Commercial Register Entry Without a Function: A Liability Trap?
In Switzerland, it is common for individuals to be registered in the commercial register as authorized signatories of Swiss companies – often with signing rights but without a specific functional title. This practice is particularly widespread among Swiss companies, that are managed by persons residing abroad, to satisfy the statutory residence requirement. What may appear at first glance as a mere formality can, however, entail liability risks.
Starting Point: Residence Requirement
According to Art. 718 para. 4 CO, every stock corporation must be represented by at least one person residing in Switzerland. The Swiss Federal Commercial Registry Office (FCRO) interprets this provision broadly and considers the residence requirement to be fulfilled if one person with sole signature (or two persons with joint signature by two) and residence in Switzerland is registered. If no such person exists, an organizational deficiency arises. For limited liability companies, a corresponding rule applies (cf. Art. 811 CO).
In practice, individuals with Swiss residence (e.g. a fiduciary) are often registered as authorized signatories without being formally involved in the company’s operations. However, this does not rule out actual involvement in the company’s operational activities, or at least the appearance thereof.
No Title, No Risk?
The absence of a formal title does not automatically protect against liability, nor does every authorization to represent the company necessarily trigger it.
Under Art. 754 CO, both formal and de facto organs of a company are liable. Formal organs include, in particular, the members of the board of directors. De facto organs, on the other hand, are persons who, without formal office, significantly influence the company’s decision-making or independently perform management tasks.
What matters is not the formal designation, but the actual influence on corporate management. Authorization to represent the company may convey a strong legal position, as it allows binding representation externally. Liability, however, only arises if the person actually shapes, controls, or significantly impacts the company’s decision-making.
Courts consistently focus on the factual circumstances. A person with sole signing authority who does not make strategic decisions and acts solely under instructions is generally not considered a liable organ. Conversely, a person can qualify as a de facto organ even without a commercial register entry or formal title if they exercise actual management functions.
It is therefore important that the authorized signatory is aware of her/his role and – in order to avoid liability risks – refrains from participating in strategic decisions and acts solely in accordance with instructions.
Practical Pitfalls: Where the Real Risks Lie
Without actual influence over the company’s decision-making, there is generally no liability – neither under the corporate responsibility rules of Art. 754 CO, nor in relation to damages to social security (AHV) under Art. 52 para. 2 OASIA, nor for breaches of tax obligations. Liability always requires qualified participation in the company’s management or supervision.
In practice, however, it is problematic that social security offices, tax authorities and creditors typically first contact the individuals listed in the commercial register. These persons must then demonstrate, and if necessary prove, that they did not exercise an organ function. When the actual decision-makers are abroad, the registered person is often the only reachable contact in Switzerland, which increases the risk of being drawn into a liability case.
Protective Measures: Minimizing Risk
Anyone taking on such a role as an authorized signatory should clearly and bindingly define the framework. A written mandate agreement is recommended, explicitly stating that the mandate serves solely to meet the residence requirement, that signing authority is exercised only on explicit instruction and that the company provides comprehensive indemnification.
At the same time, careful documentation is essential to demonstrate that no organ function is performed. The company’s developments should be continuously monitored. If there are increasing debt collections or official inquiries, or if contact with the company is lost, the deletion of the commercial register entry should be considered. This can be initiated by the authorized signatory themselves.
Conclusion: Better Safe Than Sorry
A commercial register entry without a functional title is neither harmless nor does it automatically lead to liability. The decisive factor is the actual influence over the company’s decision-making.
Registered persons are typically the first to be contacted in case of issues. Therefore, such an entry should always be professionally safeguarded – through clear contractual arrangements, comprehensive documentation and a well-prepared exit strategy.
For further information, please contact:
Sophia Zgraggen, Senior Associate
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