SWITZERLAND Law and Practice Contributed by: Urs Hoffmann-Nowotny, Marcel Jakob and Benno Strub, Schellenberg Wittmer Ltd
6.6 Foreign Creditors Swiss insolvency law makes no distinction between domestic and foreign creditors or claims that are sub - ject to foreign or Swiss substantive law (principle of equal treatment of creditors). There are certain fac - tual differences (eg, notices of the Swiss insolvency authorities may not reach foreign creditor or any lan - guage barriers). However, foreign public law claims, ie, claims of a sov - ereign nature such as tax claims, are not enforced in Switzerland and not considered in Swiss insolvency proceedings, unless this is expressly provided for in an international treaty. 7. Duties and Liability of Directors and Officers 7.1 Duties of Directors Directors’ Duties in Financial Distress in General The duties of company directors are codified in the CO and apply to both stock corporations ( Aktienge- sellschaft ) and limited liability companies ( Gesellschaft mit beschränkter Haftung ). While the 2023 corporate law reform further clarified directors’ responsibilities in cases of financial distress, they are still derived from a combination of statutory law, case law and estab - lished best practices. When a company is financially sound, its directors are expected to manage the business with due care and in good faith. According to the general fiduciary duty (Article 717 CO), directors must act in the company’s overall long-term interests, which generally means promoting long-term shareholder value. As financial difficulties arise, directors’ responsibilities intensify, and their focus gradually shifts from share - holders to protecting creditor interests, depending on the type and severity of the distress. This includes ensuring equal treatment of creditors and avoiding transactions that could benefit or harm specific credi - tors.
Duties in Case of Capital Loss (Kapitalverlust; Article 725a CO) If the company’s latest annual financial statements show that its assets no longer cover at least half of its share capital and statutory reserves (balance sheet test), the board must take steps to remedy the capi - tal loss. The board is free to decide on the relevant measures, but certain measures require shareholder approval (eg, share capital increase, unless the board has pre-authorisation to implement such). If there is no auditor in place, the relevant annual finan - cial statements must be audited by a board-appointed auditor. The board and the auditor must act promptly. An audit can be waived if the company applies for a composition moratorium. When there are reasonable concerns that the com - pany’s debts exceed its assets, the board must imme - diately prepare interim financial statements indicat - ing going-concern and liquidation values, unless the company is expected to continue as a going concern and there is no over-indebtedness (in which case liq - uidation values can be waived). These interim financial statements must be audited. If there is no auditor in place, the board must appoint one. The board and the auditor must act promptly. If over-indebtedness at going-concern and liquidation values is confirmed, the directors are required to notify the court without delay, which usually results in bank - ruptcy being opened. If the board does not act, the auditor is required to notify the court. An over-indebt - ed company may delay filing for bankruptcy and con - tinue out-of-court restructuring efforts for a maximum of 90 days (no safe harbour) if there are reasonable prospects for restructuring and creditor claims are not jeopardised. Furthermore, an over-indebted company may continue trading even beyond the 90-day dead - line if creditors subordinate their claims to those of all other creditors to the extent of insufficient cover - age of the debt. Such subordinations must also cover interest payments and must be formalised in writing following specific best practices to be accepted by auditors. Duties in Case of Over-Indebtedness (Überschuldung; Article 725b CO)
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