Swiss attempts for corporate social responsibility of Companies

Companies shall be held liable for their actions. However, the involved parties disagree on the implementation.

CSR-Directive 2014/95/EU

The referendum requires that companies with their registered office, head office or principal branch in Switzerland are required to carry out regular due diligence on the impact of their economic activities on human rights and on environmental standards. The results of this due diligence will be reported in a separate report. If human rights or environmental standards are violated, the company shall be liable for the damage, even if it was caused by a subsidiary abroad. Swiss companies would thus be liable for the activities of companies that they control economically without being directly involved in the operating business. The Federal Council rejected the referendum and recommended to Parliament that the referendum shall be rejected without even suggesting a counter-proposal.

Draft

However, a counter-proposal still has been prepared. The counter-proposal currently provides that companies are liable for damages to life or physical condition or property caused by companies controlled by the swiss entity in violation of human rights and environmental standards. However, companies may relieve themselves if they are able to provide certain proof. Companies must either be able to demonstrate that they have taken due care to prevent such damage or they must prove that they cannot influence the behaviour of the controlled company aboard. In such cases, the companies would not be liable. The Board of Directors must determine the possible and actual impact of the business activities on human rights and implement measures to minimize risks and make amends. However, only companies with special risks or a certain size should fall under the intended scope of application. Those affected would be those which exceed two of the following thresholds in two consecutive financial years: a balance sheet total of CHF 40 million, a turnover of CHF 80 million or 500 full-time positions.

The Legal Commission of the Council of States (“Senate”) has also proposed that a mandatory conciliation procedure needs to take place before the “National Contact Point for the OECD Guidelines” before a company's civil liability can be considered.

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Next steps

At the end of September 2019, the Council of States will again discuss the proposal of its Legal Commission. It will then be remitted to the National Council (“House of Representatives”), where the final vote of the two chambers may take place, if possible. The Federal Council has now announced that - if the Council of States does not approve the counter-proposal - the Federal Department of Justice and Police will be instructed to prepare a new draft in accordance with the EU Directive on Corporate Social Responsibility.

A referendum would be possible to be take place - in the best case - in February 2020.

CSR-Directive 2014/95/EU

The introduction of the CSR Directive in the European Union (“EU”) represents a further development of non-financial reporting duties for large companies within the EU. They are obliged to report on sustainability management. CSR stands for "Corporate Social Responsibility". The guideline provides for a comprehensive reporting obligation for the non-financial performances of certain large companies. This reporting obligation applies to companies whose sales revenues exceed EUR 40 million or whose balance sheet total exceeds EUR 20 million, as well as companies that are of public interest (capital market-oriented companies, banks and insurance companies) and companies that have more than 500 employees.

The reporting obligation covers a wide range of topics. They cover environmental, social and labour issues, respect for human rights and the fight against corruption and bribery. This list is not exhaustive. The company concerned is responsible for determining which other areas may be of relevance. The report must be submitted to the auditor. The auditor will also have to examine the report. The main responsibility lies with the company's supervisory boards, at least according to implementation in Germany and Austria. They must guarantee the correctness and efficiency of the report and need to render an account to the Annual General Meeting. In the event of deliberate misrepresentation or concealment of circumstances in the company, a prison sentence of up to three years or a fine shall be imposed. Administrative fines shall be imposed in Germany if no or insufficient information on non-financial aspects is provided in the report.

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October 2019 | Authors: Dr. Thomas Müller, Julia Sewer

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