The new Swiss Company Law is coming into force on January the 1st 2023, and it will bring several novelties regarding capital loss, insolvency, and over-indebtedness.
- Monitoring the solvency
Monitoring the solvency is mandatory. Companies need to monitor both, the liquidity, as well as the balance sheet regarding a possible loss of capital. The board of directors must act if their company is at risk of going bankrupt. Further measures must be taken if necessary to restructure the company, or such measures must be proposed to the general meeting of shareholders if they are within their jurisdiction.
Monitoring the liquidity continuously is important. The draft of the law, though, specifies that a liquidity plan is not required. Liquidity is not mandated to be monitored or analyzed beyond a specific timeframe in the law. There was a suggestion that a company should undergo an ordinary audit every six months or every twelve months in the case of companies that are required by law to do so. The suggested time interval should nevertheless serve as a guideline.
- Audits on the preliminary financial statements
When a company has a capital deficit, a licensed auditor must conduct a limited audit of the last annual financial statements before the annual general meeting of shareholders approving them if there are no elected auditors in place. A board of directors needs to make sure the economic situation does not worsen than what has been presented to them. They must appoint a licensed auditor. The board of directors may waive this auditing requirement if it applies for a debt-restructuring moratorium.
The board of directors must as before, immediately prepare preliminary financial statements at going concern values and liquidation values if there is reasonable concern that the company’s liabilities are not covered by its assets, that is if the company is over-indebted. In practice, the interim financial statements at liquidation values can be waived as long as the ongoing concern assumption is made. In addition, the consolidated financial statements carrying concerned values do not show any overindebtedness.
A licensed auditor must be appointed by the board of directors to audit the interim financial statements unless the board elects auditors to do so.
The board of directors must inform the court, which will initiate bankruptcy proceedings if the company is over-indebted according to both interim financial statements.
There is no requirement for the court to be notified if creditors defer or subordinate their claims (including interest claims) to the extent of overindebtedness.
In connection with the bankruptcy process, it is now explicitly stated that the claims of creditors whose claims have been subordinated behind all other creditors are not to be included in the calculations of the company’s losses. By amending this provision, the Federal Supreme Court intends to correct its case law, which suggests that a bankrupt company’s board is responsible for subordinated claims.
The court notification may also be omitted in cases where there is a realistic prospect that the over-indebtedness can be repaid within a reasonable time, but no later than 90 days after the audited interim financial statements are available, and if there is no additional jeopardy to the claims of the creditors. In practice, the matter of notifying the court of bankruptcy is frequently raised, and this clarification is very welcome.