SWITZERLAND Law and Practice Contributed by: Daniel Haeberli and Simone Gloor, Homburger
fully documented, and any surplus remaining after the application of the proceeds to the secured obligations must be returned to the pledgor. • Debt enforcement pursuant to the Swiss Fed- eral Debt Enforcement and Bankruptcy Act usually takes place through the debt enforce- ment office selling the assets in a public auc- tion. However, in certain cases, assets can also be sold without a public auction. Regarding the assets assigned or transferred for security purposes, enforcement in a strict sense is not necessary, as the ownership of the rel- evant assets has already been transferred to the secured party. Consequently, the secured party is no longer obliged to return the assets to the security provider upon an enforcement event. The same principles for private enforcement of pledged assets apply. As a matter of Swiss law, a guarantee is a prom- ise made to the guaranteed party that a third party will provide a performance. It also includes a promise to compensate the guaranteed party for any damages caused as a result of the third party’s failure to provide such a performance against the guarantee. In the context of a financ- ing transaction, the third party undertakes to pay the lenders a guaranteed amount if the borrower defaults under the credit agreement. Swiss law distinguishes between two types of guarantee. • The independent promise of guarantee is an abstract undertaking to pay a specified amount upon the request of the guaranteed 6. Guarantees 6.1 Types of Guarantees
party. It is independent and enforceable even if the borrower’s obligations have been cancelled or are unenforceable or even null and void. There are no specific requirements as to the form of the guarantee agreement. Once validly entered into, the existence of a guarantee is, in principle, independent of the existence of the underlying obligation secured by the guarantee. • The surety is an agreement between two par- ties whereby one party undertakes to perform the obligations of the borrower in the event of the borrower’s default. Unlike an independent promise of guarantee, a surety is ancillary in nature – ie, it can only be called if the borrow- er’s obligations are valid, due and enforcea- ble. If a surety is granted by a natural person, it is subject to certain form requirements, including the need to legalise the agreement. While the parties are generally free to choose the form of the guarantee (subject to certain restric- tions where natural persons are involved), sure- ties are rarely used in acquisition financings. The reasons for this are mainly of an ancillary nature, as the financing banks are looking for independ- ent and separate obligations as well as swift and The same principles apply to upstream and cross-stream guarantees as are set forth in rela- tion to upstream and cross-stream security (see 5.6 Other Restrictions ), including in relation to financial assistance. 6.3 Requirement for Guarantee Fees While the granting of a guarantee is a service that would only be provided for a fee in the mar- ket, such a guarantee fee is usually not paid in intra-group arrangements. However, in line with the principles applicable to upstream and cross- informal execution. 6.2 Restrictions
484 CHAMBERS.COM
Powered by FlippingBook