SWITZERLAND Law and Practice Contributed by: Urs Hoffmann-Nowotny, Marcel Jakob and Benno Strub, Schellenberg Wittmer Ltd
the bankrupt party’s claims falling due at the opening of bankruptcy proceedings and their conversion into monetary claims (Article 211 DEBA). 3. Out-of-Court Restructuring 3.1 Out-of-Court Restructuring Process No Statutory Process In Switzerland, there is no general statutory process for out-of-court restructurings (consensual workouts), except for bonds (see below). Out-of-court restructurings are voluntary negotiations between the debtor company and its creditors, usually with a focus on its financial creditors. While often pre - ferred for their flexibility and confidentiality, they lack key features of formal insolvency proceedings (eg, automatic stay or cram-down mechanism). Hence, agreements on all material aspects must be reached with each relevant creditor. Any securities provided by new lenders must be approved by all existing secured creditors. Agreements reached and arrangements made in out-of-court restructurings may be subject to claw-back if formal insolvency proceedings are sub - sequently opened (see 8.1 Circumstances for Setting Aside a Transaction or Transfer ). Under Swiss law, companies and creditors are not required to negotiate before initiating insolvency pro - ceedings. However, Swiss corporate law requires the board of a company in financial distress to proactively restructure, though it does not prescribe any specific processes or measures. Lenders expect an informal restructuring attempt. In the absence of specific con - tractual undertakings, however, creditors have no duty to participate in out-of-court restructurings, except for the general statutory duty to act in good faith. There is also no legal instrument to compel non-consent - ing parties to accept any out-of-court restructuring arrangements. Bond Restructurings Bonds issued by Swiss companies are subject to spe - cific restructuring provisions under Swiss law, which allow for certain cram-downs (Articles 1170 et seq CO). However, relevant decisions require the approval of two-thirds of the outstanding nominal capital and
a court must approve a bond restructuring before it can take effect. Due to the high approval threshold, successful bond restructurings are rare. 3.2 Legal Status Out-of-court restructurings are purely contractual agreements between the debtor and participating creditors. These agreements are only enforceable among those who consent and cannot bind non-con - senting or dissenting creditors, which remain free to pursue their claims independently and generally can - not be held liable merely for opposing or obstructing a workout. 4. Statutory Restructuring, Rehabilitation and Reorganisation Proceedings 4.1 Opening of Statutory Restructuring, Rehabilitation and Reorganisation Scope of Statutory Restructuring Proceedings The Swiss court-supervised restructuring proceeding is the composition proceeding ( Nachlassverfahren ), which always starts with a composition moratorium ( Nachlassstundung , also translated as debt-restruc - turing moratorium or administration). Composition proceedings mainly apply to incorporated entities. Certain types of financial institutions (banks, securi - ties firms, insurance companies) are subject to sector- specific rules. Swiss law does not provide a consoli - dated framework for restructuring corporate groups. Opening of Composition Proceedings Composition proceedings are typically initiated by the debtor. According to corporate law, the board must monitor the company’s solvency and its balance sheet (see 7.1 Duties of Directors ). In cases of imminent insolvency or capital loss, the board must consider composition proceedings but has no obligation to attempt such. If the financial situation is dire, filing for bankruptcy may be more appropriate. Creditors may request the opening of composition proceedings, though this is rare in practice. To initiate a composition proceeding, a petition must be filed with the composition court (see 1.3 Statu- tory Officers ) at the debtor’s domicile. The petition
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