Pan-Pacific Conference XXXIV. Designing New Business Models in Developing Economies

Signing the Annual Report of the Swiss Corporations
Juergen Schneider, Ph.D.
German University in Cairo – GUC Berlin Campus, Berlin, Germany
juergen_schneider@aol.com
ABSTRACT
Pursuant to Article 958 para. 3 sentence 2 of
the Swiss Code of Obligations (CO), the annual report
shall be signed by the chairperson of the supreme
management or administrative body (e.g. the chairman of
the board of directors of the corporation), and the person
responsible for financial reporting within the undertaking
[1]. The provision was introduced into the Swiss Code of
Obligations by the reform of the accounting law with
effect to 1 January 1, 2013. It shall be applied to annual
reports from 2015 financial year onwards [2].
The responsible person confirms by signature
that she is aware of the business transactions, their
accounting recognition and presentation is correct and
definite. The person documents her individual
responsibility for the completeness and correctness of the
financial statements by signature. The balance sheet and
income statement are attributed to the knowledge of the
signatory. Subsequently, the signatory cannot rely on
ignorance or incorrectness, unless he has been unable to
detect any defect even with due caution. The confirmed
correctness of the information contained in the annual
report constitutes a possible liability and punishment
basis in the event of a false statement [3].
The obligation to sign is not a validity
requirement, but a regulatory provision. If the signature
is missing, there is a violation of the regulatory.
Nevertheless, the signed annual report and its
components are effective. The signing does not restrict
the responsibility. All members of the Board of
Directors, and not only the signing Chairman, are
responsible for the annual report (Art. 716a para. 1 no. 6
CO) [4].
Although the Board of Directors is responsible
for both, to compile the annual report (Art. 716a para. 1,
no. 6 CO), and to organize the accounting and financial
control (Art. 716a para 1 no. 3 CO), as non-transferable
and inalienable duties, the question can be asked whether
the person responsible for the financial reporting can also
be responsible, if she has confirmed the correctness of
the financial statement with her signature. Before this,
however, the question must be asked when is a person
responsible for the financial reporting. The provision
leaves this question open. A non-competent person
cannot be held responsible for things for which she is not
responsible. Based on the example of the Swiss
corporation this question is discussed in the following.
DEFINITION OF RESPONSIBILITY
The term responsibility is neither defined in the
provision nor elsewhere in the Swiss Code of
Obligations. The explanatory memorandum [5] and
literature are also silent on the responsibility requirement.
They do not provide information as to when a person is
responsible for the accounting and when she is not. A
few examples are given to function holders, such as the
CFO or accountant, without questioning their
responsibility requirement. Rather, their responsibility,
which might be usually the case, is assumed [6].
In general, to be responsible means that a
person is empowered or authorized (authority) to decide
decisively about facts or things (power to decide) and is
liable for it (liability). These necessary requirements have
to be cumulatively fulfilled in order to be responsible. If,
in particular, one of the first two requirements is not met,
the person cannot be held liable. As a sufficient
requirement, a person should be competent (competency)
in order to be able to fulfill the first three requirements -
in particular those of the power of decision. Without
sufficient knowledge of the subject, a person is not in a
position to assess facts properly and to decide on the
right quality [7].
From the general definition of responsibility, it
can be derived for financial reporting that the person
responsible for financial reporting shall have the
authority and power of decision to make decisively
financial reporting related decisions. This is the case if
her decision is not dependent on any authorization of any
other person or body or cannot be lifted by the veto of
another person or body. In addition, she shall have the
necessary expertise to make competent decisions.
POSITION AND RESPONSIBILITY OF THE
BOARD OF DIRECTORS
Annual report and financial responsibility
Partial tasks of the overall management [8] of
the board of directors are to compile the annual report
(Art. 716a para. 1 no. 6 CO), and to organize the
accounting, financial control and financial planning
systems (financial responsibility; Art. 716a para. 1 no. 3
CO). Organizing the accounting is aimed at the proper
financial reporting (financial and operating accounting,
planning and special accounting) and to determine
applicable accounting standards (usually Swiss Code of
Obligations, Swiss GAAP FER, IFRS or US GAAP).
Financial control must be appropriately designed and
operational (frequency and intensity of financial
reporting). The tasks do not need to be carried out or
monitored by the Board of Directors. Rather, it has to
ensure that the tasks are performed, financial and
operating accounting function and their results are
meaningful. The responsibility of the Board of Directors
relates to the organization and suitability, not to the
details or the implementation [9].
Delegation
If the Board of Directors is authorized by the
Articles of Incorporation to delegate the executive
management in accordance with organization regulations
(By-Laws; Art. 716b no. 1 CO), it may delegate tasks to
prepare the annual report and to exercise financial
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