080 Annex No 11, 1994 28, 1995 1469 Art. 59 No 3 1837 3517 No I 2, 1996 2588 Annex No 2 2783, 1997 1187 1190, 1998 1822. AS 1998 3033 Annex No c]

613 SR 834.1. Now: Federal Act on Compensation for Loss of Earnings for Persons on Military Service or Maternity Leave (Loss of Earnings Compensation Act, LECA).

614 SR 221.215.311

414

220Federal Act on the Amendment of the Swiss Civil Code

11. Art. 20 paragraph 2 and 59 of the Federal Act of 20 September 1963616 on Vocational Education and Training,

12. Art. 64617 and 72 paragraph 2 letter a of the Employment Act of 13 March 1964618.

Art. 7 Amendment of Contracts of employment in existence when this Act comes into force legal relations governed by the (individual contracts of employment, standard employment contracts old law and collective employment contracts) must be amended in accordance

with the provisions hereof within one year; on expiry of this time limit, the provisions hereof apply to all contracts of employment. 2 Occupational benefits schemes in existence when this Act comes into force619 must amend their articles of association or regulations by 1 January 1977 at the latest taking account of the formal requirements of Articles 331 a, 331 b and 331c applicable to the amendment; from 1 January 1977, these provisions apply to all occupational benefits schemes.620

Art. 8 Commencement The Federal Council shall determine the commencement date of this of the Act Act.

Final Provisions on the Fourth Section of Title XIII.621

Art. 1 A. Transitional 1 Articles 418d paragraph 1, 418f paragraph 1, 418k paragraph 2, 418o, law 418p, 418r and 418s apply immediately to agency contracts already in

existence when the new law comes into force. 2 In other respects, agency contracts already in existence when the new law comes into force must be amended in accordance with the new provisions within two years. After this time limit expires, the new law also applies to agency contracts entered into previously.

615 [AS 1962 1089, 1964 487 Art. 22 para. 2 No b, 1968 1025 Art. 35, 1969 310 No III, 1971 751, 1978 50 570, 1985 1649, 1990 1882 Annex No 7, 1992 288 Annex No 22, 1993 2043 Annex No 3, 1994 2626 Art. 71]

616 [AS 1965 321 428, 1968 86, 1972 1681, 1975 1078 No III, 1977 2249 No I 331. AS 1979 1687 Art. 75]

617 This Art. has now been repealed. 618 SR 822.11 619 1 Jan. 1972 620 Amended by No I of the Federal Act of 25. June 1976, in force since 1 Jan. 1977 (AS 1976

1972 1974; BBl 1976 I 1269). 621 Inserted by No II of the Federal Act of 4 Feb. 1949, in force since 1 Jan. 1950

(AS 1949 I 802 808; BBl 1947 III 661).

415

220 Code of Obligations

B. Preferential payments on bankruptcy

C. Entry into force

3 In the absence of an agreement to the contrary, on expiry of two years, the provisions this Section also apply to contracts already in existence when the new law comes into force relating to agents who act as such as a subsidiary occupation

Art. 2 …622

Art. 3 The Federal Council determines the commencement date of this Act.

Transitional provisions on Title XX623

1 The provisions of the new law apply to all contracts of surety entered into after this Act comes into force. 2 Contracts of surety entered into after this Act comes into force are subject to the provisions of the new law only with regard to matters that arise subsequently and with following restrictions:

1. The new Articles 492 paragraph 3, 496 paragraph 2, 497 para- graphs 3 and 4, 499, 500, 501 paragraph 4, 507 paragraphs 4 and 6, 511 paragraph 1 do not apply.

2. The provisions of the new Articles 493 on form and 494 on the requirement of the spouse's consent apply to contracts of surety under the old law only insofar as they relate to subse- quent amendments of the contracts of surety.

3. Article 496 paragraph 1 applies with the requirement that re- course may be had to the surety not only before the principal debtor and before realisation of the property given in pledge, but also before the realisation of other charges, provided the principal debtor is in arrears and has failed to respond to re- minders or his inability to pay is obvious.

4. The creditor is granted a period of six months from falling in arrears or at least three months from the commencement of this Act to give notice of the arrears in accordance with Article 505 paragraph 1.

5. Article 505 paragraph 2 applies only to bankruptcy proceed- ings commenced at least three months after this Act comes into

622 The amendments may be consulted under AS 1949 I 802. 623 Inserted by No II of the Federal Act of 10 Dec. 1941, in force since 1 July 1942

(AS 58 279 290 644; BBl 1939 II 841).

416

220Federal Act on the Amendment of the Swiss Civil Code

A. Scope of application of the Final Title

B. Adaptation of existing compa- nies to the new law I. In general

II. Welfare schemes

SR 631.0

force, and to debt restructuring moratoriums approved at least three months after this Act comes into force.

6. The time limit mentioned in Article 509 paragraph 3 begins to run for contracts of surety under the old law when this Act comes into force.

3 Articles 77–80 of the Customs Act of 18 March 2005624 are re- served.625. 4 The Federal Council determines the commencement date of this Act.

Final and Transitional Provisions on Titles XXIV–XXXIII626

Art. 1 The provisions of the Final Title of the Civil Code627 also apply to this Act.

Art. 2 1 Companies limited by shares, partnerships limited by shares and cooperatives that are entered in the commercial register when this Act comes into force, but which do not meet the statutory requirements, must amend their articles of association in accordance with the new provisions within five years. 2 During this period, they are subject to the previous law where their articles of association are contrary to the new provisions. 3 If the companies fail to comply with this provision, on expiry of the deadline, they must be declared dissolved ex officio by the commercial registrar. 4 The Federal Council may extend the application of the old law in the case of insurance and credit cooperatives on a case-by-case basis. Any application in relation thereto must be filed within three years of this Act coming into force.

Art. 3 Where companies limited by shares, partnerships limited by shares and cooperatives have prior to the entry into force of this Act clearly provided funds to establish and support welfare schemes for employ-

625 Amended by Annex No 2 of the Customs Act of 18 March 2005, in force since 1 May 2007 (SR 631.0).

626 Inserted by the Federal Act of 18 Dec. 1936 (AS 53 185; BBl 1928 I 205, 1932 I 217). 627 SR 210

417

624

220 Code of Obligations

C. Balance sheet provisions I. Exception for extraordinary circumstances

II. ...

D. Conditions for liability of members

E. Business names

ees and for members, they must adapt these schemes within five years to the provisions of Articles 673628 and 862629.

Art. 4630

Art. 5 1 The Federal Council is entitled where extraordinary economic cir- cumstances so require to enact provisions that permit deviations from the requirements relating to balance sheets laid down in this Act. Any resolution of the Federal Council to this effect must be published. 2 If a Federal Council decree of this nature applies to the preparation of a balance sheet, this must be stated on the balance sheet.

Art. 6631

Art. 7 1 The rights of creditors existing when this Act comes into force are not adversely affected by changes to the provisions of this law relating to the conditions for liability of members. 2 Cooperatives, whose members are personally liable for the obliga- tions of the cooperative only by virtue of Article 689 of the previous Code of Obligations632, remain subject to the provisions of the previ- ous law for five years. 3 During this period, resolutions on the full or partial exclusion of personal liability or an express finding of liability may be passed in the general meeting by an absolute majority of the votes cast. Article 889 paragraph 2 on departure does not apply.

Art. 8 1 Business names in existence when this Act comes into force that do not comply with its provisions may continue to be used unchanged for a further two years. 2 If any change is made before the expiry of this deadline, the change must comply with the current law.

628 This Art. has now been reworded. 629 This Art. has now been reworded. 630 Repealed by Annex No 2 of the Mergers Act of 3 Oct. 2003, with effect from 1 July 2004

(SR 221.301). 631 Article no longer relevant. 632 AS 27 317

418

220Federal Act on the Amendment of the Swiss Civil Code

F. Securities I. Registered securities

II. Shares 1. Nominal value

2. Bearer shares not fully paid up

III. Bills of exchange and cheques

G. Community of creditors

H. ...

Art. 9 Savings bank and deposit account books, and savings and deposit certificates issued before this Act comes into force as registered securi- ties are subject to the provisions of Article 977 on the cancellation of debt instruments even if the borrower has not expressly reserved the right in the instrument not to make payment without sight of the debt instrument or and without cancellation.

Art. 10 Shares that were issued before this Act comes into force may

1. continue to have a nominal value of less than 100 francs; 2. be reduced in nominal value to less than 100 francs in the

event of a reduction in the basic capital within three years of this Act coming into force.

Art. 11 1 Bearer shares and interim certificates issued before this Act comes into force are not subject to Articles 683 and 688 paragraphs 1 and 3. 2 The legal relationship between the subscriber to and acquirer of these shares is governed by the previous law.

Art. 12 Bills of exchange and cheques issued before this Act comes into force are governed by the previous law in all transactions.

Art. 13 The Ordinance of 20 February 1918633 relating to the community of bond creditors and the provisions of the supplementary Federal Coun- cil Decrees634 continue to apply to the cases to which they applied previously.

Art. 14635

633 [AS 34 231, 35 297, 36 623 893] 634 [AS 51 673, 53 454, 57 1514, 58 934, 62 1088, 63 1342] 635 Repealed by No I No c of the Annex to the IPLA of 18 Dec. 1987 (SR 291).

419

220 Code of Obligations

J. Amendment of the Debt Collection and Bankruptcy Act

K. Relationship to the Banking Act I. General reservation

II. Amendment of individual provisions

L. Repeal of federal private law

M. Commence- ment of this Act

A. Final Title of the Civil Code

Art. 15 …636

Art. 16 The provisions of the Banking Act of 8 November 1934637 are re- served.

Art. 17 …638

Art. 18 On the entry into force of this Act, the federal private law provisions that are inconsistent herewith, and in particular, the Third Division of the Code of Obligations entitled "Commercial Enterprises, Securities and Business Names" (Federal Act of 14 June 1881639 on the Code of Obligations, Art. 552–715 and 720–880) are repealed.

Art. 19 1 This Act comes into force on 1 July 1937. 2 Excepted from the foregoing is the Section on the community of bond creditors (Art. 1157–1182), the commencement date for which will be determined by the Federal Council.640 3 The Federal Council is responsible for the implementation of this Act.

Final Provisions on the Twenty-Sixth Title641

Art. 1 The Final Title of the Civil Code642 applies to this Act.

636 The amendments may be consulted under AS 53 185. 637 SR 952.0 638 The amendments may be consulted under AS 53 185. 639 [AS 5 635, 11 490; BS 2 784 Art. 103 para. 1. BS 2 3 Final Title Art. 60 para. 2] 640 This section was brought into force in the version contained in the Federal Act of 1 April

1949. For the original version of the text, see AS 53 185. 641 Inserted by No III of the Federal Act of 4 Oct. 1991, in force since 1 July 1992

(AS 1992 733 786; BBl 1983 II 745). 642 SR 210

420

220Federal Act on the Amendment of the Swiss Civil Code

B. Amendment in accordance with the new law I. In general

II. Individual provisions 1. Participation and dividend rights certificates

Art. 2 1 Companies limited by shares and partnerships limited by shares that are entered in the commercial register when this Act comes into force, but which do not comply with the new statutory provisions, must amend their articles of association to the new provisions within five years. 2 Companies which, despite being publicly required to do so through repeated notice in the Swiss Official Gazette of Commerce and in the cantonal official gazettes, do not within five years amend the provi- sions of their articles of association governing minimum capital, the minimum contribution and the participation and dividend rights cer- tificates, will be dissolved by the court at the request of the commer- cial registrar. They may allow an additional period of a maximum of six months. Companies that were established before 1 January 1985 are exempted from the amendment of the provision of their articles of association on minimum capital. Companies whose participation capital on 1 January 1985 was more than twice the share capital are exempted from having to amend the statutory limit. 3 Other provisions of the articles of association that are incompatible with the new law remain in force until they are amended, but for five years at the most.

Art. 3 1 Articles 656a, 656b paragraphs 2 and 3, 656c and 656d as well as 656g apply to companies existing when this Act comes into force, including in cases where the articles of association or conditions of issue are contrary to the said articles. They apply to securities that are designated participation certificates or dividend rights certificates, have a nominal value and are recorded as liabilities on the balance sheet. 2 The companies must include the conditions of issue for the securities mentioned in paragraph 1, adapted to Article 656f in the articles of association within five years, arrange for the required entries to be made in the commercial register and provide securities that are in circulation and not designated as participation certificates with that designation. 3 For securities other than those mentioned in paragraph 1 the new provisions governing the dividend rights certificates apply even if they are designated as participation certificates. Within five years, they must be designated in accordance with the new law and may no longer bear a nominal value. The articles of association must be amended accordingly. The right to convert them into participation certificates is reserved.

421

220 Code of Obligations

2. Refusal to accept registered shareholders

3. Shares with preferential voting rights

4. Qualified majorities

C. Amendment of federal legislation

D. Referendum

E. Commence- ment

Art. 4 Further to Article 685d paragraph 1, the company may, on the basis of a provision of the articles of association, refuse to accept persons as acquirers of registered shares listed on the stock market, provided and for as long as their acceptance could prevent the company from pro- viding evidence of the composition of the shareholder groups as re- quired by federal legislation.

Art. 5 Companies that retain shares with preferential voting rights with a nominal value of under ten francs, in application of Article 10 of the Final and Transitional provisions of the Federal Act of 18 December 1936643 on the Revision of Titles 24–33 of the Code of Obligations, as well as companies, where the nominal value the larger shares is more than ten times the nominal value of the smaller shares are not required to amend their articles of association in accordance with Article 693 paragraph 2 second sentence. However, they are not permitted to issue any new shares whose nominal value is more than ten times that of the smaller shares or less than ten per cent of the nominal value of the larger shares.

Art. 6 Where a company has adopted provisions in its articles of association governing qualified majorities for certain resolutions by simply repro- ducing provisions of the previous law, it may within one year of this Act coming into force resolve to amend such provisions in accordance by an absolute majority of the voting rights represented.

Art. 7 …644

Art. 8 This Act is subject to an optional referendum.

Art. 9 The Federal Council determines the commencement date.

643 See above. 644 The amendments may be consulted under AS 1992 733.

422

220Federal Act on the Amendment of the Swiss Civil Code

Final Provisions on the Second Section of Title XXXIV645

6461. … 6472. …

3. The resolutions of the community of creditors passed under the previous law remain valid under the new law. For resolutions passed after this Act comes into force, the pro- visions of the new law apply. However, if a borrower has already been granted facilitations under the previous law by resolutions of the community of creditors that are equivalent or correspond to those provided for in Article 1170, appropriate account must be taken thereof in the application of this provision. In all other respects, the Final and Transitional provisions of the Federal Act of 18 December 1936 on the Revision of Titles XXIV–XXXIII of the Code of Obligations apply.

4. On commencement of this Act, contradictory provisions, and in particular the Ordinance of the Federal Council of 20 Febru- ary 1918648 on the Community of Bond Creditors, are re- pealed.

5. The Federal Council determines the commencement date of this Act.

645 Inserted by No II of the Federal Act of 1. April 1949, in force since 1 Jan. 1950 (AS 1949 I 791 801; BBl 1947 III 869).

646 The amendments may be consulted under AS 1949 I 791. 647 The amendments may be consulted under AS 1949 I 791. 648 [AS 34 231, 35 297, 36 623 893]

423

220 Code of Obligations

Table of Contents

Code of Obligations

Division One: General Provisions

Title One: Creation of Obligations Section One: Obligations arising by Contract

A. Conclusion of the contract I. Mutual expression of intent 1. In general Art. 1 2. Secondary terms Art. 2

II. Offer and acceptance 1. Offer subject to time limit Art. 3

2. Offer without time limit a. In the parties’ presence Art. 4

b. In the parties’ absence Art. 5 3. Implied acceptance Art. 6 3a. Unsolicited goods Art. 6a 4. Non-binding offer, announcement of prices, display Art. 7 5. Publicly promised remuneration Art. 8 6. Withdrawal of offer and acceptance Art. 9

III. Entry into effect of a contract concluded in the parties’ absence Art. 10

B. Form of contracts I. Formal requirements and significance in general Art. 11 II. Written form 1. Form required by law a. Scope Art. 12 b. Effect Art. 13 c. Signature Art. 14 d. Mark in lieu of signature Art. 15 2. Form stipulated by contract Art. 16

C. Cause of obligation Art. 17 D. Interpretation of contracts, simulation Art. 18 E. Terms of the contract I. Definition of terms Art. 19

424

220Federal Act on the Amendment of the Swiss Civil Code

II. Nullity Art. 20 III. Unfair advantage Art. 21 IV. Agreement to conclude a contract Art. 22

F. Defect in consent I. Error 1. Effect Art. 23 2. Cases of mistake Art. 24 3. Invoking error contrary to good faith Art. 25 4. Error by negligence Art. 26 5. Incorrect intermediation Art. 27

II. Fraud Art. 28 III. Duress 1. Consent to contract Art. 29 2. Definition of duress Art. 30

IV. Defect of consent negated by ratification of the contract Art. 31 G. Agency I. With authorisation 1. In general a. Effect of agency Art. 32 b. Scope of authority Art. 33 2. Authority arising from a transaction a. Restriction and revocation Art. 34 b. Effect of death, incapacity, etc. Art. 35 c. Return of the instrument conferring authority Art. 36 d. Time from which end of authority takes effect Art. 37

II. Without authority 1. Ratification Art. 38 2. Failure to ratify Art. 39

III. Reservation of special provisions Art. 40 H. Revocation in door-to-door sales and similar contracts I. Scope of application Art. 40a II. General principle Art. 40b III. Exceptions Art. 40c IV. Duty to inform Art. 40d V. Revocation 1. Form and time limit Art. 40e 2. Consequences Art. 40f

Art. 40g

425

220 Code of Obligations

Section Two: Obligations in Tort A. General principles I. Conditions of liability Art. 41 II. Determining the loss or damage Art. 42 III. Determining compensation Art. 43 IV. Grounds for reducing compensation Art. 44 V. Special cases 1. Homicide and personal injury a. Damages for homicide Art. 45 b. Damages for personal injury Art. 46 c. Satisfaction Art. 47 2. ... Art. 48 3. Injury to personality rights Art. 49

VI. Multiple liable parties 1. In tort Art. 50 2. On different legal grounds Art. 51

VII. Self-defence, necessity, legitimate use of force Art. 52 VIII. Relationship with criminal law Art. 53

B. Liability of persons lacking capacity to consent Art. 54 C. Liability of employers Art. 55 D. Liability for animals I. Damages Art. 56 II. Seizure of animals Art. 57

E. Liability of property owners I. Damages Art. 58 II. Safety measures Art. 59 F. Liability in respect of electronic signatures Art. 59a

G. Time limits Art. 60 H. Liability of civil servants and public officials Art. 61

Section Three: Obligations deriving from Unjust Enrichment

A. Requirement I. In general Art. 62 II. Payment in satisfaction of a non-existent obligation Art. 63

B. Scope of restitution I. Obligations of the unjustly enriched party Art. 64 II. Rights in respect of expenditures Art. 65

426

220Federal Act on the Amendment of the Swiss Civil Code

C. Exclusion of restitution Art. 66 D. Time limits Art. 67

Title Two: Effect of Obligations Section One: Performance of Obligations

A. General principles I. Performance by the obligor in person Art. 68 II. Object of performance 1. Part payment Art. 69 2. Indivisible performance Art. 70 3. Debt of generic object Art. 71 4. Obligations involving choice of performance Art. 72 5. Interest Art. 73

B. Place of performance Art. 74 C. Time of performance I. Open-ended obligations Art. 75 II. Obligations subject to time limit 1. Monthly time limits Art. 76 2. Other time limits Art. 77 3. Sundays and public holidays Art. 78

III. Performance during business hours Art. 79 IV. Extension of the time limit Art. 80 V. Early performance Art. 81 VI. In bilateral contracts 1. Order of performance Art. 82 2. Allowance for unilateral insolvency Art. 83

D. Payment I. National currency Art. 84 II. Allocation 1. Of part payments Art. 85 2. In the case of multiple debts a. At the discretion of debtor or creditor Art. 86 b. By law Art. 87

III. Receipt and return of borrower’s note 1. Right of the debtor Art. 88 2. Effect Art. 89 3. Return of borrower’s note not possible Art. 90

427

220 Code of Obligations

E. Default of obligee I. Requirement Art. 91 II. Effect 1. On obligations relating to objects a. Right to deposit object Art. 92 b. Right to sell Art. 93 c. Right to take back the object Art. 94 2. On other obligations Art. 95

F. Performance prevented for other reasons Art. 96

Section Two: The Consequences of Non-Performance of Obligations

A. Failure to perform I. Obligor’s duty to compensate 1. In general Art. 97 2. Obligation to act or refrain from action Art. 98

II. Scope of liability and compensation 1. In general Art. 99 2. Exclusion of liability Art. 100 3. Liability for associates Art. 101

B. Default of obligor I. Requirement Art. 102 II. Effect 1. Liability for accidental damage Art. 103 2. Default interest a. In general Art. 104 b. Debtor in default on payments of interest, annuities and gifts Art. 105 3. Excess damage Art. 106 4. Withdrawal and damages a. Subject to time limit Art. 107 b. Without time limit Art. 108 c. Effect of withdrawal Art. 109

Section Three: Obligations involving Third Parties A. Subrogation Art. 110 B. Guarantee of performance by third party Art. 111 C. Contracts conferring rights on third parties I. In general Art. 112

428

220Federal Act on the Amendment of the Swiss Civil Code

II. In the case of liability insurance Art. 113

Title Three: Extinction of Obligations A. Extinction of accessory rights Art. 114 B. Extinction by agreement Art. 115 C. Novation I. In general Art. 116 II. In relation to current accounts Art. 117

D. Merger Art. 118 E. Performance becomes impossible Art. 119 F. Set-off I. Requirement 1. In general Art. 120 2. Under surety Art. 121 3. In contracts conferring rights on third parties Art. 122 4. Where the debtor is bankrupt Art. 123

II. Effect of set-off Art. 124 III. Exceptions Art. 125 IV. Waiver Art. 126

G. Time limits I. Time limits 1. Ten years Art. 127 2. Five years Art. 128 3. Mandatory limitation periods Art. 129 4. Start of limitation period a. In general Art. 130 b. For periodic obligations Art. 131 5. Computation of limitation periods Art. 132

II. Effect on accessory claims Art. 133 III. Prevention and suspension of the limitation period Art. 134 IV. Interruption of limitation period 1. Grounds for interruption Art. 135 2. Effect of interruption on or-obligors Art. 136 3. Start of new limitation period a. In the event of acknowledgment or judgment Art. 137 b. By action of the creditor Art. 138

V. ... Art. 139 VI. Limitation of liens on chattels Art. 140

429

220 Code of Obligations

VII. Waiver of time limits Art. 141 VIII. Assertion Art. 142

Title Four: Special Relationships relating to Obligations Section One: Joint and Several Obligations

A. Joint and several debtors I. Requirement Art. 143 II. Relationship between creditor and debtor 1. Effect a. Liability of the debtors Art. 144 b. Objections by the debtors Art. 145 c. Action taken by individual debtors Art. 146 2. Extinction of the joint and several obligation Art. 147

III. Relationship between joint and several debtors 1. Participation Art. 148 2. Subrogation Art. 149

B. Joint and several creditors Art. 150

Section Two: Conditional Obligations A. Condition precedent I. In general Art. 151 II. Before the condition occurs Art. 152 III. Benefits enjoyed in the interim Art. 153

B. Condition subsequent Art. 154 C. Joint provisions I. Fulfilment of the condition Art. 155 II. Prevention in bad faith Art. 156 III. Inadmissible conditions Art. 157

Section Three: Earnest Money, Forfeit Money, Salary Deductions and Contractual Penalties

A. Earnest and forfeit money Art. 158 B. ... Art. 159 C. Contractual penalty I. Rights of the creditor 1. Relation between penalty and contractual performance Art. 160 2. Relation between penalty and damage Art. 161 3. Forfeiture of part payments Art. 162

430

220Federal Act on the Amendment of the Swiss Civil Code

II. Amount, nullity and reduction of the penalty Art. 163

Title Five: Assignment of Claims and Assumption of Debt

A. Assignment of claims I. Requirements 1. Voluntary assignment a. Admissibility Art. 164 b. Form of the contract Art. 165 2. Assignment by law or court order Art. 166

II. Effect of assignment 1. Position of the debtor a. Payment made in good faith Art. 167 b. Refusal of payment and deposit Art. 168 c. Objections raised by the debtor Art. 169 2. Transfer of preferential and accessory rights, documents and evidence Art. 170 3. Warranty a. In general Art. 171 b. In the case of assignment by way of satisfaction Art. 172 c. Scope of liability Art. 173

III. Special provisions Art. 174 B. Assumption of debt I. Debtor and debt acquirer Art. 175 II. Contract between debt acquirer and creditor 1. Offer and acceptance Art. 176 2. Lapse of offer Art. 177

III. Effect of change of debtor 1. Accessory rights Art. 178 2. Objections Art. 179

IV. Failure of debt assumption contract Art. 180 V. Assignment of assets or a business with assets and liabilities Art. 181 VI. ... Art. 182 VII. In relation to division of estate and land purchase Art. 183

431

220 Code of Obligations

Division Two: Types of Contractual Relationship

Title Six: Sale and Exchange Section One: General Provisions

A. Rights and obligations of the parties in general Art. 184 B. Benefits and risks Art. 185 C. Reservation of cantonal law Art. 186

Section Two: The Chattel Sale A. Object Art. 187 B. Seller’s obligations I. Transfer 1. Transfer costs Art. 188 2. Transport costs Art. 189 3. Delivery default a. Withdrawal from commercial transactions Art. 190 b. Liability for and computation of damages Art. 191

II. Warranty of title 1. Warranty obligation Art. 192 2. Procedure a. Third-party notice Art. 193 b. Surrender of object without court decision Art. 194 3. Rights of the buyer a. Full dispossession Art. 195 b. Partial dispossession Art. 196 c. Objects of cultural heritage Art. 196a

III. Warranty of quality and fitness 1. Object of the warranty a. In general Art. 197 b. In livestock trading Art. 198 2. Exclusion of warranty Art. 199 3. Defects known to the buyer Art. 200 4. Notice of defects a. In general Art. 201 b. In livestock trading Art. 202 5. Intentional deceit Art. 203 6. Remote sale and purchase Art. 204

432

220Federal Act on the Amendment of the Swiss Civil Code

7. Types of action a. Rescission or reduction Art. 205 b. Substitute performance Art. 206 c. Rescission when the object is destroyed Art. 207 8. Rescission of the contract of sale a. In general Art. 208 b. For sales of batches or sets of objects Art. 209 9. Time limits Art. 210

C. Obligations of the buyer I. Payment of the sale price and acceptance of the object Art. 211 II. Fixing the price Art. 212 III. Time when price falls due, interest Art. 213 IV. Buyer in default 1. Seller’s right of withdrawal Art. 214 2. Liability for and computation of damages Art. 215

Section Three: Sale of Immovable Property A. Formal requirements Art. 216 Abis. Duration and priority notice Art. 216a Ater. Inheritance and assignment Art. 216b Aquater. Rights of pre-emption I. Pre-emption events Art. 216c II. Effect of pre-emption, conditions Art. 216d III. Exercise, forfeiture Art. 216e

B. Conditional purchase and reservation of ownership Art. 217 C. Agricultural properties Art. 218 D. Warranty Art. 219 E. Benefits and risks Art. 220 F. Reference to chattel sale Art. 221

Section Four: Special Types of Sale A. Sale by sample Art. 222 B. Sale on approval or inspection I. Effect Art. 223 II. Inspection on the seller’s premises Art. 224 III. Inspection on the buyer’s premises Art. 225

Art. 226

433

220 Code of Obligations

C. Hire purchase I. ... Art. 226a-226d

Art. 226e Art. 226f-226k

Art. 226l Art. 226m Art. 227

II. Advance payment agreement 1. Definition, form and content Art. 227a 2. Rights and obligations of the parties a. Security for advance payments Art. 227b b. Buyer’s right to call for delivery Art. 227c c. Payment of the sale price Art. 227d d. Fixing the price Art. 227e 3. Termination of the agreement a. Right of termination Art. 227f b. Duration of the agreement Art. 227g 4. Buyer in default Art. 227h 5. Scope of application Art. 227i 6. Application of Consumer Credit Act Art. 228

D. Auctions I. Conclusion of the purchase Art. 229 II. Avoidance Art. 230 III. Binding nature of bids at auction 1. In general Art. 231 2. Immovable property Art. 232

IV. Cash payment Art. 233 V. Warranty Art. 234 VI. Transfer of ownership Art. 235 VII. Cantonal provisions Art. 236

Section Five: The Contract of Exchange A. Reference to provisions governing purchase Art. 237 B. Warranty Art. 238

Title Seven: Gifts A. Definition Art. 239 B. Personal capacity I. Of the donor Art. 240

434

220Federal Act on the Amendment of the Swiss Civil Code

II. Of the recipient Art. 241 C. Establishing the gift I. From hand to hand Art. 242 II. Promise of a gift Art. 243 III. Effect of acceptance Art. 244

D. Conditions and provisos I. In general Art. 245 II. Fulfilment of provisos Art. 246 III. Reversion clause Art. 247

E. Liability of the donor Art. 248 F. Annulment of gifts I. Claim for return of gift Art. 249 II. Revocation and invalidation of a promise to give Art. 250 III. Time limits and heirs’ right of action Art. 251 IV. Death of the donor Art. 252

Title Eight: The Lease Section One: General Provisions

A. Definition and scope of application I. Definition Art. 253 II. Scope of application 1. Residential and commercial premises Art. 253a 2. Provisions on protection against unfair rents Art. 253b

B. Tie-in transactions Art. 254 C. Duration Art. 255 D. Obligations of the landlord I. In general Art. 256 II. Duty of disclosure Art. 256a III. Charges and taxes Art. 256b

E. Obligations of the tenant or lessee I. Payment of rent and accessory charges 1. Rent Art. 257 2. Accessory charges a. In general Art. 257a b. Residential and commercial premises Art. 257b 3. Payment deadlines Art. 257c 4. Tenant in arrears Art. 257d

435

220 Code of Obligations

II. Security furnished by the tenant Art. 257e III. Care and consideration Art. 257f IV. Duty of notification Art. 257g V. Duty of tolerance Art. 257h

F. Non-performance or defective performance when object handed over Art. 258 G. Defects during the contract I. Obligation of tenant to carry out minor cleaning and repairs Art. 259 II. Rights of the tenant 1. In general Art. 259a 2. Remedy of defects a. General principle Art. 259b b. Exception Art. 259c 3. Reduction of rent Art. 259d 4. Damages Art. 259e 5. Assumption of litigation Art. 259f 6. Deposit of rent a. General principle Art. 259g b. Release of deposited rent Art. 259h c. Procedure Art. 259i

H. Renovations and modifications I. By the landlord Art. 260 II. By the tenant Art. 260a

J. Change of ownership I. Alienation of the object Art. 261 II. Conferral of limited rights in rem Art. 261a III. Entry under priority notice in the land register Art. 261b

K. Sub-letting Art. 262 L. Transfer of lease to a third party Art. 263 M. Early return of the object Art. 264 N. Set-off Art. 265 O. End of lease I. Expiry of agreed duration Art. 266 II. Notice of termination and termination dates 1. In general Art. 266a 2. Immovable and movable structures Art. 266b 3. Residential premises Art. 266c

436

220Federal Act on the Amendment of the Swiss Civil Code

4. Commercial premises Art. 266d 5. Furnished rooms and parking spaces Art. 266e 6. Chattels Art. 266f

III. Extraordinary notice 1. Good cause Art. 266g 2. Bankruptcy of the tenant or lessee Art. 266h 3. Death of the tenant or lessee Art. 266i 4. Chattels Art. 266k

IV. Required form of notice for residential and commercial premises 1. In general Art. 266l 2. Family residence a. Notice given by the tenant Art. 266m b. Notice given by the landlord Art. 266n 3. Void notice Art. 266o

P. Return of the object I. In general Art. 267 II. Inspection of object and notification of tenant or lessee Art. 267a

Q. Landlord’s special lien I. Scope Art. 268 II. Objects belonging to third parties Art. 268a III. Exercise of lien Art. 268b

Section Two: Protection against Unfair Rents or other Unfair Claims by the Landlord in respect of Leases of Residential and Commercial Premises

A. Unfair rent I. General rule Art. 269 II. Exceptions Art. 269a

B. Index-linked rent Art. 269b C. Stepped rent Art. 269c D. Rent increases and other unilateral amendments by the landlord Art. 269d E. Challenge to rent I. Request for rent reduction 1. Initial rent Art. 270 2. During the lease Art. 270a

437

220 Code of Obligations

II. Challenge to rent increases and other unilateral amendments by the landlord Art. 270b III. Challenge to index-linked rent Art. 270c IV. Challenge to stepped rent Art. 270d

F. Continued validity of lease during challenge proceedings Art. 270e

Section Three: Protection against Termination of Leases of Residential and Commercial Premises

A. Notice open to challenge I. In general Art. 271 II. Notice served by the landlord Art. 271a

B. Extension of the lease I. Tenant’s entitlement Art. 272 II. Exclusion of extension Art. 272a III. Length of extension Art. 272b IV. Continued validity of lease Art. 272c V. Notice given during extension Art. 272d

C. Time limits and procedure Art. 273 D. Family residence Art. 273a E. Sub-letting Art. 273b F. Mandatory provisions Art. 273c

Section Four: … Art. 274–274g

Title Eightbis: The Usufructuary Lease A. Definition and scope of application I. Definition Art. 275 II. Scope of application 1. Residential and commercial premises Art. 276 2. Agricultural lease Art. 276a

B. Inventory Art. 277 C. Obligations of the lessor I. Hand-over of object Art. 278 II. Major repairs Art. 279 III. Charges and taxes Art. 280

438

220Federal Act on the Amendment of the Swiss Civil Code

D. Obligations of the lessee I. Payment of rent and accessory charges 1. In general Art. 281 2. Lessee in arrears Art. 282

II. Care, consideration and maintenance 1. Care and consideration Art. 283 2. Normal maintenance Art. 284 3. Breach of duty by the lessee Art. 285

III. Duty of notification Art. 286 IV. Duty of tolerance Art. 287

E. Rights of the lessee on non-performance or defective performance Art. 288 F. Renovations and modifications I. By the lessor Art. 289 II. By the lessee Art. 289a

G. Change of ownership Art. 290 H. Sub-letting Art. 291 J. Transfer of usufructuary lease to a third party Art. 292 K. Early return of the object Art. 293 L. Set-off Art. 294 M. End of usufructuary lease I. Expiry of agreed duration Art. 295 II. Notice of termination and termination dates Art. 296 III. Extraordinary notice 1. Good cause Art. 297 2. Bankruptcy of the lessee Art. 297a 3. Death of the lessee Art. 297b

IV. Required form of notice for residential and commercial premises Art. 298

N. Return of the object I. In general Art. 299 II. Inspection of object and notification of lessee Art. 299a III. Replacement of inventory items Art. 299b

O. Lessor’s lien Art. 299c P. Protection against termination of usufructuary leases of residential and commercial premises Art. 300 Q. Procedure Art. 301

439

220 Code of Obligations

R. Livestock lease I. Rights and obligations of the tenant farmer Art. 302 II. Liability Art. 303 III. Termination Art. 304

Title Nine: The Loan Section One: The Loan for Use

A. Definition Art. 305 B. Effect I. Borrower’s right of use Art. 306 II. Maintenance costs Art. 307 III. Liability of joint borrowers Art. 308

C. Termination I. Loan for designated use Art. 309 II. Loan for non-designated use Art. 310 III. Death of the borrower Art. 311

Section Two: The Fixed-Term Loan A. Definition Art. 312 B. Effect I. Interest 1. Liability for interest Art. 313 2. Rules governing interest Art. 314

II. Limitation period for claims for delivery and acceptance Art. 315 III. Insolvency of the borrower Art. 316

C. Goods in lieu of money Art. 317 D. Timing of repayment Art. 318

Title Ten: The Employment Contract Section One: The Individual Employment Contract

A. Definition and conclusion I. Definition Art. 319 II. Creation Art. 320

B. Obligations of the employee I. Duty to work in person Art. 321 II. Duty of care and loyalty Art. 321a III. Disclosure and hand-over of benefits received and work produced Art. 321b

440

Federal Act on the Amendment of the Swiss Civil Code 220

IV. Overtime Art. 321c V. Compliance with general directives and instructions Art. 321d VI. Employee’s liability Art. 321e

C. Obligations of the employer I. Salary 1. Type and amount in general Art. 322 2. Share in the business results Art. 322a 3. Commission a. Entitlement Art. 322b b. Statement Art. 322c 4. Bonuses Art. 322d

II. Payment of salary 1. Payment terms and periods Art. 323 2. Withholding of salary Art. 323a 3. Salary protection Art. 323b

III. Salary in the event work is not possible 1. Failure by employer to accept performance Art. 324 2. Employee prevented from working a. General principle Art. 324a b. Exceptions Art. 324b

IV. Assignment and pledge of salary claims Art. 325 V. Piece work 1. Work allocation Art. 326 2. Piece work rates Art. 326a

VI. Work tools, materials and expenses 1. Work tools and materials Art. 327 2. Expenses a. In general Art. 327a b. Motor vehicle Art. 327b c. Payment dates Art. 327c

VII. Protection of the employee’s personality rights 1. In general Art. 328 2. Shared household Art. 328a 3. When handling personal data Art. 328b

VIII. Days off work, holidays, leave for youth work, maternity leave 1. Days off work Art. 329

441

220 Code of Obligations

2. Holidays a. Annual entitlement Art. 329a b. Reduction Art. 329b c. Consecutive weeks, timing Art. 329c d. Salary Art. 329d 3. Leave for extracurricular youth work Art. 329e 4. Maternity leave Art. 329f

IX. Other duties 1. Security Art. 330 2. Reference Art. 330a 3. Duty of information Art. 330b

D. Employee benefits provision I. Obligations of the employer Art. 331 II. Beginning and end of insurance cover Art. 331a III. Assignment and pledge Art. 331b IV. Reservations on medical grounds Art. 331c V. Promotion of home ownership 1. Pledge Art. 331d 2. Early withdrawal Art. 331e

3. Restrictions if the benefits scheme has a cover deficit Art. 331f E. Right to inventions and designs Art. 332

Art. 332a F. Transfer of employment relationship

1. Effects Art. 333 2. Consultation of employees’ organisation Art. 333a

G. End of the employment relationship I. Fixed-term employment relationship Art. 334 II. Open-ended employment relationship 1. Notice in general Art. 335 2. Notice periods a. In general Art. 335a b. During the probation period Art. 335b c. After the probation period Art. 335c

IIbis. Mass redundancies 1. Definition Art. 335d 2. Scope of application Art. 335e 3. Consultation of employees’ organisation Art. 335f 4. Procedure Art. 335g

442

220Federal Act on the Amendment of the Swiss Civil Code

III. Protection from termination 1. Wrongful termination a. General principle Art. 336 b. Penalties Art. 336a c. Procedure Art. 336b 2. Termination at an inopportune juncture a. By the employer Art. 336c b. By the employee Art. 336d

IV. Termination with immediate effect 1. Requirements a. For good cause Art. 337 b. Salary at risk Art. 337a 2. Consequences a. Termination for good cause Art. 337b b. Termination without just cause Art. 337c c. Failure to take up post and departure without just cause Art. 337d

V. Death of the employee or employer 1. Death of the employee Art. 338 2. Death of the employer Art. 338a

VI. Consequences of termination of the employment relationship 1. Maturity of claims Art. 339 2. Return Art. 339a 3. Severance allowance a. Requirements Art. 339b b. Amount and due date Art. 339c c. Benefits in lieu of allowance Art. 339d

VII. Prohibition of competition 1. Requirements Art. 340 2. Restrictions Art. 340a 3. Consequences of infringement Art. 340b 4. Extinction Art. 340c

H. No right of waiver; time limits Art. 341 I. Reservation of public law and effects under civil law Art. 342

Art. 343

443

220 Code of Obligations

Section Two: Special Individual Employment Contracts A. The Apprenticeship Contract

I. Definition and conclusion 1. Definition Art. 344 2. Conclusion and content Art. 344a

II. Effects 1. Special obligations of the trainee and his legal representa- tive Art. 345 2. Special obligations of the employer Art. 345a

III. Termination 1. Early termination Art. 346 2. Certificate of apprenticeship Art. 346a

B. The Commercial Traveller’s Contract I. Definition and conclusion 1. Definition Art. 347 2. Conclusion and content Art. 347a

II. Obligations and authority of the commercial traveller 1. Special obligations Art. 348 2. Del credere Art. 348a 3. Authority Art. 348b

III. Special obligations of the employer 1. Area of activity Art. 349 2. Salary a. In general Art. 349a b. Commission Art. 349b c. Prevention from travelling Art. 349c 3. Expenses Art. 349d 4. Special lien Art. 349e

IV. Termination 1. In special circumstances Art. 350 2. Special consequences Art. 350a

C. The Homeworker’s Contract I. Definition and conclusion 1. Definition Art. 351 2. Notification of conditions Art. 351a

II. Special obligations of the home worker 1. Performance of the work Art. 352 2. Materials and work tools Art. 352a

444

220Federal Act on the Amendment of the Swiss Civil Code

III. Special obligations of the employer 1. Acceptance of completed work Art. 353 2. Salary a. Payment Art. 353a b. When prevented from working Art. 353b

IV. Termination Art. 354

D. Applicability of General Provisions Art. 355

Section Three: The Collective Employment Contract and the Standard Employment Contract A. The Collective Employment Contract

I. Definition, content, form and duration 1. Definition and content Art. 356 2. Freedom of association and freedom to practise a profes- sion Art. 356a 3. Accession Art. 356b 4. Form and duration Art. 356c

II. Effects 1. On participating employers and employees Art. 357 2. On the contracting parties Art. 357a 3. Joint enforcement Art. 357b

III. Relationship to mandatory law Art. 358

B. The Standard Employment Contract I. Definition and content Art. 359 II. Competent authorities and procedure Art. 359a III. Effects Art. 360 IV. Minimum wage 1. Requirements Art. 360a 2. Tripartite commissions Art. 360b 3. Official secrecy Art. 360c 4. Effects Art. 360d 5. Associations’ right of action Art. 360e 6. Notification Art. 360f

Section Four: Mandatory Provisions A. Provisions from which no derogation is permissible to the detriment of the employer or the employee Art. 361

445

220 Code of Obligations

B. Provisions from which no derogation is permissible to the detriment of the employee Article 362

Title Eleven: The Contract for Work and Services A. Definition Art. 363 B. Effects I. Contractor’s obligations 1. In general Art. 364 2. Regarding materials Art. 365 3. Prompt commencement and contractual performance of work Art. 366 4. Liability for defects a. Identification of defects Art. 367 b. Rights of the customer in the event of defects Art. 368 c. Customer’s liability Art. 369 d. Approval of the work Art. 370 e. Time limits Art. 371

II. Customer’s obligations 1. Due date for remuneration Art. 372 2. Amount of remuneration a. Firm commitment Art. 373 b. By the value of the work Art. 374

C. Termination I. Withdrawal because estimate exceeded Art. 375 II. Destruction of the work Art. 376 III. Withdrawal by the customer against indemnity Art. 377 IV. Impossibility of performance for reasons attributable to the customer Art. 378 V. Death or incapacity of the contractor Art. 379

Title Twelve: The Publishing Contract A. Definition Art. 380 B. Effects I. Transfer of copyright and warranty Art. 381 II. Originator’s power of disposal Art. 382 III. Number of editions Art. 383 IV. Publication and sale Art. 384 V. Improvements and corrections Art. 385 VI. Collected and separate editions Art. 386

446

220Federal Act on the Amendment of the Swiss Civil Code

VII. Translation rights Art. 387 VIII. Author’s remuneration 1. Amount Art. 388 2. Due date for payment, record of sales and complimentary copies Art. 389

C. Termination I. Destruction of the work Art. 390 II. Destruction of the edition Art. 391 III. Grounds for termination pertaining to the person of the author or the publisher Art. 392

D. Work on a project originated by the publisher Art. 393

Title Thirteen: The Agency Contract Section One: The Simple Agency Contract

A. Definition Art. 394 B. Conclusion of the contract Art. 395 C. Effects I. Scope of agency Art. 396 II. Obligations of the agent 1. Compliance with instructions Art. 397 2. Faithful performance a. In general Art. 398 b. In the event of delegation Art. 399 3. Account of agency Art. 400 4. Transfer of acquired rights Art. 401

III. Obligations of the principal Art. 402 IV. Liability of joint principals and agents Art. 403

D. Termination I. Grounds 1. Revocation, termination Art. 404 2. Death, incapacity, bankruptcy Art. 405

II. Effects of extinction of the contract Art. 406

Section Onebis: The Marriage or Partnership Brokerage Contract

A. Definition and applicable law Art. 406a B. Introduction of or to foreign nationals I. Costs of return journey Art. 406b

447

220 Code of Obligations

II. Duty to obtain a licence Art. 406c C. Form and content of the contract Art. 406d D. Entry into force, withdrawal Art. 406e E. Declaration of withdrawal and notice of termination Art. 406f F. Information and data protection Art. 406g G. Reduction Art. 406h

Section Two: The Letter of Credit and the Loan Authorisation

A. Letter of credit Art. 407 B. Loan authorisation I. Definition and form Art. 408 II. Incapacity of payee to enter into a contract Art. 409 III. Payment extension granted on own authority Art. 410 IV. Borrower and principal Art. 411

Section Three: The Brokerage Contract A. Definition and form Art. 412 B. Broker’s fee I. When due Art. 413 II. Fixing the fee Art. 414 III. Forfeiture Art. 415 IV. ... Art. 416 V. Excessive fees Art. 417

C. Reservation of cantonal law Art. 418

Section Four: The Commercial Agency Contract A. General I. Definition Art. 418a II. Applicable law Art. 418b

B. Obligations of the agent I. General and del credere Art. 418c II. Duty of discretion and prohibition of competition Art. 418d

C. Powers of representation Art. 418e D. Obligations of the principal I. In general Art. 418f II. Commission

448

220Federal Act on the Amendment of the Swiss Civil Code

1. On business facilitated and concluded a. Scope and entitlement Art. 418g b. Lapse of entitlement Art. 418h c. Due date Art. 418i d. Statement of commission Art. 418k 2. Collection commission Art. 418l

III. Inability to work Art. 418m IV. Costs and expenses Art. 418n V. Special lien Art. 418o

E. Termination I. Expiry of duration Art. 418p II. Notice of termination 1. In general Art. 418q 2. For good cause Art. 418r

III. Death, incapacity, bankruptcy Art. 418s IV. Claims of the agent 1. Commission Art. 418t 2. Compensation for clientele Art. 418u

V. Duty of restitution Art. 418v

Title Fourteen: Agency without Authority A. Rights and obligations of the agent I. Manner of execution Art. 419 II. Liability of the agent in general Art. 420 III. Liability of agents lacking capacity to enter into contracts Art. 421

B. Position of the principal I. Agency in the principal’s best interests Art. 422 II. Business conducted in the agent’s interests Art. 423 III. Approval of agency activities Art. 424

Title Fifteen: The Commission Contract A. Buying and selling commission I. Definition Art. 425 II. Obligations of the commission agent 1. Duty of notification, insurance Art. 426 2. Treatment of goods on commission Art. 427 3. Pricing by the principal Art. 428 4. Advances and loans to third parties Art. 429 5. Del credere Art. 430

449

220 Code of Obligations

III. Rights of the commission agent 1. Reimbursement of advances and expenses Art. 431 2. Commission a. Entitlement Art. 432 b. Forfeiture and conversion into transaction for own account Art. 433 3. Special lien Art. 434 4. Sale of goods at auction Art. 435 5. Agent acting for his own account a. Pricing and commission Art. 436 b. Presumption of trading for own account Art. 437 c. Lapse of right to trade for own account Art. 438

B. Forwarding contract Art. 439

Title Sixteen: The Contract of Carriage A. Definition Art. 440 B. Effects I. Obligations of the carrier 1. Required information Art. 441 2. Packaging Art. 442 3. Power of disposal over freight Art. 443

II. Position of the carrier 1. Treatment of freight a. Delivery not possible Art. 444 b. Sale Art. 445 c. Liability Art. 446 2. Liability of the carrier a. Loss or destruction of the goods Art. 447 b. Delay, damage, partial destruction Art. 448 c. Liability for sub-contractors Art. 449 3. Duty of notification Art. 450 4. Lien Art. 451 5. Forfeiture of liability claims Art. 452 6. Procedure Art. 453 7. Time limits on actions for damages Art. 454

C. State-owned and licensed carriers Art. 455 D. Use of state transport facilities Art. 456 E. Liability of the forwarding agent Art. 457

450

220Federal Act on the Amendment of the Swiss Civil Code

Title Seventeen: Registered Power of Attorney and other Forms of Commercial Agency

A. Registered power of attorney I. Definition and conferral Art. 458 II. Scope of authority Art. 459 III. Restrictions Art. 460 IV. Withdrawal Art. 461

B. Other forms of commercial agency Art. 462 C. ... Art. 463 D. Prohibition of competition Art. 464 E. Extinction of power of attorney and other forms of commercial agency Art. 465

Title Eighteen: The Payment Instruction A. Definition Art. 466 B. Effects I. Relations between principal and payee Art. 467 II. Obligations of the agent Art. 468 III. Duty to notify non-payment Art. 469

C. Revocation Art. 470 D. Payment instructions relating to securities Art. 471

Title Nineteen: The Contract of Bailment A. Bailment in general I. Definition Art. 472 II. Obligations of the bailor Art. 473 III. Obligations of the bailee 1. Prohibition of use Art. 474 2. Return a. Rights of the bailor Art. 475 b. Rights of the bailee Art. 476 c. Place of return Art. 477 3. Liability of joint bailees Art. 478 4. Third-party rights of title Art. 479

IV. Official receiver Art. 480 B. Bailment of fungibles Art. 481

451

220 Code of Obligations

C. Warehousing business I. Right to issue documents of title to goods Art. 482 II. Warehouse keeper’s duty of safe-keeping Art. 483 III. Intermingling of stored goods Art. 484 IV. Rights of the warehouse keeper Art. 485 V. Return of the goods Art. 486

D. Inns, hotels and stables I. Liability of hoteliers 1. Conditions and scope Art. 487 2. Specific liability for valuables Art. 488 3. End of liability Art. 489

II. Liability of stable owners Art. 490 III. Lien Art. 491

Title Twenty: The Contract of Surety A. Requirements I. Definition Art. 492 II. Form Art. 493 III. Spouse’s consent Art. 494

B. Substance I. Particularities of different types of surety 1. Simple surety Art. 495 2. Joint and several surety Art. 496 3. Co-surety Art. 497 4. Collateral surety and counter-surety Art. 498

II. Common provisions 1. Relationship between the surety and the creditor a. Scope of liability Art. 499 b. Reduction of liability by court order Art. 500 c. Resort to the surety Art. 501 d. Defences Art. 502 e. Creditor’s duty of diligence and duty to release docu- ments and pledges Art. 503 f. Right to demand acceptance of payment Art. 504 g. Creditor’s duty to notify and to register his claim in bankruptcy and composition proceedings Art. 505 2. Relationship between surety and principal debtor a. Right to security and release Art. 506

452

220Federal Act on the Amendment of the Swiss Civil Code

b. Surety’s right of recourse a. In general Art. 507 bb. Surety’s duty to notify Art. 508

C. Termination of the contract of surety I. By operation of law Art. 509 II. Fixed-term contract of surety; revocation Art. 510 III. Open-ended contract of surety Art. 511 IV. Contracts of surety for official and civil service obligations Art. 512

Title Twenty-One: Gambling and Betting A. No actionable claim Art. 513 B. Debentures and voluntary payment Art. 514 C. Lotteries and prize draws Art. 515 D. Gambling in casinos, loans from casinos Art. 515a

Title Twenty-Two: The Life Annuity Contract and the Lifetime Maintenance Agreement

A. Life annuity I. Nature Art. 516 II. Formal requirement Art. 517 III. Rights of the annuitant 1. Exercise of entitlement Art. 518 2. Assignment Art. 519

IV. Life annuities under the law governing insurance policies Art. 520 B. Lifetime maintenance agreement I. Definition Art. 521 II. Conclusion 1. Form Art. 522 2. Security Art. 523

III. Content Art. 524 IV. Challenge and reduction Art. 525 V. Termination 1. Notice Art. 526 2. Unilateral termination Art. 527 3. Termination on the death of the settlor Art. 528

VI. Non-transferable claim, asserting claim in the event of bankruptcy and seizure Art. 529

Title Twenty-Three: The Simple Partnership A. Definition Art. 530

453

220 Code of Obligations

B. Relationship between partners I. Contributions Art. 531 II. Profit and loss 1. Profit sharing Art. 532 2. Participation in profits and losses Art. 533

III. Partnership resolutions Art. 534 IV. Management of partnership business Art. 535 V. Liability between partners 1. Prohibition of competition Art. 536 2. Claims arising from partnership activities Art. 537 3. Due diligence Art. 538

VI. Withdrawal and restriction of management authority Art. 539 VII. Managing partners and other partners 1. In general Art. 540 2. Right to information on the affairs of the partnership Art. 541

VIII. Admission of new partners and sub-participation Art. 542 C. Relationship between partners and third parties I. Representation Art. 543 II. Effects of representation Art. 544

D. Dissolution I. Grounds for dissolution 1. In general Art. 545 2. Partnership of indefinite duration Art. 546

II. Effect of dissolution on business management Art. 547 III. liquidation 1. Treatment of contributions Art. 548 2. Division of surplus and deficit Art. 549 3. liquidation method Art. 550

IV. Liability towards third parties Art. 551

Division Three: Commercial Enterprises and the Cooperative

Title Twenty-Four: The General Partnership Section One: Definition and Formation

A. Commercial partnerships Art. 552 B. Non-commercial partnerships Art. 553

454

220Federal Act on the Amendment of the Swiss Civil Code

C. Entry in the commercial register I. Place of registration Art. 554 II. Representation Art. 555 III. Formal requirements Art. 556

Section Two: Relationship between Partners A. Freedom of contract, reference to simple partnership Art. 557 B. Profit and loss account Art. 558 C. Entitlement to profit, interest and fees Art. 559 D. Losses Art. 560 E. Prohibition of competition Art. 561

Section Three: Relationship between the Partnership and Third Parties

A. In general Art. 562 B. Representation I. General principle Art. 563 II. Scope Art. 564 III. Withdrawal Art. 565 IV. Registered power of attorney and commercial agency Art. 566 V. Transactions and liability in tort Art. 567

C. Position of creditors I. Partners’ liability Art. 568 II. Liability of new partners Art. 569 III. Insolvency of the partnership Art. 570 IV. Insolvency of the partnership and bankruptcy of the partners Art. 571

D. Position of personal creditors of partners Art. 572 E. Set off Art. 573

Section Four: Dissolution and Withdrawal A. In general Art. 574 B. Termination by personal creditors Art. 575 C. Withdrawal of partners I. Agreement Art. 576 II. Exclusion by court order Art. 577 III. Exclusion by the other partners Art. 578 IV. In the case of two partners Art. 579

455

220 Code of Obligations

V. Determining the share Art. 580 VI. Registration Art. 581

Section Five: Liquidation A. General principle Art. 582 B. Liquidators Art. 583 C. Representation of heirs Art. 584 D. Rights and obligations of the liquidators Art. 585 E. Provisional distribution Art. 586 F. Division I. Balance sheet Art. 587 II. Repayment of capital and distribution of surplus Art. 588

G. Deletion from the commercial register Art. 589 H. Archiving of ledgers and other documents Art. 590

Section Six: Time Limits A. Object and limitation period Art. 591 B. Special cases Art. 592 C. Interruption Art. 593

Title Twenty-Five: The Limited Partnership Section One: Definition and Formation

A. Commercial partnerships Art. 594 B. Non-commercial partnerships Art. 595 C. Entry in the commercial register I. Place and contributions in kind Art. 596 II. Formal requirements Art. 597

Section Two: Relationship between Partners A. Freedom of contract, reference to general partnership Art. 598 B. Management of business Art. 599 C. Position of limited partners Art. 600 D. Share in profit and loss Art. 601

Section Three: Relationship between the Partnership and Third Parties

A. In general Art. 602

456

220Federal Act on the Amendment of the Swiss Civil Code

B. Representation Art. 603 C. Liability of general partners Art. 604 D. Liability of limited partners I. Acting for the partnership Art. 605 II. Lack of registration Art. 606 III. Name of limited partner in business name Art. 607 IV. Scope of liability Art. 608 V. Reduction of limited partner’s specific contribution Art. 609 VI. Creditors’ right of action Art. 610 VII. Entitlement to interest and profit Art. 611 VIII. Joining limited partnerships Art. 612

E. Position of personal creditors Art. 613 F. Set off Art. 614 G. Insolvency I. In general Art. 615 II. Insolvency of the partnership Art. 616 III. Procedure against general partners Art. 617 IV. Bankruptcy of limited partners Art. 618

Section Four: Dissolution, Liquidation, Time Limits Art. 619

Title Twenty-Six: The Company Limited by Shares

Section One: General Provisions A. Definition Art. 620 B. Minimum share capital Art. 621 C. Shares I. Types Art. 622 II. Splitting and consolidating shares Art. 623 III. Issue price Art. 624

D. Shareholders Art. 625 E. Articles of association I. Content prescribed by law Art. 626 II. Further provisions 1. In general Art. 627 2. Relating specifically to contributions in kind, acquisitions in kind, special privileges Art. 628

457

220 Code of Obligations

F. Establishment I. Deed of incorporation 1. Content Art. 629 2. Share subscription Art. 630

II. Supporting documents Art. 631 III. Capital contributions 1. Minimum contribution Art. 632 2. Performance of contributions a. Money contributions Art. 633 b. Contributions in kind Art. 634 c. Subsequent contribution Art. 634a 3. Verification of capital contributions a. Statutory report Art. 635 b. Audit confirmation Art. 635a

Art. 636–639 G. Entry in the commercial register I. Company Art. 640 II. Branch offices Art. 641 III. Contributions and acquisitions in kind, special privileges Art. 642

H. Acquisition of legal personality I. Timing; entry conditions not satisfied Art. 643 II. Shares issued before entry Art. 644 III. Obligations contracted prior to entry Art. 645

Art. 646 J. Amending the articles of association Art. 647

Art. 648–649 K. Increase in the share capital I. Ordinary and authorised capital increase 1. Ordinary capital increase Art. 650 2. Authorised capital increase a. Basis in articles of association Art. 651 b. Amendment of the articles of association Art. 651a 3. Common provisions a. Share subscription Art. 652 b. Issue prospectus Art. 652a c. Subscription right Art. 652b d. Making capital contributions Art. 652c e. Increase from equity capital Art. 652d

458

Federal Act on the Amendment of the Swiss Civil Code 220

f. Capital increase report Art. 652e g. Audit confirmation Art. 652f h. Amendment of articles of association and statements required Art. 652g i. Entry in the commercial register; nullity of previously issued shares Art. 652h

II. Contingent capital increase 1. General principle Art. 653 2. Restrictions Art. 653a 3. Basis in articles of association Art. 653b 4. Protection of shareholders Art. 653c 5. Protection of beneficiaries of conversion or option rights Art. 653d 6. Execution of capital increase a. Exercise of rights; capital contribution Art. 653e b. Audit confirmation Art. 653f c. Amendment of the articles of association Art. 653g d. Entry in the commercial register Art. 653h 7. Deletion Art. 653i

III. Preference shares 1. Requirements Art. 654

Art. 655 2. Status of preference shares Art. 656

L. Participation certificates I. Definition; applicable provisions Art. 656a II. Participation and share capital Art. 656b III. Legal position of participation certificate holders 1. In general Art. 656c 2. Notice and resolutions of general meetings Art. 656d 3. Representation on the board of directors Art. 656e 4. Pecuniary rights a. In general Art. 656f b. Subscription rights Art. 656g

M. Dividend rights certificates Art. 657 Art. 658

N. Own shares I. Restrictions on acquisition Art. 659 II. Consequences of acquisition Art. 659a III. Acquisition by subsidiaries Art. 659b

459

220 Code of Obligations

Section Two: Rights and Obligations of Shareholders A. Entitlement to a share of the profits and proceeds of liquidation I. In general Art. 660 II. Calculation method Art. 661

B. Annual report I. In general 1. Content Art. 662 2. Recognised financial reporting standards Art. 662a

II. Profit and loss account; minimum sub-division Art. 663 III. Balance sheet; minimum sub-division Art. 663a IV. Notes to the accounts 1. In general Art. 663b 2. Additional information on companies with listed shares a. Remuneration Art. 663bbis b. Equity participations Art. 663c

V. Management report Art. 663d VI. Consolidated accounts 1. Duty to draw up accounts Art. 663e 2. Subsidiaries Art. 663f 3. Preparation Art. 663g

VII. Protection and adaptation Art. 663h VIII. Valuation 1. Costs of establishment and capital increases, organisa- tional costs Art. 664 2. Fixed assets a. In general Art. 665 b. Equity participations Art. 665a 3. Inventories Art. 666 4. Securities Art. 667

Art. 668 5. Write-downs, valuation adjustments and provisions Art. 669 6. Revaluation Art. 670

C. Reserves I. Legal reserves 1. General reserve Art. 671 2. Reserve for own shares Art. 671a 3. Revaluation reserve Art. 671b

460

220Federal Act on the Amendment of the Swiss Civil Code

II. Reserves pursuant to the articles of association 1. In general Art. 672 2. For staff welfare purposes Art. 673

III. Ratio of the share in the profit to the reserves Art. 674 D. Dividends, interest before commencement of operations and shares of profits paid to board members I. Dividends Art. 675 II. Interest before commencement of operations Art. 676 III. Shares of profits paid to board members Art. 677

E. Return of benefits I. In general Art. 678 II. Shares of profits paid to board members on insolvency Art. 679

F. Shareholder’s duty to contribute I. Object Art. 680 II. Consequences of default 1. By law and the articles of association Art. 681 2. Call for performance Art. 682

G. Issue and transfer of shares I. Bearer shares Art. 683 II. Registered shares Art. 684

H. Restricted transferability I. Statutory restriction Art. 685 II. Restrictions under the articles of association 1. General principles Art. 685a 2. Unlisted registered shares a. Requirements for refusal Art. 685b b. Effect Art. 685c 3. Listed registered shares a. Requirements for refusal Art. 685d b. Duty of notification Art. 685e c. Transfer of rights Art. 685f d. Time limit for refusal Art. 685g 4. Share register a. Entry Art. 686 b. Deletion Art. 686a 5. Registered shares not fully paid in Art. 687

III. Interim certificates Art. 688

461

220 Code of Obligations

J. Personal membership rights I. Participation in general meetings of shareholders 1. General principle Art. 689 2. Entitlement as against the company Art. 689a 3. Representation of the shareholder a. In general Art. 689b b. Governing officer as representative Art. 689c c. Custodian as representative Art. 689d d. Disclosure Art. 689e 4. Multiple beneficiaries Art. 690

II. Unauthorised participation Art. 691 III. Voting rights at general meetings of shareholders 1. General principle Art. 692 2. Shares with privileged voting rights Art. 693 3. Entitlement to exercise voting right Art. 694 4. Exclusion of voting right Art. 695

IV. Shareholders’ rights of control 1. Availability of the annual report Art. 696 2. Information and inspection Art. 697

V. Right to instigate a special audit 1. With approval of the general meeting Art. 697a 2. If motion rejected by the general meeting Art. 697b 3. Appointment Art. 697c 4. Audit activities Art. 697d 5. Report Art. 697e 6. Procedure and publication Art. 697f 7. Costs Art. 697g

K. Publication of accounts Art. 697h

Section Three: Organisation of the Company Limited by Shares A. The General Meeting

I. Powers Art. 698 II. Convocation and agenda items 1. Right and duty Art. 699 2. Form Art. 700 3. Universal meeting Art. 701

III. Preparatory measures; minutes Art. 702 IV. Participation of members of the board of directors Art. 702a

462

220Federal Act on the Amendment of the Swiss Civil Code

IV. Resolutions and elections 1. In general Art. 703 2. Important resolutions Art. 704

V. Dismissal of the board of directors and the auditors Art. 705 VI. Challenging resolutions of the general meeting 1. Right of action and grounds Art. 706 2. Procedure Art. 706a

VII. Nullity Art. 706b

B. The Board of Directors I. In general 1. Eligibility Art. 707

Art. 708 3. Representation of shareholder classes and groups Art. 709 4. Term of office Art. 710

Art. 711 II. Organisation 1. Chairman and secretary Art. 712 2. Resolutions Art. 713 3. Void resolutions Art. 714 4. Right to convene meetings Art. 715 5. Right to information and inspection Art. 715a

III. Duties 1. In general Art. 716 2. Non-transferable duties Art. 716a 3. Delegation of business management Art. 716b

IV. Duty of care and loyalty Art. 717 V. Representation 1. In general Art. 718 2. Scope and restriction Art. 718a 3. Contracts between the company and its representative Art. 718b 3. Signatures Art. 719 4. Registration Art. 720 5. Registered attorneys and commercial agents Art. 721

VI. Directors’ and officers’ liability Art. 722 Art. 723–724

VII. Capital loss and overindebtedness 1. Duty to notify Art. 725 2. Commencement or stay of insolvency proceedings Art. 725a

463

220 Code of Obligations

VIII. Dismissal and suspension Art. 726

C.The External Auditors I. Audit requirement 1. Ordinary audit Art. 727 2. Limited audit Art. 727a

II. Requirements for the auditor 1. In an ordinary audit Art. 727b 2. In a limited audit Art. 727c

III. Ordinary audit 1. Independence of the auditor Art. 728 2. Duties of the auditor a. Subject matter and extent of the audit Art. 728a b. Audit report Art. 728b c. Duty to notify Art. 728c

IV. Limited audit (Review) 1. Independence of the auditor Art. 729 2. Duties of the auditor a. Subject matter and extent of the audit Art. 729a b. Audit report Art. 729b c. Duty to notify Art. 729c

V. Common provisions 1. Appointment of the auditor Art. 730 2. Term of office of the auditor Art. 730a 3. Information and confidentiality Art. 730b 4. Documentation and safekeeping of documents Art. 730c 5. Approval of the accounts and allocation of profits Art. 731 6. Special provisions Art. 731a

D. Defects in the Organisation of the Company Art. 731b

Section Four: Reduction of the Share Capital A. Resolution to reduce the capital Art. 732 B. Cancellation of shares in the event of restructuring Art. 732a B. Call on creditors Art. 733 C. Implementation of the reduction Art. 734 D. Reduction in the case of negative net worth Art. 735

464

220Federal Act on the Amendment of the Swiss Civil Code

Section Five: Dissolution of a Company Limited by Shares A. Dissolution in general I. Grounds Art. 736 II. Notification for entry in the commercial register Art. 737 III. Consequences Art. 738

B. Dissolution with liquidation I. Consequences of liquidation; powers Art. 739 II. Appointment and dismissal of the liquidators 1. Appointment Art. 740 2. Dismissal Art. 741

III. Liquidation process 1. Balance sheet, call on creditors Art. 742 2. Other duties Art. 743 3. Protection of creditors Art. 744 4. Distribution of assets Art. 745

IV. Deletion from the commercial register Art. 746 V. Archiving of accounting records Art. 747

C. Dissolution without liquidation I. ... Art. 748─750 II. Takeover by a public sector corporation Art. 751

Section Six: Liability A. Liability I. For the issue prospectus Art. 752 II. Founder members’ liability Art. 753 III. Liability for administration, business management and liquidation Art. 754 IV. Auditors’ liability Art. 755

B. Damage to the company I. Claims outside insolvency Art. 756 II. Claims in insolvency Art. 757 III. Effect of the resolution of release Art. 758

C. Joint and several liability and recourse Art. 759 D. Time limits Art. 760

Art. 761

Section Seven: Involvement of Public Sector Corporations Art. 762

465

220 Code of Obligations

Section Eight: Exclusion of Application of the Code to Public-Sector Entities

Art. 763

Title Twenty-Seven: The Partnership limited by Shares

A. Definition Art. 764 B. Directors I. Designation and powers Art. 765 II. Approval of resolutions of the general meeting Art. 766 III. Withdrawal of authority to manage business and represent the partnership Art. 767

C. Supervisory board I. Appointment and powers Art. 768 II. Liability action Art. 769

D. Dissolution Art. 770 E. Resignation Art. 771

Title Twenty-Eight: The Limited Liability Company Section One: General Provisions

A. Definition Art. 772 B. Nominal capital Art. 773 C. Capital contributions Art. 774 D. Profit sharing certificates Art. 774a D. Company members Art. 775 E. Articles of association I. Content prescribed by law Art. 776 II. Conditional requirements as to content Art. 776a 2. Establishment I. Certificate of incorporation Art. 777

II. Subscription for capital contributions Art. 777a III. Documents Art. 777b IV. Capital contributions Art. 777c

H. Entry in the commercial register I. Company Art. 778 II. Branch offices Art. 778a

466

220Federal Act on the Amendment of the Swiss Civil Code

J. Acquisition of legal personality I. Time; Failure to meet requirements Art. 779 II. Obligations entered into before registration Art. 779a

K. Amendment of the articles of association Art. 780 L. Increase in the nominal capital Art. 781 M. Reduction of the nominal capital Art. 782 N. Acquisition of own capital contributions Art. 783

Section Two: Rights and Obligations of Company Members

A. Capital contributions I. Official document Art. 784 II. Transfer 1. Assignment a. Form Art. 785 b. Consent requirements Art. 786 c. Transfer of rights Art. 787 2. Special forms of acquisition Art. 788 3. Determining the true value Art. 789 4. Usufruct Art. 789a 5. Charge Art. 789b

III. Register of contributions Art. 790 IV. Entry in the commercial register Art. 791 V. Common property Art. 792

B. Payment of capital contributions Art. 793 C. Liability the company members Art. 794 D. Additional financial and material contributions I. Additional financial contributions 1. Principle and amount Art. 795 2. Call for additional financial contributions Art. 795a 3. Repayment Art. 795b 4. Reduction Art. 795c 5. Continuation Art. 795d

II. Further material contributions Art. 796 III. Retrospective introduction Art. 797

E. Dividends, interest, shares of profits I. Dividends Art. 798

467

220 Code of Obligations

II. Interest Art. 798a III. Shares of profits Art. 798b

F. Preferential capital contributions Art. 799 G. Refund of payments Art. 800 H. Reserves Art. 801 J. Notification of the annual report Art. 801a K. Right to information and to inspect documents Art. 802 L. Duty of loyalty and prohibition of competition Art. 803

Section Three: Organisation of the Company A. Members' general meeting I. Responsibilities Art. 804 II. Convening and conduct of the meeting Art. 805 III. Voting rights 1. Determination Art. 806 2. Exclusion of the right to vote Art. 806a 3. Usufruct Art. 806b

IV. Right of veto Art. 807 V. Resolutions 1. In general Art. 808 2. Casting vote Art. 808a 3. Important resolutions Art. 808b

VI. Contesting resolutions of the members' general meeting Art. 808c B. Management and representation I. designation the managing director and organisation Art. 809 II. Duties of the managing directors Art. 810 III. Approval by the members' general meeting Art. 811 IV. Duty of care and of loyalty; prohibition of competition Art. 812 V. Equal treatment Art. 813 VI. Representation Art. 814 VII. Removal of managing directors; Revocation of the right to represent the company Art. 815 VIII. Nullity of decisions Art. 816 IX. Liability Art. 817

C. Auditor Art. 818 D. Defects in the organisation the company Art. 819 E. Loss of capital and overindebtedness Art. 820

468

220Federal Act on the Amendment of the Swiss Civil Code

Section Four: Dissolution and Resignation A. Dissolution I. Grounds Art. 821 II. Consequences Art. 821a

B. Resignation of company members I. Resignation Art. 822 II. Follow-up resignations Art. 822a III. Exclusion Art. 823 IV. Interim measures Art. 824 V. Financial settlement 1. Entitlement and amount Art. 825 2. Payment Art. 825a

C. Liquidation Art. 826

Section Five: Liability Art. 827

Title Twenty-Nine: The Cooperative Section One: Definition and Establishment

A. Cooperatives under the Code of Obligations Art. 828 B. Cooperatives under public law Art. 829 C. Establishment I. Requirements 1. In general Art. 830 2. Number of members Art. 831

II. Articles of association 1. Content prescribed by law Art. 832 2. Further provisions Art. 833 III. Constituent assembly Art. 834 IV. Entry in the commercial register 1. Cooperative Art. 835 2. Branch offices Art. 836 3. List of members Art. 837

V. Acquisition of legal personality Art. 838

Section Two: Acquisition of Membership A. General principle Art. 839 B. Declaration of accession Art. 840

469

220 Code of Obligations

C. In connection with an insurance policy Art. 841

Section Three: Loss of Membership A. Departure I. Freedom to leave Art. 842 II. Restriction of departure Art. 843 III. Notice and timing of departure Art. 844 IV. Exercise in bankruptcy and attachment Art. 845

B. Exclusion Art. 846 C. Death of a member Art. 847 D. Lapse of office, employment or contract Art. 848 E. Transfer of membership I. In general Art. 849 II. By transfer of land or commercial exploitation Art. 850

F. Departure of the legal successor Art. 851

Section Four: Rights and Obligations of the Members A. Proof of membership Art. 852 B. Share certificates Art. 853 C. Equality Art. 854 D. Rights I. Voting right Art. 855 II. Control by the members 1. Disclosure of the balance sheet Art. 856 2. Release of information Art. 857

III. Rights to share the net profit 1. Determining the net profit Art. 858 2. Profit distribution principles Art. 859 3. Duty to form and accumulate a reserve fund Art. 860 4. Net profit at credit cooperatives Art. 861 5. Welfare funds Art. 862 6. Further allocations to reserves Art. 863

IV. Entitlement to settlement 1. Under the articles of association Art. 864 2. By law Art. 865

E. Duties I. Duty of loyalty Art. 866 II. Duty to make contributions Art. 867

470

220Federal Act on the Amendment of the Swiss Civil Code

III. Liability 1. Of the cooperative Art. 868 2. Of the members a. Unlimited liability Art. 869 b. Limited liability Art. 870 c. Liability to make additional contributions Art. 871 d. Inadmissible restrictions Art. 872 e. Procedure in insolvency Art. 873 f. Amendment of liability provisions Art. 874 g. Liability of new members Art. 875 h. Liability after departure or dissolution Art. 876 i. Notification of accessions and departures for entry in the commercial register Art. 877 k. Limitation periods for liability Art. 878

Section Five: Organisation of the Cooperative A. General assembly of members I. Powers Art. 879 II. Ballot Art. 880 III. Convening the general assembly 1. Right and duty Art. 881 2. Form Art. 882 3. Agenda items Art. 883 4. Universal meeting Art. 884

IV. Voting rights Art. 885 V. Representation Art. 886 VI. Exclusion of voting rights Art. 887 VII. Resolutions 1. In general Art. 888 2. Increase of members’ obligations Art. 889

VIII. Dismissal of the directors and the auditor Art. 890 IX. Challenging resolutions of the general assembly Art. 891 X. Assembly of delegates Art. 892 XI. Exceptions for insurance cooperatives Art. 893

B. Directors I. Eligibility 1. Membership Art. 894 2.... Art. 895

II. Term of office Art. 896

471

220 Code of Obligations

III. Administrative committees Art. 897 IV. Business management and representation 1. Delegation Art. 898 2. Scope and restriction Art. 899 3. Contracts between the cooperative and its representatives Art. 899a 3. Signatures Art. 900 4. Entry Art. 901

V. Duties 1. In general Art. 902

2. Duty to notify capital loss and overindebtedness Art. 903 VI. Return of payments to members Art. 904 VII. Dismissal and suspension Art. 905

C. Auditor I. In general Art. 906 II. Verification of the membership list Art. 907 2. Defects in organisation Art. 908

Art. 909 and 910

Section Six: Dissolution of the Cooperative A. Grounds for dissolution Art. 911 B. Notification for entry in the commercial register Art. 912 C. Liquidation, distribution of assets Art. 913

D. ... Art. 914 E. Takeover by a public sector corporation Art. 915

Section Seven: Liability A. Liability to the cooperative Art. 916 B. Liability to the cooperative, members and creditors Art. 917 C. Joint and several liability and recourse Art. 918 D. Time limits Art. 919 E. Liability in credit and insurance cooperatives Art. 920

Section Eight: Cooperative Unions A. Requirements Art. 921 B. Organisation I. Assembly of delegates Art. 922 II. Board of directors Art. 923 III. Monitoring, challenge Art. 924 IV. Exclusion of new obligations Art. 925

472

220Federal Act on the Amendment of the Swiss Civil Code

Section Nine: Involvement of Public Sector Corporations Art. 926

Division Four: The Commercial Register, Business Names and Commercial Accounting

Title Thirty: The Commercial Register A. Purpose and establishment I. In general Art. 927 II. Liability Art. 928 III. Federal Council ordinances 1. In general Art. 929 2. Electronic commercial registers Art. 929a

IV. Public register Art. 930 V. Swiss Official Gazette of Commerce Art. 931

B. Entries I. Application Art. 931a II. Entry into force Art. 932 III. Effects Art. 933 IV. Entry in the commercial register 1. Right and duty Art. 934 2. Branch offices Art. 935 3. Implementing provisions Art. 936 4. Business Identification number Art. 936a

V. Changes Art. 937 VI. Deletion 1. Duty to delete Art. 938 2. Ex officio deletion Art. 938a 3. Executive officers and powers of representation Art. 938b

VII. Insolvency of commercial enterprises and cooperatives Art. 939 VIII. Duties of the registrar 1. Duty of verification Art. 940 2. Reminder, ex officio entry Art. 941 3. Application to the court or supervisory authority Art. 941a

IX. Failure to comply with provisions 1. Liability for losses Art. 942 2. Administrative fines Art. 943

473

220 Code of Obligations

Title Thirty-One: Business Names A. General principles of business name composition I. General provisions Art. 944 II. Names of sole proprietorships 1. Essential content Art. 945 2. Exclusivity of the registered business name Art. 946

III. Business names of companies, partnerships and coopera- tives 1. General partnerships, limited partnerships and partner- ships limited by shares a. Composition of the business name Art. 947 b. Changing the business name Art. 948

Art. 949 3. Companies limited by shares, limited liability companies and cooperatives Art. 950 4. Exclusivity of the registered business name Art. 951

IV. Branch offices Art. 952 V. Takeover of a business Art. 953 VI. Change of name Art. 954

B. Obligation to use business and other names Art. 954a B. Monitoring Art. 955 C. Protection of business names Art. 956

Title Thirty-Two: Commercial Accounting A. Duty to keep and archive accounting records Art. 957 B. Accounting rules I. Duty to keep accounts Art. 958 II. Accounting practices 1. True and fair view, clarity Art. 959 2. Valuation methods Art. 960

III. Signatures Art. 961 C. Duration of duty to archive records Art. 962

Art. 963 Art. 964

474

Federal Act on the Amendment of the Swiss Civil Code 220

Division Five: Negotiable Securities

Title Thirty-Three: Registered Securities, Bearer Securities and Instruments to Order Section One: General Provisions

A. Definition of negotiable security Art. 965 B. Obligation under the security Art. 966 C. Transfer of the security I. General form Art. 967 II. Endorsement 1. Form Art. 968 2. Effect Art. 969

D. Conversion Art. 970 E. Cancellation I. Party requesting cancellation Art. 971 II. Procedure, effect Art. 972

F. Special provisions Art. 973 I. Collective custody of negotiable securities Art. 973a II. Global certificate Art. 973b III. Uncertificated securities Art. 973c

Section Two: Registered Securities A. Definition Art. 974 B. Evidence of creditor’s right I. As a general rule Art. 975 II. With qualified bearer securities Art. 976

C. Cancellation Art. 977

Section Three: Bearer Securities A. Definition Art. 978 B. Obligor’s defences I. In general Art. 979 II. In the case of bearer coupons Art. 980

C. Cancellation I. In general 1. Application Art. 981 2. Attachment order Art. 982

475

220 Code of Obligations

3. Public call for presentation, time limit Art. 983 4. Form of public notice Art. 984 5. Effect a. Where the security is presented Art. 985 b. Where the security is not presented Art. 986

II. Of coupons in particular Art. 987 III. In the case of banknotes and the like Art. 988

D. Mortgage certificates and land charge certificates Art. 989

Section Four: Bills and Notes A. Capacity to incur Liability as a party to a Bill

Art. 990

B. The Bill of Exchange I. Drawing and Formal Requirements of Bills of Exchange 1. Requirements Art. 991 2. Required content lacking Art. 992 3. Types Art. 993 4. Payment of domiciled bills Art. 994 5. Promise of interest Art. 995 6. Discrepancy in specification of bill amount Art. 996 7. Signatures of persons lacking capacity Art. 997 8. Unauthorised signature Art. 998 9. Liability of the drawer Art. 999 10. Blank bill Art. 1000

II. Endorsement 1. Transferability Art. 1001

2. Requirements Art. 1002 3. Form Art. 1003 4. Effects a. Transfer function Art. 1004 b. Guarantee function Art. 1005 c. Proof of bearer’s entitlement Art. 1006

5. Defences Art. 1007 6. Procuration endorsement Art. 1008

476

220Federal Act on the Amendment of the Swiss Civil Code

7. Pledging endorsement Art. 1009 8. Subsequent endorsement Art. 1010

III. Acceptance 1. Right to present bill Art. 1011 2. Presentation compulsory or prohibited Art. 1012

3. Duty to present after-sight bills Art. 1013 4. Repeat presentation Art. 1014

5. Form of acceptance Art. 1015 6. Restrictions on acceptance Art. 1016

7. Domiciliate and bill domicile Art. 1017 8. Effect of acceptance a. In general Art. 1018 b. In the case of deletion Art. 1019

IV. Bill Guarantees 1. Bill guarantor Art. 1020 2. Form Art. 1021 3. Effects Art. 1022

V. Maturity 1. In general Art. 1023 2. In the case of sight bills Art. 1024 3. In the case of after-sight bills Art. 1025 4. Computation of time limits Art. 1026 5. Computation by the old method Art. 1027

VI. Payment 1. Presentation for payment Art. 1028

2. Right to receipt, part payment Art. 1029 3. Payment before and at maturity Art. 1030 4. Payment in foreign currency Art. 1031 5. Deposit Art. 1032

VII. Recourse in the event of Non-Acceptance and Non- Payment

1. Recourse of the holder Art. 1033 2. Protest a. Time limits and requirements Art. 1034

477

220 Code of Obligations

b. Responsibility Art. 1035 c. Content Art. 1036 d. Form Art. 1037 e. For partial acceptance Art. 1038 f. Against several persons Art. 1039 g. Copy of the protest document Art. 1040 h. Defective protest Art. 1041

3. Notification Art. 1042 4. Waiver of protest Art. 1043 5. Joint and several liability of the parties Art. 1044 6. Nature of recourse a. By the holder Art. 1045 b. By the party honouring the bill Art. 1046 c. Right to take possession of bill, protest and receipt Art. 1047 d. In respect of partial acceptance Art. 1048 e. Re-exchange bill Art. 1049

7. Invalidation a. In general Art. 1050 b. Force majeure Art. 1051 c. Unjust enrichment Art. 1052

VIII. Devolution of Cover Art. 1053

IX. Act of Honour 1. General provisions Art. 1054 2. Acceptance for honour a. Requirements, position of the holder Art. 1055 b. Form Art. 1056 c. Liability of the acceptor for honour, effect on right of recourse Art. 1057

3. Payment for honour a. Requirements Art. 1058 b. Obligation of the holder Art. 1059 c. Consequence of refusal Art. 1060 d. Right to take possession of bill, protest and receipt Art. 1061 e. Devolution of the holder’s rights; multiple payments for honour Art. 1062

478

220Federal Act on the Amendment of the Swiss Civil Code

X. Production of Multiple Duplicates and Copies of Bills of Exchange 1. Duplicates a. Right to make duplicates Art. 1063 b. Relationship between duplicates Art. 1064 c. Acceptance comment Art. 1065

2. Copies a. Form and effect Art. 1066 b. Surrender of the original bill Art. 1067

XI. Amendments to the Bill of Exchange Art. 1068

XII. Time Limits 1. Limitation periods Art. 1069 2. Interruption a. Grounds Art. 1070 b. Effects Art. 1071

XIII. Cancellation 1. Provisional measures Art. 1072 2. Known holder Art. 1073 3. Unknown holder a. Duties of the applicant Art. 1074 b. Public call for presentation Art. 1075 c. Time limits Art. 1076 d. Publication Art. 1077

4. Effect a. If the bill is presented Art. 1078 b. If the bill is not presented Art. 1079

5. Court orders Art. 1080

XIV. General Provisions 1. Setting time limits a. Holidays Art. 1081 b. Computing time limits Art. 1082 c. Exclusion of days of respite Art. 1083

2. Place for actions in connection with bills of exchange Art. 1084 3. Signature by hand; blind person’s signature Art. 1085

479

220 Code of Obligations

XV. Applicable Jurisdiction 1. Capacity to incur liability as a party to a bill Art. 1086 2. Form and time limits of declaration on bills of exchange a. In general Art. 1087 b. Actions to exercise and safeguard rights under bills of exchange Art. 1088 c. Exercise of right of recourse Art. 1089

3. Effect of declarations on bills of exchange a. In general Art. 1090 b. Partial acceptance and part payment Art. 1091 c. Payment Art. 1092 d. Claims for unjust enrichment Art. 1093 e. Devolution of cover Art. 1094 f. Annulment Art. 1095

C. The Promissory Note 1. Requirements Art. 1096 2. Required content lacking Art. 1097 3. Reference to bill of exchange Art. 1098 4. Liability of the maker; presentation for sight Art. 1099

Section Five: The Cheque I. Issue and Formal Requirements of Cheques 1. Requirements Art. 1100 2. Required content lacking Art. 1101 3. Capacity to act as drawee Art. 1102 4. Cover requirement Art. 1103 5. Exclusion of acceptance Art. 1104 6. Designation of payee Art. 1105 7. Interest comment Art. 1106 8. Paying agents, domiciled cheques Art. 1107

II. Transfer 1. Transferability Art. 1108

2. Requirements Art. 1109 3. Proof of bearer’s entitlement Art. 1110 4. Bearer cheque Art. 1111

480

220Federal Act on the Amendment of the Swiss Civil Code

5. Lost cheques Art. 1112 6. Rights stemming from subsequent endorsement Art. 1113

III. Cheque Guarantees Art. 1114

IV. Presentation and Payment 1. Maturity Art. 1115 2. Presentation for payment Art. 1116 3. Computation by the old method Art. 1117 4. Delivery to clearing house Art. 1118 5. Revocation a. In general Art. 1119 b. Death, incapacity, bankruptcy Art. 1120

6. Verification of endorsements Art. 1121 7. Payment in foreign currency Art. 1122

V. The Crossed Cheque and the Account-Payee-Only Cheque 1. Crossed cheques a. Definition Art. 1123 b. Effects Art. 1124

2. Account-payee-only cheques a. In general Art. 1125 b. Bearer’s rights in the event of insolvency, suspension of payments, compulsory execution Art. 1126

c. Bearer’s rights in the event of refusal of account credit or settlement Art. 1127

VI. Recourse for Non-Payment 1. Bearer’s rights of recourse Art. 1128 2. Protest, time limits Art. 1129 3. Object of recourse Art. 1130 4. Exceptions in the case of force majeure Art. 1131

VII. Forged Cheques Art. 1132

VIII. Duplicates of a Cheque Art. 1133

481

220 Code of Obligations

IX. Time Limits Art. 1134

X. General Provisions 1. Definition of ‘banker’ Art. 1135 2. Setting time limits a. Holidays Art. 1136 b. Computing time limits Art. 1137

XI. Applicable Jurisdiction 1. Capacity to act as drawee of a cheque Art. 1138 2. Form and time limits for declarations on cheques Art. 1139 3. Effect of cheque declarations a. Law of the place of issue Art. 1040 b. Law of the place of payment Art. 1141 c. Law of domicile Art. 1142

XII. Applicability of the Law on Bills of Exchange Art. 1143

XIII. Reservation of Specific Law Art. 1144

Section Six: Bill-like Securities and Other Instruments to Order

A. In general I. Requirements Art. 1145 II. Defences of the obligor Art. 1146

B. Bill-like securities I. Payment instructions to order 1. In general Art. 1147 2. No duty to accept Art. 1148 3. Consequences of acceptance Art. 1149 4. No enforcement of bills of exchange Art. 1150

II. Promise to pay to order Art. 1151 C. Other endorsable securities Art. 1152

Section Seven: Documents of Title to Goods A. Requirements Art. 1153 B. The warrant Art. 1154 C. Significance of the formal requirements Art. 1155

482

220Federal Act on the Amendment of the Swiss Civil Code

Title Thirty-Four: Bonds Section One: Obligation to publish a Prospectus when issuing Bonds

Art. 1156

Section Two: Community of Bond Creditors A. Requirements Art. 1157 B. Bond representative I. Appointment Art. 1158 II. Powers 1. In general Art. 1159 2. Monitoring of the borrower Art. 1160 3. In the case of bonds secured by pledge Art. 1161

III. Lapse of authority Art. 1162 IV. Costs Art. 1163

C. Creditors’ meeting I. In general Art. 1164 II. Convocation 1. In general Art. 1165 2. Moratorium Art. 1166

III. Holding the meeting 1. Voting right Art. 1167 2. Representation of individual bond creditors Art. 1168

IV. Procedure Art. 1169 D. Resolutions of the community of creditors I. Encroachment on creditors’ rights 1. Admissibility and required majority a. In the case of only one community of creditors Art. 1170 b. In the case of several communities of creditors Art. 1171 c. Determining the majority Art. 1172 2. Restrictions a. In general Art. 1173 b. Equal treatment Art. 1174 c. Statement and balance sheet Art. 1175 3. Official approval a. In general Art. 1176 b. Requirements Art. 1177 c. Appeal Art. 1178

483

220 Code of Obligations

d. Revocation Art. 1179 II. Other resolutions 1. Authority of the bond representative Art. 1180 2. On other matters Art. 1181 3. Challenge Art. 1182

E. Special cases I. Insolvency of the borrower Art. 1183 II. Composition agreement Art. 1184 III. Bonds issued by railway or inland waterways transport companies Art. 1185

F. Mandatory law Art. 1186 Transitional Provisions of the Federal Act of 30 March 1911 Final Provisions on the Amendment of 23 March 1962 A. Preferential payments on bankruptcy Art. 1 B. Unfair competition Art. 2 C. Transitional law Art. 3 D. Entry into force Art. 4

Transitional Provisions on the Amendment of 16 December 2005 A. General rule Art. 1 B. Deadline for amendments Art. 2 C. Payment of contributions Art. 3 D. Participation certificates and dividend rights certificates Art. 4 E. Own capital contributions Art. 5 F. duty to pay in further capital Art. 6 G. Auditor Art. 7 H. Voting rights Art. 8 J. Amendment of majority requirements in the articles of association Art. 9 K. Cancellation of shares and capital contributions in the event of restructuring Art. 10 L. Exclusivity of registered business names Art. 11

484

220Federal Act on the Amendment of the Swiss Civil Code

Final Provisions on Title Eight and Title Eightbis Art. 1

Art. 2-4 Art. 5 Art. 6

Final and Transitional Provisions on Title X Amendment of the COR Art. 1 Amendment of the CC Art. 2 Amendment of the Insurance Contracts Act Art. 3 Amendment of the Agriculture Act Art. 4 Amendment of the Employment Act Art. 5 Repeal of federal law provisions Art. 6 Amendment of legal relations governed by the old law Art. 7 Commencement of the Act Art. 8

Final Provisions on the Fourth Section of Title XIII. A. Transitional law Art. 1 B. Preferential payments on bankruptcy Art. 2 C. Entry into force Art. 3

Transitional provisions on Title XX Final and Transitional Provisions on Titles XXIV– XXXIII A. Scope of application of the Final Title Art. 1 B. Adaptation of existing companies to the new law I. In general Art. 2 II. Welfare schemes Art. 3

Art. 4 C. Balance sheet provisions I. Exception for extraordinary circumstances Art. 5

II. ... Art. 6 D. Conditions for liability of members Art. 7 E. Business names Art. 8 F. Securities I. Registered securities Art. 9

485

220 Code of Obligations

II. Shares 1. Nominal value Art. 10 2. Bearer shares not fully paid up Art. 11

III. Bills of exchange and cheques Art. 12 G. Community of creditors Art. 13 H. ... Art. 14 J. Amendment of the Debt Collection and Bankruptcy Act Art. 15 K. Relationship to the Banking Act I. General reservation Art. 16 II. Amendment of individual provisions Art. 17

L. Repeal of federal private law Art. 18 M. Commencement of this Act Art. 19

Final Provisions on the Twenty-Sixth Title A. Final Title of the Civil Code Art. 1 B. Amendment in accordance with the new law I. In general Art. 2 II. Individual provisions 1. Participation and dividend rights certificates Art. 3 2. Refusal to accept registered shareholders Art. 4 3. Shares with preferential voting rights Art. 5 4. Qualified majorities Art. 6

C. Amendment of federal legislation Art. 7 D. Referendum Art. 8 E. Commencement Art. 9

Final Provisions on the Second Section of Title XXXIV

486