The group of companies and unified management

When several companies answer to a single centre of command, we speak of a group. It is a very common reality — a holding company with its subsidiaries, an operating parent company with subsidiaries in different sectors or countries — yet Swiss law does not devote an organic body of rules to the group. There is no complete “law of groups”: there are individual companies, each with its own legal autonomy, held together by unified management. Understanding this starting point avoids many mistakes. Let us see how it works.

What unified management is

In substance, the group is defined by unified management (einheitliche Leitung): one or more companies are subject to a common strategic and managerial direction, decided by the parent company. No formal contract or standardised structure is required: unified management is a fact, inferred from one company’s ability to determine the fundamental choices of the others.

This control may derive from a majority of votes, from the right to appoint the governing bodies, from agreements among shareholders or from other forms of effective dominance. What matters is the concrete ability to impress a unified direction on the whole.

Legal autonomy remains

The cardinal principle is that, even within a group, each company retains its own legal personality. The subsidiary is not a “branch” devoid of legal standing: it is a company in its own right, with its own governing bodies, its own assets, its own creditors. As a result:

• each company is in principle liable only for its own debts;
• the governing bodies of each company have their own duties towards that company, not towards the group in the abstract;
• transactions between group companies (financing, guarantees, services) must respect the interest of the individual company involved.

This is where the most delicate tensions arise: the interest of the group does not always coincide with that of the individual subsidiary, and whoever manages the subsidiary must bear in mind their duty towards it and towards its creditors.

The group accounts (consolidated)

On the accounting side, the group emerges through the obligation to prepare group accounts (consolidated financial statements). A company that controls one or more undertakings — because it holds the majority of votes, the right to appoint or remove the majority of the governing bodies, or a dominant influence — must, as a rule, prepare consolidated accounts that represent the economic situation of the whole as if it were a single entity.

The law, however, provides exemptions for smaller groups: the parent company may be released from consolidation if, together with the subsidiaries, it does not exceed two of the three threshold values (balance sheet total, turnover and annual average number of full-time positions) in two consecutive financial years. Cases in which consolidation is nevertheless required remain reserved — for example if qualified shareholders, the law or the need for a reliable assessment require it. Consolidation is therefore not automatic for every group: it depends on size and structure.

Liability within the group

Because each company is autonomous, the parent company is not automatically liable for the debts of the subsidiaries. However, there are situations in which the veil of autonomy thins:

• when the parent company, through its own conduct, creates in third parties a legitimate expectation of support for the subsidiary and then betrays it, a liability based on trust may arise;
• when the separation between the companies is merely apparent and is used in an abusive manner, case law may override the formal autonomy;
• the directors who, in the interest of the group, sacrifice that of the individual company to the detriment of its creditors, are liable under the rules on the liability of governing bodies.

Unified management, in short, confers power but does not erase responsibilities: whoever commands the group must manage the subsidiaries without hollowing them out to the detriment of third parties.

What to watch over in a group

• Clear governance: distinguish the role of the parent company from the decision-making autonomy of the subsidiaries’ governing bodies.
• Intra-group transactions on proper terms: financing, guarantees and transfer prices must withstand the test of the individual company’s interest and of the tax rules.
• Consolidation: check whether the obligation to prepare group accounts is triggered or whether an exemption applies.
• Protection of the subsidiaries’ creditors: avoid conduct that shifts value upstream at the expense of those who extended credit to the individual company.

How we work at SIH ONE

We help parent companies and subsidiaries structure group governance, correctly set up intra-group transactions and assess consolidation obligations, holding together the unified direction and the legal autonomy of each company. Are you building or reorganising a group of companies? SIH ONE’s corporate division helps you do it on solid foundations.