LLC organs: Geschäftsführung, Gesellschafter, Revision

What LLC bodies exist in Switzerland?

The LLC is structured into three bodies: shareholders' meeting, management and auditors. The shareholders' meeting and the management are mandatory for every LLC. Under certain conditions, an auditor is not required (Art. 804 OR, Art. 809 OR, Art. 818 OR, Art. 727a Abs. 2 OR).

The shareholders' meeting is designated in the law as the supreme governing body (Art. 804 Abs. 1 OR). However, this does not mean that it is allowed to assume every operational matter. The management has its own core tasks that cannot be withdrawn from it (Art. 810 Abs. 2 OR).

What does the shareholders' meeting do?

The shareholders' meeting decides on the most important matters of the LLC. These include in particular amendments to the articles of association, election and dismissals of managing directors, election of auditors, approval of the annual financial statements, allocation of profits, discharge of managing directors, approval of the assignment of shares and dissolution of the company (Art. 804 Abs. 2 OR).

In short: The shareholders' meeting is where the owners of the LLC exercise their rights.

Its non-transferable powers include, among others:

• The amendment of the articles of association (Art. 804 Abs. 2 Ziff. 1 OR)

• The appointment and dismissal of managing directors (Art. 804 Abs. 2 Ziff. 2 OR)

• The appointment and dismissal of auditors (Art. 804 Abs. 2 Ziff. 3 OR)

• The approval of the annual financial statements and the decision on the allocation of profits (Art. 804 Abs. 2 Ziff. 5 OR)

• The discharge of the managing directors (Art. 804 Abs. 2 Ziff. 7 OR)

• The dissolution of the LLC (Art. 804 Abs. 2 Ziff. 16 OR)

The ordinary shareholders' meeting takes place every year within six months after the end of the financial year (Art. 805 Abs. 2 OR). It is generally convened by the managing directors (Art. 805 Abs. 1 OR). The invitation must be made at least 20 days prior to the meeting. The articles of association may extend this period or shorten it up to ten days (Art. 805 Abs. 3 OR).

How do shareholders vote in the LLC?

The voting rights are generally based on the nominal value of the shares. However, each shareholder has at least one vote (Art. 806 Abs. 1 OR). The articles of association may provide that each share carries one vote, regardless of the nominal value (Art. 806 Abs. 2 OR).

For ordinary resolutions, the absolute majority of the represented votes applies, unless the law or the articles of association provide otherwise (Art. 808 OR). Particularly important resolutions require at least two-thirds of the represented votes and an absolute majority of the entire share capital that carries an exercisable voting right (Art. 808b Abs. 1 OR).

This applies, for example, to amendments to the company's purpose, an increase in share capital, relocation of the registered office and dissolution of the company (Art. 808b Abs. 1 Ziff. 1 OR, Art. 808b Abs. 1 Ziff. 5 OR, Art. 808b Abs. 1 Ziff. 10 OR, Art. 808b Abs. 1 Ziff. 11 OR).

Particularly for small LLCs, it is important to properly plan voting rights and majorities right from the incorporation stage. Anyone who wants to set up their LLC professionally should not treat the articles of association as a mere formality. If you need support with the process of incorporation, Jurata is always happy to help you.

Who manages the LLC?

The management runs the LLC on a day-to-day basis. If the articles of association do not provide otherwise, all shareholders manage the company jointly (Art. 809 Abs. 1 OR). This principle is often referred to as self-management. Under this, whoever is a shareholder is generally also a managing director.

The articles of association may, however, organize management differently. For instance, they can assign it to individual shareholders or appoint a third party as managing director. Managing directors must be natural persons (Art. 809 Abs. 2 OR).

If the LLC has multiple managing directors, the shareholders' meeting must regulate the chairmanship (Art. 809 Abs. 3 OR). Multiple managing directors generally decide with the majority of the votes cast. The chairman has the casting vote, unless the articles of association provide otherwise (Art. 809 Abs. 4 OR).

What tasks does the management have?

The management is responsible for all matters that are not assigned to the shareholders' meeting by law or the articles of association (Art. 810 Abs. 1 OR). This gives it a broad catch-all competence.

Its non-transferable tasks include in particular:

• The overall management of the company and the issuance of necessary instructions (Art. 810 Abs. 2 Ziff. 1 OR)

• The determination of the organization (Art. 810 Abs. 2 Ziff. 2 OR)

• The organization of accounting, financial control and, if applicable, financial planning (Art. 810 Abs. 2 Ziff. 3 OR)

• The supervision of persons to whom parts of the management have been delegated (Art. 810 Abs. 2 Ziff. 4 OR)

• The preparation of the annual report (Art. 810 Abs. 2 Ziff. 5 OR)

• The preparation of the shareholders' meeting and the implementation of its resolutions (Art. 810 Abs. 2 Ziff. 6 OR)

• The filing of an application for a debt restructuring moratorium and notification of the court in the event of overindebtedness (Art. 810 Abs. 2 Ziff. 7 OR)

The management is therefore much more than a formal roll in the commercial register. It carries responsibility for supreme governance, organization, finances and timely action in the event of financial difficulties.

Who represents the LLC externally?

In principle, every managing director is authorized to represent the LLC (Art. 814 Abs. 1 OR). The articles of association can regulate the representation differently, for example with sole signature or joint signature by two. However, at least one managing director must remain authorized to represent the company (Art. 814 Abs. 2 OR).

Additionally, the LLC must be able to be represented by a person who is resident in Switzerland. This person must be a managing director or director and have access to the share register as well as to the list of beneficial owners (Art. 814 Abs. 3 OR).

What duties do managing directors have?

Managing directors and third parties involved in management must perform their duties with care and protect the interests of the LLC in good faith (Art. 812 Abs. 1 OR). They are also subject to a duty of loyalty (Art. 812 Abs. 2 OR). Competing activities are only permitted if the articles of association allow them or if the other shareholders give their written consent. The articles of association may instead provide for the approval of the shareholders' meeting (Art. 812 Abs. 3 OR).

In addition, managing directors must treat shareholders equally under the same conditions (Art. 813 OR). The shareholders' meeting can dismiss managing directors it has elected at any time (Art. 815 Abs. 1 OR). For important reasons, any shareholder can request the court to withdraw or restrict a managing director's power of management and representation (Art. 815 Abs. 2 OR).

When does an LLC need an auditor?

The LLC must generally have an auditor, unless the limited audit has been effectively waived. The provisions of stock corporation law apply key duties to the auditor in the case of an LLC (Art. 818 Abs. 1 OR).

An ordinary audit is required in particular if a company exceeds two of the following thresholds in two consecutive financial years: total assets of CHF 20'000'000, revenue of CHF 40'000'000 or 250 full-time positions on annual average (Art. 727 Abs. 1 Ziff. 2 OR). Companies that are required to prepare consolidated financial statements also require an ordinary audit (Art. 727 Abs. 1 Ziff. 3 OR).

If the requirements for an ordinary audit are not met, a limited audit is generally provided for (Art. 727a Abs. 1 OR).

When can an LLC waive the audit?

An LLC can waive the limited audit if all shareholders agree and the company does not have more than ten full-time positions on annual average (Art. 727a Abs. 2 OR in conjunction with Art. 818 Abs. 1 OR). This waiver is often referred to as opting-out.

The waiver only applies to future financial years and must be registered with the commercial register office before the start of the financial year (Art. 727a Abs. 2 OR). The annual financial statements of the last financial year ended must be attached to the application (Art. 727a Abs. 2bis OR).

After an opting-out, the waiver also applies to the subsequent years. However, any shareholder can request a limited audit at least ten days before the shareholders' meeting. Then the shareholders' meeting must elect an auditor (Art. 727a Abs. 4 OR).

There is also a special feature for LLCs: A shareholder who is subject to an additional contribution obligation can request an ordinary audit of the annual financial statements (Art. 818 Abs. 2 OR).

What does the auditor check?

In an ordinary audit, the auditor checks, among other things, whether the annual financial statements and, if applicable, the consolidated financial statements comply with statutory provisions, the articles of association and the chosen framework (Art. 728a Abs. 1 Ziff. 1 OR). It also checks the proposal on the allocation of balance sheet profit and whether an internal control system exists (Art. 728a Abs. 1 Ziff. 2 OR, Art. 728a Abs. 1 Ziff. 3 OR). The management itself is not subject to the audit (Art. 728a Abs. 3 OR).

In a limited audit, the auditor checks whether there are indications that the annual financial statements or the proposal on the allocation of balance sheet profit do not comply with the statutory provisions and articles of association (Art. 729a Abs. 1 OR). The audit is limited to inquiries, analytical audit procedures and appropriate detailed tests (Art. 729a Abs. 2 OR).

What is the most important insight regarding LLC bodies?

The most important insight is: The LLC is flexible, but its bodies must be neatly separated and used correctly. The shareholders' meeting decides on the general lines, the management runs the company, and the auditor checks the annual financial statements when an audit is required.

Particularly because many LLCs are managed by only a few people, the roles quickly blur in practice. The same person can be a shareholder, managing director and beneficial owner. Legally, the functions nevertheless remain distinct. Anyone who understands this avoids conflicts, organizational deficiencies and liability risks.

Frequently asked questions about LLC bodies

Does every LLC have to have management?

Yes. The management is a mandatory body of the LLC. Unless the articles of association provide otherwise, all shareholders jointly manage the business (Art. 809 Abs. 1 OR).

Can non-shareholders be managing directors of an LLC?

Yes. The articles of association can regulate management differently and thus also provide for third parties as managing directors. However, managing directors must be natural persons (Art. 809 Abs. 2 OR).

Can a small LLC be run without an auditor?

Yes, if all shareholders agree and the LLC does not have more than ten full-time positions on annual average, the limited audit can be waived (Art. 727a Abs. 2 OR in conjunction with Art. 818 Abs. 1 OR).