D&O insurance and Swiss company law after 2023
The liability of directors under Article 754 OR
The demand for D&O insurance in Switzerland follows the liability regime of the Code of Obligations. Under Article 754 OR, the members of the board of directors and all persons engaged in the management or liquidation of the company are liable to the company, to the individual shareholders and to the creditors for the damage they cause by intentional or negligent breach of their duties. A person who delegates a task remains liable unless he proves that he exercised due care in selecting, instructing and supervising the delegate. The Federal Supreme Court applies a business judgment rule. It reviews business decisions with restraint if they were taken on an adequate basis of information, after a proper decision-making process and free of conflicts of interest. If these conditions are not met, the court examines the decision in full.1
The company law revision of 2023
The revision of Swiss company law that entered into force on 1 January 2023 changed the duties of directors in several ways that bear directly on D&O exposure. The most important concern financial distress. Under the new Article 725 OR, the board must monitor the company’s solvency and take measures if insolvency threatens, including where necessary an application for a moratorium. A company is regarded as solvent where its liquidity suffices for roughly the next twelve months. Article 725a OR addresses a capital loss, which exists when the assets after deduction of liabilities no longer cover half of the share capital plus the non-distributable statutory reserves. The board must then take corrective measures, although it is no longer obliged to convene a general meeting. Article 725b OR requires an interim balance sheet at going concern and liquidation values if there is reason to fear over-indebtedness, and notification of the court if over-indebtedness is confirmed. The auditors must notify the court if the board fails to do so.2
The revision also permits a board to postpone the notification of over-indebtedness for at most ninety days if there is a concrete prospect of restructuring and creditors’ positions do not deteriorate further. A subordination agreement now avoids the duty to notify the court only if it covers interest as well as principal, and subordinated claims are no longer taken into account when the damage of creditors is calculated in liability proceedings. A new Article 717a OR requires members of the board and of management to inform the board without delay of conflicts of interest. The board must then take the necessary measures to safeguard the company’s interests. The relative limitation period for liability claims was reduced from five to three years, with an absolute period of ten years.3
Consequences for D&O cover
These rules make the timing and documentation of board decisions in a crisis decisive for liability. A board that fails to monitor liquidity, delays the necessary measures or keeps a failing company alive without a realistic restructuring prospect exposes its members to claims by the liquidator and creditors. Because such claims typically arise after insolvency, when the company can no longer indemnify its directors, the D&O policy is often the only solvent source of recovery. Swiss D&O wordings have adapted to this reality in several ways. Many now provide separate limits for the personal cover of directors, which cannot be exhausted by claims of the company itself, and include cover for defence costs in criminal and regulatory investigations. They also contain run-off provisions for the period after a change of control or an insolvency.
The conflict of interest rule of Article 717a OR has a similar effect. A director who fails to disclose a conflict loses the protection of the business judgment rule, since the Federal Supreme Court applies that rule only to decisions taken free of conflicts. The D&O insurer, for its part, may rely on exclusions for intentional breaches of duty or for personal profit obtained without entitlement. The shortened relative limitation period under Article 760 OR interacts with the claims-made trigger of D&O policies. Once a claim has been made within the policy period, or a circumstance has been notified that may lead to a claim, the cover attaches even if the claim is pursued later. For boards, the practical advice is to notify circumstances early and fully.
Swiss D&O practice has one further feature. Most policies are bought by the company for the benefit of its organs. A large company that exceeds the thresholds of 20 million francs in balance sheet total, 40 million francs in turnover and 2 million francs in equity will usually qualify as a professional policyholder under Article 98a VVG. The parties may then deviate from the semi-mandatory provisions of the act. The individual directors, as insured persons who did not negotiate the policy, may find that the protections of the statute are not available to them. A careful board reviews the wording of its D&O policy with its own advisers, and Zurich lawyers are frequently asked for exactly this review.
Notes
- LAW.CH, “LAWNEWS – Aktienrechtliche Verantwortlichkeit + Business Judgment Rule”, September 2025, https://law.ch/lawnews/2025/09/aktienrechtliche-verantwortlichkeit-business-judgment-rule/, summarising Federal Supreme Court judgment 4A_506/2024 of 18 March 2025. ↩
- RSP Rechtsanwälte, “Art. 725 OR, Pflichten bei drohender Zahlungsunfähigkeit, Kapitalverlust und Überschuldung”, glossary, https://rsplaw.ch/glossar/art-725-or/. ↩
- Jakob Höhn and Myrtha Talirz, “Aktienrechtsrevision: Verwaltungsrat, Geschäftsleitung und Revisionsstelle”, Pestalozzi Attorneys at Law, 8 July 2021, https://pestalozzilaw.com/de/insights/aktuell/legal-insights/aktienrechtsrevision-verwaltungsrat-geschaftsleitung-und-revisionsstelle/. ↩
For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.