21 April 2020

On April 20, 2020, the Swiss COVID-19 Insolvency Law Ordinance (only German) came into force, after an emergency legal freeze ended on April 19, 2020 (see our blog post "Federal Council orders a nationwide stay of debt enforcement proceedings"). However, no end of the corona pandemic is in sight. The Swiss government has launched a comprehensive bridging loan programme to help companies that run into liquidity problems (see our blog post ""Help is coming!" – The COVID-19 Bridging Assistance from the Government" ), but the longer the corona crisis lasts, for more and more companies this emergency aid will not be sufficient. To prevent bankruptcy filings until the corona pandemic is over and a fresh start can be made, the Federal Council has decreed three important changes of Swiss bankruptcy law:

No notification required in case of coronavirus-induced over-indebtedness of Swiss companies

In principle, the board's duties do not change during the COVID-19-crisis. However, the board of directors must actively exercise its leadership role (see our blog post "Directors' Duties in Times of COVID-19"). The corona crisis will first lead to liquidity problems, but subsequently, balance sheet problems and over-indebtedness can arise.

Normally, the board must immediately notify the bankruptcy court in the event of imminent over-indebtedness. Under the new COVID-19 insolvency rules, the board of directors is now released from this obligation if the company was not over-indebted at the end of 2019 and there is a prospect that the over-indebtedness can be remedied by the end of 2020.

The suspension of this obligation to file for bankruptcy does not mean that there will be no bankruptcy filings. As the legal standstill ended on April 19, 2020, creditors can initiate debt collection proceedings and demand their further pursuit. As a result, bankruptcies may still occur.

COVID-19 relief in Swiss debt-restructuring proceedings

The new COVID-19 insolvency rules make it easier for over-indebted companies to enter into debt-restructuring proceedings.

Irrespective of the Corona crisis, in Switzerland over-indebted companies of any legal form for which there is a prospect of restructuring can apply for debt-restructuring proceedings (similar to Chapter 11 proceedings). Within the scope of the debt-restructuring proceedings, the company is granted a (initially provisional, then definitive) debt-restructuring moratorium, which grants it creditor protection for up to twelve months or, in complex cases, even up to 24 months. The debt-restructuring proceedings offer the company the opportunity to find a permanent solution with its creditors, even if not all debt can be fully satisfied. During the debt-restructuring moratorium, with a few exceptions, creditors cannot enforce debts against the debtor, with the exception of urgent cases, civil proceedings and administrative proceedings are suspended.

To simplify the restructuring of companies in the wake of the Corona crisis, the new Swiss COVID-19 Insolvency Law Ordinance provides for the following three reliefs for debtors in debt-restructuring proceedings:

  • No provisional restructuring plan is required.
  • The court does not examine the debtor's ability to restructure before the opening of the debt-restructuring proceedings. Even in the event of apparent futility, the debt-restructuring proceedings must therefore initially be approved and there is no ex officio bankruptcy filing. Thus, the debtor is granted a grace period to prepare the restructuring.
  • The duration of the provisional debt-restructuring moratorium may be up to six months instead of four.

COVID-19 emergency moratorium for Swiss SME

The COVID-19 Insolvency Law Ordinance gives small and medium-sized companies (SME) the possibility of a temporary moratorium, the so-called COVID-19 moratorium. Avoiding red tape, this moratorium is intended to provide simple assistance to SME companies experiencing liquidity bottlenecks. The company receives creditor protection (as in the debt-restructuring moratorium, see above), but does not go through restructuring proceedings.


How to proceed must be carefully clarified in each individual case. What should I as a board member check before I can invoke the exemption from the over-indebtedness notification? When should a debt-restructuring moratorium be considered? When is the COVID-19 moratorium suitable? Your normal contacts at VISCHER and our insolvency law team will be happy to answer these or any further questions you may have, as well as to provide in-depth advice.

Authors: Benedict F. Christ, Jana Essebier, Thomas Krizaj

Topics: Insolvency LawRestructuringCoronavirusBoard of DirectorsCOVID-19


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