On October 16 2014 the Federal Supreme Court decided an appeal (4A_138/2014) against a Zurich
Commercial Court decision and clarified important issues under mandatory Swiss company law.
In the bankruptcy of the Swissair Group (the former Swiss national carrier), the Federal Court upheld
PricewaterhouseCoopers’ (PwC) personal liability for auditing and approving a dividend payment by
Swisscargo (a Swissair indirect subsidiary) to its direct holding company (another Swissair group
member) – both of which are now bankrupt. PwC’s personal liability resulted from the fact that the
profits and losses booked into Swisscargo’s accounts failed to reflect that two loans advanced by
Swisscargo to two other Swissair Group companies (one, the internal group cash-pooling entity) did
not pass the arm’s-length test because they were not properly secured and the credit standing of the
receiving group companies had not been verified by Swisscargo.
For these reasons, the Federal Court recharacterised the loans as (forbidden) hidden capital
repayments under Article 680 II of the Code of Obligations and held that the respective amounts could
not be advanced as dividend payments by Swisscargo (ie, Swisscargo would have been entitled to
advance only a much lower dividend).
Swiss and foreign companies participating in cash-pooling systems or intra-group loans involving
Swiss companies as lenders, and the respective Swiss lenders’ boards, management members
and auditors, must follow meticulously the strict new limitations on cash pooling and other intragroup
loans in order to avoid personal liability under mandatory Swiss company law resulting from
the approval of unlawful dividend payments or the advancing of intra-group loans that do not meet the
arm’s-length test.
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