Insolvency Proceedings

Within the ambit of the Federal Act on Debt Collection and Bankruptcy of 11 April 1889 two basic types of proceedings can be distinguished:

i) bankruptcy proceedings and
ii) proceedings to reach a creditors' composition.

In addition, there is a procedure under the Swiss Code of Obligation (CO) serving the rehabilitation of a distressed company, the so-called corporate moratorium.

Generally spoken, the relevant goal of a bankruptcy is usually the realisation and liquidation of all assets of a debtor. The focus is not on the survival of an undertaking but rather on the achievement of the highest values. The proceeds generated will then be distributed amongst all the creditors, usually in accordance with their ranking.

In contrast, the purpose of proceedings to reach a creditors' composition and of corporate moratoriums is rather to accomplish the work-out, restructuring and survival of an undertaking. Unlike bankruptcy proceedings, creditors' composition proceedings and corporate moratoriums allow for a (limited) continuation of the debtor's business activities under the protection of the court and for a more flexible realisation of the debtor's assets.

Creditors' composition proceedings under Swiss law can be somewhat similar to the Chapter 11 proceedings provided by U.S. law. Compared to U.S. Chapter 11 proceedings, however, Swiss law focuses more on the rights of the creditors rather than on the continuation of the debtor's business activities.