9. March 2026

Personal Liability of Board Members – Identifying and Avoiding Risks

Serving on a board of directors is an interesting and responsible task. Those who are aware of their duties, take organizational precautions, and seek professional advice in case of doubt can significantly reduce their liability risks. This article provides an overview of the civil law obligations of board members and how they can effectively protect themselves.

Legal Obligations and Basis for Liability

The legal responsibility of the board of directors is regulated in Art. 754 et seqq. of the Swiss Code of Obligations (CO). According to these provisions, the members of the board of directors are liable to both the company and the individual shareholders and creditors of the company for any losses or damage arising from any intentional or negligent breach of their duties. Members of the board of directors can therefore be held personally liable. If several persons are liable for the losses, each of them is jointly and severally liable with the others to the extent that the damage is personally attributable to them on the basis of their own fault and the circumstances (Art. 759 para. 1 CO).

This far-reaching responsibility extends in particular to the non-transferable and inalienable duties of the board of directors under Art. 716a CO. These include, for example, the overall management of the company, the determination of its organization, financial planning, the appointment and dismissal of the management, and notification of the court in the event of overindebtedness. The board of directors remains responsible for these tasks even if it has appointed a management team. Furthermore, members of the board of directors have a duty of care and loyalty (Art. 717 CO).

Even if tasks are delegated in a permissible manner, the board of directors continues to bear responsibility: it is liable for damage caused by delegated persons, unless it can prove that it has carefully selected, instructed, and supervised them (Art. 754 para. 2 CO).

Typical Liability Pitfalls in Practice

A frequent cause of liability is the delayed or omitted notification of the court in the event of overindebtedness. As soon as there is justified concern that the company’s liabilities are no longer covered by its assets, the board of directors must immediately prepare and have audited interim financial statements. If overindebtedness is confirmed, the court must be notified (Art. 725b CO). If the notification is not made in good time, the members of the board of directors are liable for the damage caused by the delay. Under certain conditions, in the event of subordination by company creditors to the extent of the overindebtedness or if there are reasonable prospects of restructuring within a reasonable period of time (maximum 90 days according to CO), the notification is exceptionally not required.

Other risk areas relevant in practice are:

• Conflicts of interest: conflicts of interest must be disclosed immediately and in full (Art. 717a CO); the board of directors must take appropriate measures to protect the interests of the company.
• Breach of the duty to inform: members of the board of directors are obliged to actively inform themselves about the company’s business activities. Anyone who fails to obtain sufficient information or does not take action against obvious irregularities is in breach of their duty of care and cannot claim ignorance.
• Social security contributions: members of the board of directors must ensure that social security contributions are paid properly. Otherwise, in the event of the company’s bankruptcy, there is a risk that the social security authorities will take direct action against the bodies responsible at the time.

How can Board Members protect Themselves?

Effective protection against liability risks begins with preventive organizational measures, for example:

• Gathering information about the company before accepting the mandate;
• Holding regular board meetings with complete, careful minutes of all decisions and discussions;
• Clear rules on responsibilities and (permissible) delegations in organizational regulations;
• Ongoing monitoring of the financial situation, in particular solvency;
• Business decisions based on a correct decision-making process, adequate information, and free from conflicts of interest.

On a personal level, board members should, for example:

• Allow sufficient time for their mandate and engage in continuous professional development;
• In extreme cases, consider resigning if there are fundamental differences.

Another important component is D&O insurance (directors and officers). This is liability insurance for executive bodies (e.g. board of directors, management) and protects their private assets if they are sued for damages due to an (alleged) breach of duty in their executive function. The scope of coverage depends on the policy; typically, costs for defending against lawsuits and unfounded claims as well as any compensation payments are covered. Important to know: The insurance does not protect against criminal liability and does not apply in cases of intentional breaches of duty.

Special considerations for SMEs

In small and medium-sized enterprises, board members are often also shareholders, family members, or close acquaintances. Formal structures are often less pronounced, and there is a high level of mutual trust. However, the above-mentioned duties also apply here. This is precisely why it is important to ensure that even smaller structures have a clear organization, clear responsibilities, and documented decision-making processes. D&O insurance is also advisable for SMEs.

 

For further information, please contact:

Michelle Ris-Enz, Associate