Bankruptcy Procedures in Switzerland

Bankrputcy in Switzerland

Bankruptcy in Switzerland is governed by the Federal Statute on Debt Enforcement and Bankruptcy that also covers insolvency, foreclosure and debt restructuring. Bankruptcy proceedings are conducted at cantonal level, therefore they will fall under the regulations of cantonal laws on bankruptcy. In 2011 cantonal regulations have been incorporated in the Swiss Code of Civil Procedure.

The beginning of bankruptcy proceedings in Switzerland

Swiss bankruptcy procedures are preceded by debt collection actions when creditors will 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 maximum 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.

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 wich 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.

For information about detailed bankruptcy procedures you can ask our Swiss lawyers for legal advice. Our Swiss law firm can also provide assistance in litigation cases.