SWITZERLAND Law and Practice Contributed by: Shelby R du Pasquier, Patrick Hünerwadel, Valérie Menoud and Marcel Tranchet, Lenz & Staehelin
Furthermore, a lender’s ability to enforce its rights under finance documents may be limited by the occurrence of a bankruptcy or insolvency event with the Swiss debtor (see 7. Bankruptcy and Insolvency ).
(in straightforward cases) to a few years (in complex cases). 7.4 Rescue or Reorganisation Procedures Other Than Insolvency Switzerland does not provide for a system similar to a Chapter 11 bankruptcy in the United States or com- parable schemes available under the laws of certain European jurisdictions. However, Swiss law is fairly flexible in its ability to accommodate reorganisation procedures outside of a formal bankruptcy and is also fairly flexible with regard to its interaction with non- Under the DEBA, dispositions taken to disadvantage certain creditors prior to the opening of bankruptcy proceedings may be subject to avoidance actions. This includes acts of disposition of assets made against no consideration or against inadequate con- sideration during the year preceding the declaration of bankruptcy. It also includes acts taken during the five years prior to the opening of bankruptcy proceed- ings with the purpose of disadvantaging creditors or favouring some creditors to the detriment of others. If a debtor was over-indebted at the time, the follow- ing acts may be voidable if carried out by that debtor during the year prior to the opening of a bankruptcy proceeding: • the granting of collateral for previously unsecured debt; • the settlement of debt by unusual means of pay- ment; or • the repayment of debt not due. Swiss reorganisation schemes. 7.5 Risk Areas for Lenders Such acts are not voidable if the party that benefited from the act demonstrates that it did not have actual or deemed knowledge of a debtor’s over-indebtedness.
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes
Once bankruptcy has been declared over a Swiss obligor, or a composition agreement with assignment of the Swiss obligor’s assets has been approved, the Swiss obligor becomes insolvent. All its obligations become due and payable, and the insolvent loses legal capacity to dispose of its assets. All of its assets will form part of the bankruptcy estate, including pledged assets. Private enforcement of any assets that are part of the bankruptcy estate is no longer possible. The enforcement of creditors’ rights in this context will be governed by the DEBA. Assets from which the legal title was transferred for security purposes, however, do not fall in the bank- ruptcy estate but remain with the assignee, respec- tively the transferee. These assets may still be pri- vately enforced by the secured party. Any eventual surplus from liquidation must then be returned to the bankruptcy estate for distribution to other creditors. Subject to avoidance actions (see 7.5 Risk Areas for Lenders ), the initiation of insolvency proceedings should not affect valid acts of disposition made prior to such an occurrence. 7.2 Waterfall of Payments Unsecured creditors are ranked into three groups, with financial creditors typically falling into the third group. Secured creditors are satisfied on a priority basis out of the enforcement proceeds of the relevant security assets. 7.3 Length of Insolvency Process and Recoveries The time taken for an insolvency process to complete depends significantly on how complex the particular insolvency is and on what type of insolvency proceed- ing is being applied. It can range from a few weeks
8. Project Finance 8.1 Recent Project Finance Activity
Project finance continues to be of interest as a financ- ing approach in Switzerland. An example of an area where increased project financing activity can current-
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