SWITZERLAND Trends and Developments Contributed by: Thiemo Sturny, Dominik Hohler and Estelle Mathis, Walder Wyss Ltd
Company balance sheets may later be adjusted – for example, through asset revaluations or the applica - tion of liquidation values. This raises the question of how loans granted by shareholders or related par - ties should be treated if a retroactive adjustment of the balance sheet reveals that the company was already overindebted at the time the loans were made. According to legal literature, the legal basis invoked by the SFSC – namely the prohibition of contradictory conduct (venire contra factum proprium) – necessarily entails a subjective element. In our view, subordination therefore should only be assumed if the lender was, or at least ought to have been, aware of the company’s overindebtedness at the time the loan was granted. Treatment of loans granted during the 90-day restructuring window According to Article 725b para. 4 no. 1 CO, the board of directors may refrain from notifying the court, provided there is a reasonable prospect that over - indebtedness can be remedied within a reasonable period, but no later than 90 days after submission of the audited interim accounts. The judgment does not address whether loans granted during this period bear the risk of subordination in the event of subsequent bankruptcy. It may be argued that creditors cannot reasonably assume that subordination agreements are already in place while a restructuring effort is ongoing. However, as outlined above, shareholders and other related parties enjoy an informational advantage over ordinary creditors. Where a loan is granted by share - holders or related parties at a time when the com - pany is already overindebted – even if still within the 90-day restructuring window – and bankruptcy pro - ceedings are subsequently opened after that period, such claims, in our view and considering the strict approach adopted by the SFSC, carry a significant risk of being subordinated. Extent of subordination Another unresolved issue concerns the scope of sub - ordination. This question is particularly relevant in cas - es involving large loan amounts and raises the ques - tion of whether such loans should be subordinated only to the extent necessary to eliminate the overind - ebtedness, or in their entirety. Since Article 725b para. 4 no 1 CO requires subordination only to the extent of the overindebtedness in order to dispense with a court
notification, we take the view that loans granted by shareholders or other related parties after overindebt - edness has occurred should likewise be subordinated only to the extent of such overindebtedness. Conclusion The SFSC’s decision provides legal certainty on a number of open questions regarding the treatment of loans from shareholders or other related parties in bankruptcy proceedings of the borrowing entity. It clarified that: • a contractual (including tacit) subordination must be based on clear indications in the parties’ decla - rations; and • loans granted by shareholders or other related parties may be subordinated by operation of law (under the prohibition of abuse of rights) only where the company was already overindebted at the time the loan was granted. Shareholders and related parties considering loans to a distressed company should therefore carefully assess the company’s financial situation – particu - larly the possibility of overindebtedness – in order to minimise the risk of subordination in bankruptcy. In addition, it is advisable to expressly state in the loan agreement whether a contractual subordination is intended or not. Legislative Reforms Enhanced protection against unjustified debt collection proceedings On 20 August 2025, the Federal Council resolved to bring into force, as of 1 January 2026, a targeted amendment to the DEBA. Under the revised Article 8a para. 3 let. d DEBA, persons subject to unjustified debt collection proceedings may, upon request to the competent debt collection office, prevent disclosure of such proceedings to third parties throughout the entire five-year period during which third-party inspection rights exist. Currently, such requests have to be made within one year of the conclusion of the proceedings. This amendment is the result of a parliamentary initia - tive responding to the SFSC’s jurisprudence in BGE 147 III 544.
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