SWITZERLAND Law and Practice Contributed by: Urs Hoffmann-Nowotny, Marcel Jakob and Benno Strub, Schellenberg Wittmer Ltd
2.2 Priority Claims in Restructuring and Insolvency Proceedings In Swiss insolvency proceedings, there are priority orders for the ranking of the claims and thus of the dividend payments to the creditors (see 2.1 Types of Creditors ). The ranking is determined by the bank - ruptcy administration or liquidator in the composition proceedings and set out in the schedule of claims, which creditors can challenge. Before distribution to creditors takes place, the costs of insolvency proceedings and the liabilities entered into by the estate or during the composition (including fees of the administrator) are paid out of the estate (see also 2.1 Types of Creditors ). 2.3 Secured Creditors Types of Security Swiss law recognises personal and real securities. Securities constituted under foreign law are recog - nised to the extent permitted by the provisions of the PILA. Real securities include the following: • Security over movable property: Secured creditors typically obtain liens or security interests in mov - able property through a pledge. A pledge requires a written agreement and the transfer of possession or control of the pledged assets to the pledgee. It is thus common to pledge shares and intellectual property rights, but not other movable goods (eg, machinery), as the debtor cannot relinquish their use and thus their possession. • Security over receivables: Creditors generally take liens or security interests by way of a security assignment of receivables. The debtor’s coun - terparties may be or may not immediately be informed of the assignment, which usually only takes effect if the debtor does not perform accord - ing to the agreement with the secured creditor. An assignment of receivables must be in writing to be valid. The assignment of a future claim no longer has any effect after the opening of insolvency proceedings; ie, the usual global assignments end with the opening of insolvency proceedings.
• Security over immovable property (real estate): Creditors may obtain security interest in immovable property through a mortgage. Enforcement of Security Outside Insolvency Proceedings A secured party may realise its security if the secured obligation is not paid when due. The realisation of a collateral may occur by way of official enforce - ment proceedings or by private enforcement. Private enforcement is only permissible if agreed between the parties. If the parties have not agreed on private enforcement, ta secured creditor wanting to enforce a mortgage or a pledge must seek enforcement in the form of the realisation of the collateral in accordance with the DEBA ( Betreibung auf Pfandverwertung ). The scope of this special proceeding is limited; only the collateral (and not all other assets of the debtor) is realised and only the pledgee (and not all other creditors of the debtor) benefits from such realisation. The debt col - lection office (DCO; Betreibungsamt ) rather than the bankruptcy administration or liquidator is entrusted with taking the requisite enforcement actions. There is no general obligation for the creditor to first realise the security. However, the pledgor faced with a request for the opening of ordinary enforcement pro - ceedings is entitled to invoke the priority of the reali - sation of the collateral (beneficium excussionis realis), but this objection may be waived by the debtor. It is standard for Swiss law security agreements to explic - itly include such a waiver. The proceeds from the realisation of the collateral (after deduction of the costs) are disbursed to the secured creditor. Any surplus must be returned to the pledgor. Should the proceeds (less costs) be insuf - ficient to satisfy the creditor in full, the creditor may instigate, as an unsecured creditor, ordinary debt enforcement proceedings to recover the remaining outstanding claim (see 2.4 Unsecured Creditors ). 2.4 Unsecured Creditors Enforcement of Claim There are different ways to enforce an unsecured claim in Switzerland outside of insolvency proceedings:
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