Bankruptcy in Switzerland is governed by the Federal Statute on Debt Enforcement and Bankruptcy which also covers insolvency, foreclosure, and debt restructuring. Bankruptcy proceedings are conducted at the cantonal level, therefore they will fall under the regulations of cantonal laws on bankruptcy. In 2011 cantonal regulations were incorporated in the Swiss Code of Civil Procedure.
Below, our law firm in Switzerland explains how bankruptcy procedures are carried out and how it can help with them.
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Steps to declare bankruptcy in Switzerland
Companies facing financial difficulties and deciding to declare Swiss bankruptcy must go through the following steps:
- hold a meeting of the board of directors where an interim balance sheet is drafted;
- the document is given to the auditors for verification;
- if the auditors find that the company cannot pay its debts, they will inform the board;
- one of the company’s representatives must then file for insolvency with the district court in its jurisdiction.
The last step does not need to be completed if the company and the creditors agree for the debt to be added to the existing ones in a sum that equals the shortfall of assets of the business.
Following these steps, Swiss bankruptcy proceedings can be initiated.
You can rely on our law firm in Switzerland for more information on the regulations associated with insolvency and bankruptcy procedures.
The beginning of bankruptcy proceedings in Switzerland
Swiss bankruptcy procedures are preceded by debt collection actions when creditors file for debt enforcement procedures (betreibungsverfahren) to begin. The request will be processed by the cantonal debt collection office. If the debtor opposes the creditor’s request he or she has the possibility to file an objection with the debt collection agency. Once all issues are settled the debt collection procedure can start. According to the Bankruptcy Law, bankruptcy procedures can start only in cases of companies registered with the Commercial Register.
Bankruptcy procedures in Switzerland
Once the debt collection procedures have begun, a bankruptcy agency will request the debtor to pay the debt in a maximum of 20 days. If the debtor fails to pay within this time span, a judge will rule for the bankruptcy procedures to start. At this point, all debtor’s assets will be seized and an inventory will be made. The liquidation of the company will depend on the value of the company’s assets and liabilities. Based on these two factors the proceedings can be suspended or continued by bankruptcy summarized procedures or ordinary procedures. Once the assets have been evaluated they will be used to pay off the company’s debts.
Types of procedures for company bankruptcy in Switzerland:
There are two types of procedures that can be initiated when it comes to Swiss bankruptcy in the case of local businesses:
- liquidation proceedings;
- composition procedures.
If company liquidation will usually conclude with the termination of the company’s operations, composition implies the following 3 scenarios:
- the liquidation of the company with the distribution of the debtor’s assets in a simplified manner, also known as the composition agreement with assignment of assets;
- debt restructuring, which can be done through the repayment of the debt based on a new calendar, by concluding a dividend agreement, or a combination of the two methods;
- the issuance of a restructuring moratorium, which is the simplest way to restructure a Swiss company without reaching a composition agreement or going through liquidation.
Our lawyers in Switzerland can offer detailed information on the 3 scenarios and what each of them implies from a legal point of view.
The suspension of bankruptcy procedures in Switzerland
As mentioned above, under certain circumstances bankruptcy proceedings can be suspended in Switzerland. There are three situations that could lead to bankruptcy postponement in this country:
- there is no certainty on which jurisdiction bankruptcy procedures fall under and in this case, the supervising committee must decide,
- if a moratorium or an agreement between creditor and debtor has been drafted,
- if there is a possibility for the debtor and creditor to reach an agreement that would lead to the settlement and liquidation of the debt.
Swiss reorganization proceedings
The law also allows Swiss companies to proceed with restructuring measures in order to avoid bankruptcy. One of these measures refers to a reorganization procedure requested by the debtor or by the creditor and a judge will appoint a trustee that will oversee the reorganization procedure. The second method to avoid bankruptcy proceedings is an out-of-court reorganization when a judge, under special circumstances, allows a series of measures to be undertaken in order to avoid insolvency.
Private restructuring and reorganization in Switzerland
To avoid bankruptcy in Switzerland, companies can use several methods that will help them remain financially solvent. Among these, we mention:
- a decrease of the nominal capital of the shareholders;
- a cash increase in the capital of the company;
- bridge loans obtained during the restructuring procedures.
Swiss bankruptcy statistics
Here is some information on the number of bankruptcies in Switzerland:
- the total number of bankruptcy proceedings opened in 2023 was 15,447;
- this represents a 2.9% increase compared to 2022;
- however, financial losses decreased by 12% in 2023 compared to 2022.
Our law firm is also at the service of natural persons with various solutions. As such, you can also rely on our local lawyers for support in opening a Swiss bank account.
Our Swiss law firm can also provide assistance in litigation cases. For information about detailed bankruptcy procedures, you can ask our Swiss lawyers for legal advice.