Separation of powers

Question

In all of its German-language documents, our association has included the term "Vereinsversammlung" (translated literally as association meeting but rendered as general meeting in the Swiss Civil Code). A member has now complained that it should actually be "Generalversammlung" (general meeting). Which is correct?

Answer

The term "Generalversammlung" is indeed often used in place of "Mitgliederversammlung" (members meeting) or "Vereinsversammlung". This term isn't found in Swiss association law. Here, the terms used are "Vereinsversammlung" and "Mitgliederversammlung". The organisation of the association is governed in the Swiss Civil Code (ZGB) in Articles 64 to 69 under the title "I. Vereinsversammlung". In the French version of the Swiss Civil Code, however, the term "assemblée générale" is also used.

The term "Generalversammlung" is used in the German-language version of the Swiss Code of Obligations (SCO) in connection with public limited companies and cooperatives. While an association is person-oriented, including at its "Mitgliederversammlung", a public limited company gathers its capital (shareholders) at its "Generalversammlung".

German-language articles of association that include the term "Generalversammlung" are not invalid for this reason, however.

Many associations whose activities are realised by permanent employees entrust an administrative office with the performance of tasks and/or the administration. While the administrative office is acting on an operational level, the committee is acting on a strategic level.

Question

Is it admissible for an association to consist of committee members only?

Answer

An association that has no members other than committee members is legitimate, too. In this case, the general meeting consists of the committee members only. It is important that such an association comply with the legal provisions governing associations: It has to convene a general meeting, hold elections, adhere to democratic processes, observe obligations to refrain from voting, etc. For such an association it is particularly important to choose one or two auditors in order to provide supervision and some sort of protection for the executive committee, because the committee cannot relieve itself.

It may be stipulated in the articles of association that the executive committee shall decide on the admission of new members. The executive committee thus determines whether further members are to be admitted or whether membership remains limited to members of the executive committee.

The committee is the executive body of the association and manages the association’s business on behalf of the general meeting. As the executive body of the association, it develops and implements the strategic objectives of the association. It is responsible for fulfilling the purpose of the association, for setting objectives and controlling them, for organising tasks and/or the operation, for the procurement and use of funds (finances) and for the preparation of the annual report including the profit and loss accounts for the attention of the general meeting. An association may also entrust an administrative office or secretariat with the management. In this case, the committee is responsible for their supervision. The executive committee is elected by the general meeting and is accountable to it (annual report). Its duties and powers are defined by law, the articles of association and resolutions taken by the general meeting. The law does neither prescribe a minimum number of committee members nor certain offices. The articles of association, on the other hand, may stipulate a minimum or maximum number or define offices and functions.

The committee is the executive body of the association and manages the association’s business in accordance with the law. It may delegate the executive management to the administrative office (the secretaries), the business operation or the operational management, but ultimately remains responsible.

The governing bodies of an association act on its behalf: The general meeting as the supreme governing body, the committee as the managing body and the auditors in charge of verifying the accounts. The association as a legal entity acts through its governing bodies.

The committee is the executive body of an association. It is entrusted with the association’s management and/or the management of its commercial activities. It is responsible for managing the association in accordance with its purpose, to use the funds wisely and to make sure that an appropriate organisation is in place. It also performs personnel management duties. Where the association is engaged in commercial activities or has an administrative office, the management task is limited to the development and monitoring of strategic guidelines for all matters and to the direct supervision of the executive management.

The members meeting is the supreme and most important governing body of an association. It usually takes place once a year (ordinary or statutory meeting). The members meeting is the legislature of the association. It issues and amends the articles of association, elects the committee and appoints other statutory bodies (such as auditors) and sets up working groups and commissions. It supervises the committee by reviewing and approving (or rejecting) the annual report (management report) including the annual accounts. With the approval, the meeting grants discharge to the committee. Depending on the articles of association, it may be responsible for other matters that have not been transferred to another body. The members meeting can also resolve the dissolution of the association. Members must be invited in due time to the meeting and are entitled to submit motions. They are allowed to speak on agenda items, take part in discussions or make counter motions. Members may themselves request the convening of a general meeting. Under the law, it is sufficient if one fifth of the members request an extraordinary general meeting.

The general meeting is the supreme governing body of an association. It has more authority than the committee. The general meeting elects the committee and is responsible for the amendment of the articles of association and for giving instructions to the committee. It approves the annual report of the committee and grants or refuses its discharge. Within the democratic structure of an association, it corresponds to the legislature because it passes the articles of association.

Persons who are not members of the committee may attend meetings upon invitation and advise the committee. In many cases, the business manager and/or the head of the administrative office attend meetings as advisory participants.

The term “checks and balances” refers to the mutual control (checks) of an association’s bodies in order to achieve a balance (balances), which is helpful for the success of the association. The balance of power includes: 1. The separation of powers, i.e. employees cannot simultaneously be members of the committee. 2. The balanced distribution of power within the committee and throughout the association.

Corporate governance refers to principles of good management practices, guidelines for correct behaviour and the approach of the committee in its relationship with the administrative office, the business operation and in particular the public and the association and its members. The term originates from the economic context, in particular from stock corporation law, but also has validity in the non-profit area, as here too, it is important to ensure the reasonable and effective use of resources and a transparent and responsible leadership in line with the intended purpose of the association.

“Dealing at arms’ length” refers to the principle that transactions with related parties are carried out under the same terms that apply when dealing with fully unrelated parties. This requires the disclosure of conflicts of interest.

Working effectively means doing things in a way that a maximum impact can be achieved with the resources available. Working efficiently means doing things in a way that a desired result can be achieved using as few resources as possible.

Original meaning: “good conduct of government affairs”. The term refers to a good guidance and control system of socio-political units, such as states or communities. Nowadays, the term is also used for the management of other organisations. For associations, especially for medium and large associations, management according to the principles of good governance is recommended, too. Good governance is based on three principles: transparency, balance of power and effectiveness.

Associations, too, have different levels of responsibility: The general meeting as the supreme body entrusts the committee with the fulfilment of the association’s purpose and/or the development, monitoring and operational implementation of the strategy. The committee either implements the strategy itself or delegates the implementation to the administrative office or the operational management. Where an administrative office or an operational management exists, the committee should not be involved in operational activities or the day-to-day business. A clear distinction between the powers and responsibilities of the general meeting and of the committee as well as those of the committee and of the administrative office makes the cooperation between these bodies easier. It is not advisable to have one person carry out two or more functions. Function descriptions support the function holders at all levels in the performance of their tasks. They must be adjusted periodically, preferably in discussions about the definition of competences. Such discussions create a common understanding of the respective tasks.

Question

My partner and I work in the therapeutic field. We would like to shift the focus of our services to people with disabilities. We want to set up an association for this purpose. I have read that only two people are needed for an association. Can my partner and I set up an association and provide therapy within the scope of the association?

Answer

An association must not operate for the purpose of generating a profit (Art. 60 ZGB). If the association is intended to enable its members to earn a living or a part thereof, it is by definition profit-driven. Associations are given preferential treatment with regard to taxes and liability. Any circumvention is therefore punishable by law. In your situation, a different legal form should be chosen, or the association should be organised differently. 

However, associations are generally permitted to employ people to fulfil their non-profit objectives. Pursuant to Article 68 of the Swiss Civil Code, its members must recuse themselves from any transactions concerning themselves, their spouses and cohabiting partners and close relatives. This means that you, in your function as a representative of the association, cannot appoint yourself or your partner, nor can you hire yourselves. 

However, you could formulate an idealistic or charitable objective in the purpose of the association (e.g. reduction of costs for affected people). This would allow you to recruit people who value the focus on people with disabilities and who are willing to take on responsibility as board members in the association. The Board of Directors could hire or commission you as a superior body on behalf of the association. You yourself could be represented on the Board in an advisory capacity. 

Anyone who is affected by the outcome of a resolution from the general meeting or from the committee may not participate in the resolution but must recuse himself/herself. The same applies if relatives, such as spouses, parents, children, grandparents or grandchildren, are affected.

Question

We are looking for new committee members in the association. A married couple have expressed their interest. Is it generally allowed for related individuals to sit on the same committee?

Answer

Yes, this is allowed. In specific cases, it can be justified to ask whether family representation is appropriate or not. Keywords to consider here: synergies, short information paths, concentration of power, etc.

Ultimately, it is the members who decide with their vote whether or not they want to have people from the same family on the committee. It must be noted that the requirement to abstain from voting on legal transactions or legal disputes with the association also applies to relatives in accordance with Article 68 of the Swiss Civil Code (ZGB) Not least for this reason, it makes little sense for the committee to exclusively or primarily comprise family members. It is then almost impossible for resolutions to be passed in an orderly fashion.