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Insolvency procedures

What are the main insolvency procedures applicable to companies in your jurisdiction?

  • Bankruptcy
  • Composition (debt restructuring)

Bankruptcy – A liquidation proceeding in which a liquidator realises the company’s assets and distributes the proceeds to its creditors. A bankruptcy can be opened as a result of an enforcement action brought by a creditor or on the application of the company.

Composition – A proceeding that can be used in one of two ways: (a) a debt restructuring with assignment of assets, a more flexible way to liquidate a company in which the company’s assets are realised by the creditors, possibly including a sale of the company’s business to a third party; or (b) an ordinary debt restructuring in which there is either or both a debt-rescheduling and a partial compromise of debt. Composition proceedings are usually commenced by the company but can also be commenced by a creditor who would be entitled to request the bankruptcy of the company.

Can a company obtain a moratorium whilst it prepares a restructuring plan?

Yes. The granting of a moratorium is the first step in a composition.

To what extent do the directors of the company remain in control of its affairs during any of the above procedures?

Bankruptcy – the powers of the directors cease and the liquidator takes control of the company.

Composition - the directors remain in control of the company subject to supervision of the courtappointed administrator. On the court’s final confirmation of a debt restructuring agreement with assignment of assets, the company ceases to carry on its business and the directors powers cease. On the court’s confirmation of an ordinary debt restructuring agreement, the company continues its business and the directors’ powers continue.

Timeline to commence liquidation
How quickly can a creditor generally commence the liquidation of an insolvent company, assuming an undisputed claim and no opposition from the company?

Generally bankruptcy is commenced within three months of filing a debt collection request with the competent cantonal Debt Collection Office.

Overseas proceedings
Do your courts recognise insolvency proceedings commenced in the courts of another jurisdiction?

Yes. Foreign insolvency proceedings are recognised in Switzerland on application by the foreign liquidator or duly authorised creditor, if:

(i) the insolvency judgment is issued by the courts of the jurisdiction in which the company is domiciled;
(ii) the judgment is enforceable in that jurisdiction;
(iii) there is no public policy ground for non-recognition under the Swiss Private International Law Act; and
(iv) the relevant jurisdiction has reciprocal rights of recognition for Swiss insolvency proceedings.

Position of creditors

Forms of security
What are the main forms of security over movable and immovable property?

Security over immovable property is taken by:

  • mortgages
  • mortgage instruments

Security over movable property is taken by:

  • pledges
  • fiduciary transfers of property titles

Security over intangible property (eg receivables, shares) is taken by:

  • pledges
  • fiduciary transfers

Preferential status
Which classes of creditor are given preferential status? Are any classes subordinated?

Debts owed to employees have preferential status. Social security contributions are also preferred, ranking after debts owed to employees. Both rank ahead of ordinary unsecured claims. 

No classes of debt are legally subordinated.

Treatment of foreign creditors
Are foreign creditors treated equally to domestic creditors?


Termination of contract by reason of insolvency
Are contract terms permitting termination of the contract by reason of insolvency valid?


Retention of title
Are retention of title clauses effective?

Yes, provided the retention of title clause is registered in the Title Register at the Debt Collection Office of the canton in which the company is domiciled.

Setting aside transactions

Transaction avoidance provisions
What are the main transaction avoidance provisions, and who can challenge transactions?

The following transactions can be challenged by creditors of the company:

  • if entered into in the year prior to the commencement of insolvency proceedings:
    • transactions at an undervalue
    • transactions for no consideration
    • gifts
  • if entered into in the year prior to the commencement of insolvency proceedings at a time when the company was overindebted and the counterparty knew or should have known of that overindebtedness:
    • granting security for existing debt
    • settling a monetary debt other than in cash or by a standard means of payment, eg settling a monetary debt in kind
    • settling a debt not yet due
  • any transaction entered into in the five years prior to the commencement of insolvency proceedings with the intention of either disadvantaging its creditors or favouring certain creditors to the disadvantage of other creditors

Position of directors

Risks for directors
What are the risks facing the directors of an insolvent company?

Directors can be held civilly liable for losses caused to the company as a result of their failure to commence insolvency proceedings as soon as they knew, or should have known, that the company was insolvent.

Directors can be held criminally liable for mismanagement or giving undue preferences to creditors and punished by up to five years imprisonment and/or a fine of up to CHF  Swiss law does not provide for delinquent directors to be disqualified from acting as directors.