Liquidity planning and monitoring are essential to prevent corporate crises and insolvencies: the Board of Directors must adopt appropriate measures to ensure solvency, even in the absence of any imminent signs of crisis. However, the approach can differ between legal systems: what are the differences between Italy and Switzerland?
An interesting article is available in Ticino Management magazine, co-written by our Cristina Fussi and Stefania Merati together with Rocco Rigozzi and Andrea Ziswiler, partners at Bär & Karrer, which analyses directors’ responsibilities and duties in managing liquidity crises, with a detailed comparison between the two jurisdictions.
How much discretion do directors have, in a crisis situation, when deciding when to intervene and which measures to adopt?
Regarding the situation in Italy following the adoption of the new Business Crisis rules, Cristina Fussi explained:
“The ability of directors of Italian companies to determine at their own discretion whether the company is in a state of crisis, and whether it is time to adopt crisis-resolution tools (procedures), is curtailed by recently adopted legal provisions, which appear designed to limit the scope of the business judgement rule.”
By contrast, as Rocco Rigozzi and Andrea Ziswiler explain, in Switzerland the legislator did not impose new obligations in the recent revision of the Swiss Code of Obligations’ provisions on liquidity and insolvency, but instead formalised obligations already established by Swiss case law within the context of directors’ general duty of care. The Board of Directors has reasonable discretion in planning, monitoring and supervising corporate liquidity, and related decisions—if made through proper procedures—are generally not questioned by courts in hindsight.