Contracting Party of Distressed Company

Is my Agreement still Valid / Will it Be Satisfied?

As a general and undisputed rule, Swiss insolvency proceedings do not result per se in the termination or terminability of (ongoing) agreements to which the insolvent debtor is a party unless such is foreseen differently by specific rules of the law applicable to the particular agreement (in particular the rules of the Swiss Code of Obligation governing the special contract types), or set out in the agreement itself.

In Bankruptcy Proceedings

As a result of the opening of bankruptcy proceedings against a debtor, all outstanding obligations of the debtor become immediately due and payable, except those covered by collateral on its real property. Claims which do not have a cash payment as their objects are converted into cash claims of corresponding value. Ongoing contracts: Generally, as one of his first tasks, the liquidator will terminate ongoing contracts. However, the liquidator has the right to perform ongoing contracts which are not performed or only partially performed at the time of the opening of bankruptcy proceedings. The contracting party may demand that performance be ensured.

In Composition Proceedings

As one of the centre pieces of the 2014 DCBA revision and the amended DCBA, subject to the express consent of the administrator and provided the rehabilitation would otherwise be jeopardised, the company is entitled to early terminate ongoing contractual obligations to which it is a party. Resulting (damage) claims will become subject to the composition agreement. 

Do I Have to hand over (Pledged) Assets which Belong to the Distressed Company?

In Bankruptcy Proceedings

Assets encumbered with collateral fall into the bankrupt's estate. A pledgee can no longer sell the pledged assets by private sale after bankruptcy proceedings have been opened, even if it is contractually entitled to do so.

In Composition Proceedings

Collateral regarding movable assets does not have to be handed over to the administrator; their enforcement pursuant to the security agreement may be continued.

Once a composition agreement with assignment of assets has been approved and confirmed by the creditors and the court, private realisation of collateral for secured claims is available for movable assets on the basis of article 324 DCBA, provided that the composition agreement may include a stay for realisation of secured claims for a certain time period after confirmation of the composition agreement by the court. If it is necessary in the interest of the estate that collateral be realised, the administrator can set the respective creditors a deadline of at least six months to realise the collateral. 

How Can I Settle my Outstanding Debt?

Claims of a debtor against third parties do not become immediately due and payable by the initiation of bankruptcy proceedings. They are to be collected by the bankruptcy administration in compliance with the agreed terms under the agreements. However, third parties may no longer settle their claims with the debtor directly but with the bankruptcy administrator. Claims are only deemed to have been settled correctly if they have been paid to the bankruptcy estate.