Representation of a public limited company by de facto organs
October 2022

My employment contract was terminated by a person who, according to the extract from the commercial register, has no authority to sign for the employer. Is the termination legal?

Representation of the corporation

The corporation may be represented by (i) the board of directors, delegates of the board of directors or directors (i.e. as a body pursuant to Art. 718 CO), (ii) authorized signatories or other agents (Art. 721 CO) or (iii) third parties as representatives under civil law within the meaning of Art. 32 et seq. OR, are represented.

In the case of de facto organs, the highest degree of caution is then required in accordance with federal court case law (Art. 4A_455/2018). A clear distinction must be made between the representation for the conclusion of legal transactions and the imputation of tortious acts of the corporate bodies.

The imputation of tortious acts of the corporate bodies to the joint stock company is based on the fact that the corporate bodies act as parts of the legal entity within the scope of their function as corporate bodies. However, the case law in connection with tortious acts of (de facto) organs within the meaning of Art. 55 para. 2 CC as well as Art. 722 CO is not applicable to the question of representation of a joint-stock company for the conclusion of a legal transaction.

The legal attribution of acts of the (de facto) organs is based on the good faith of third parties in the case of a restriction of their internal powers (Art. 718a para. 2 CO). A de facto organ cannot bind the company directly by contract or by legal transactions within the meaning of Art. 718 CO. Rather, it must always be examined whether they act as representatives under civil law within the meaning of Art. 32ff. OR. A representative can bind the represented party (in such cases the corporation) in three cases (cf. BGE 4A_455/2018 E. 7.1.):

  1. internal authorization within the meaning of Art. 32 para. 1 CO (includes acquiescence or prima facie authorization)
  2. Notification of the authorization by the grantor of the power of attorney to a third party within the meaning of Art. 33 para. 3 CO
  3. Subsequent approval in the absence of power of attorney within the meaning of Art. 38 para. 1 CO


It follows from the principle of the clarity of the termination as well as its non-conditionality and irrevocability that it can only be effective if it has been pronounced by the person responsible for it. The employee has a right to know without restriction during the entire notice period that the employment relationship will be terminated; a state of suspense is not reasonable. However, a state of suspense can only be spoken of if the terminated party actually doubts the binding nature of the termination. If the defect is cured before the employee notices it, there was never any uncertainty on her part about the validity of the termination.

The above statements are then also applicable to terminations on the part of the employer. If an employment contract is terminated by a person who is neither a formal body nor authorised to sign, the prerequisites of representation under civil law within the meaning of Art. 32 et seq. CO must be examined. The fact that the lack of power of representation can be subsequently remedied is beyond doubt (cf. Art. 38 para. 1 CO). 



Diana Krasnic
+41 58 255 73 00