SWITZERLAND Law and Practice Contributed by: Urs Hoffmann-Nowotny, Marcel Jakob and Benno Strub, Schellenberg Wittmer Ltd
7.4 Other Consequences for Directors and Officers Directors face strict civil and criminal liability if they fail to pay certain Swiss social security contributions. Directors may also face criminal penalties under the Swiss Criminal Code (SCC), particularly under Article 165 of the SCC for mismanagement leading to bank - ruptcy and under Article 167 of the SCC for granting preferential treatment to certain creditors. Criminal convictions typically result in monetary fines, though imprisonment is technically possible. The same applies to professional disqualification, which is pos - sible only in the event of a criminal conviction. Notably, the Swiss Financial Market Supervisory Authority (FINMA) may consider a director’s business history when assessing the fitness and propriety of individuals applying for certain corporate functions at supervised financial institutions. 8. Setting Aside or Annulling a Transaction 8.1 Circumstances for Setting Aside a Transaction or Transfer Under Swiss insolvency law, transactions or legal acts involving the debtor can be challenged with a claw-back/avoidance action (actio Pauliana). How - ever, acts that were performed by a third party with - out the debtor’s participation or on its behalf cannot be challenged. Claw-back actions are subject to two substantive conditions: (a) the creditors or the bank - ruptcy estate must suffer damage as a result of the transaction or legal act; ie, the debtor’s assets must be diminished and the inability to satisfy all creditors increased, and (b) the debtor’s transaction must be challengeable. There are three different categories of challengeable transactions and thus of claw-back actions: • Gifts, including any transactions without adequate consideration (Article 286 DEBA). • Specific transactions listed in the law made even though the debtor was over-indebted (Article 287 DEBA).
• Transactions made with the intention, apparent to the beneficiary, to disadvantage the creditors or favour certain creditors to the disadvantage of oth - ers (Article 288 DEBA). In addition, Swiss law also provides for the voidability of a set-off if a debtor of the insolvent debtor acquires a claim against that debtor, creating thereby the mutu - ality of the claims, allowing the set-off at that time even if the acquiring debtor knew or should have known of the impending insolvency (Article 214 DEBA). Nota - bly, certain transactions approved by the court or, if applicable, the creditors’ committee during composi - tion proceedings (see 4.4 The Position of the Debtor in Restructuring, Rehabilitation and Reorganisation ) are not subject to claw-back. Challenge of Gifts Any gifts and transactions made by the debtor without adequate consideration, ie, transactions not at market value, within a one-year period prior to the opening of insolvency proceedings (look-back period) are sub - ject to claw-back. The opening of a bankruptcy or a composition moratorium, if followed by the opening of bankruptcy proceedings or a composition agreement with assignment of assets, is considered as the start - ing date for the lookback period. Challenge Due to Over-Indebtedness Under this challenge, the claimant may claw back a transaction that was entered into during a one-year lookback period (see above for details of the start - ing point of this period) if the debtor was already over-indebted at the time. Notably, such transactions include the posting of collateral by the debtor for pre- existing unsecured obligations without a pre-existing obligation to do so, any settlement of obligations by means other than cash or other customary means of payment, and any payments made despite not being due. However, the counterparty can avoid a success - ful claw-back if it can prove that it was unaware of (and was not supposed to know about) the debtor’s
over-indebtedness. Challenge for Intent
Any transactions entered into during a five-year look- back period are subject to claw-back, provided that the transaction impaired the creditors, the debtor act -
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