Two recent Federal Supreme Court cases demonstrate that the two stages where the debt restructuring court assesses the prospects of restructuring are crucial, because the lack of such prospects may automatically lead to the bankruptcy and liquidation of the company. Even though debt restructuring proceedings may be a good solution to restructuring, the company or creditors requesting the proceeding must be certain that there is a prospect for the debt restructuring and have evidence to prove this.
The Debt Enforcement and Bankruptcy Act was revised on January 1 1997 and the privilege of creditors possessing a loss certificate was restricted. The intertemporal rules of the act provide that the claims confirmed in loss certificates issued before January 1 1997 will be time barred 20 years after the revision. This means that the statute of limitation of all claims confirmed in an old loss certificate will enter into force on January 1 2017.
The Zug Cantonal Bank recently applied a negative interest rate to deposits which had been made by the liquidators of a company in composition proceedings. On appeal, the Federal Supreme Court upheld the decision, ruling that designated banks in debt enforcement proceedings have no statutory obligation to apply a positive interest rate to deposited amounts.
The insolvency proceedings for the Swissair companies have yet again proved to be one of the biggest and most important cases in the history of Swiss insolvency law. The Federal Supreme Court recently rendered a groundbreaking decision in the liquidation proceedings for SAirGroup and changed its jurisprudence regarding the legitimacy of an insolvent company's estate to claim for damages incurred by company creditors.
The Federal Council recently proposed amending the Debt Enforcement and Bankruptcy Act to take into account foreign proceedings regarding a claim in a Swiss debtor's bankruptcy proceedings. The council intends to create a new provision obliging the Swiss trustee to list a claim subject to foreign pending proceedings as a pro memoria claim. This will apply only if the foreign proceedings have been initiated before opening bankruptcy proceedings in Switzerland.
The Federal Council recently published a revision project for the Private International Law Act regarding the recognition and coordination of foreign bankruptcy proceedings in Switzerland. Among other things, it proposes amendments and modifications to the conditions for recognition of foreign insolvency decrees. The proposal has been eagerly anticipated, as recognition proceedings are tedious and expensive.
Under Swiss law, a contract will not automatically be terminated due to the opening of bankruptcy proceedings over a company. Whether a contract can be terminated on insolvency depends on the law and the agreement that governs the contractual relationship. If there is no option for termination, the bankruptcy officer of a insolvent company may choose whether to enter into a contract.
The Federal Supreme Court recently rendered a new decision in the SAirGroup and SAirLines debt restructuring liquidation proceedings. It upheld the Zurich High Court decision in which the claims of three Sabena shareholders were not admitted in the schedule of claims. The court ruled that only a binding and enforceable foreign judgment issued before the opening of insolvency proceedings must be taken into account when establishing the schedule of claims.
The Federal Council and the Federal Supreme Court recently reacted against the potential abuse of law in debt collection and insolvency proceedings. The Federal Council suggested that competent state agencies should be entitled to request the opening of insolvency proceedings over a debtor company for unpaid taxes or fines, thus ending the special treatment for state claims and its misuse by smart debtors.
A foreign bankruptcy trustee's powers to act in Switzerland are limited. In general, a foreign trustee is not allowed to collect assets located in Switzerland, even if it is competent to act under the applicable foreign law. A foreign bankruptcy trustee may, in principle, only apply for recognition of the foreign bankruptcy decree and request protective measures.
Stilli Park AG, the leaseholder of hotel the Intercontinental Davos, recenlty declared bankruptcy when it realised that it would be unable to pay the lease. It is possible that a number of creditors will be unhappy with the result of the proceedings and there are signs in the Swiss press that it might end up in a legal dispute.
One of the latest decisions on the debt restructuring proceedings of former national carrier Swissair concerns a claim of the insolvency estate of Sabena AG against SAirGroup AG. The Federal Supreme Court ruled that the Zurich High Court had asked for too high a deposit in the appeal proceedings. The liquidator in SAirGroup's restructuring has announced that proceedings will involve the liquidation of remaining assets.
The Zurich Supreme Court recently confirmed Rolf Erb's criminal liability after he gave away certain assets to third parties following his company's collapse and his personal bankruptcy. The court ruled that the assets must be returned to the insolvency estate. Even though the sentence was not solely due to the insolvency offences committed, the courts have once more confirmed their determination to prosecute such misbehaviour.
Switzerland has recently revised its Financial Market Insolvency Regulation. The Swiss Financial Market Supervisory Authority (FINMA) is now responsible for restructuring and bankruptcy proceedings. The new FINMA Banking Insolvency Ordinance has implemented efficient restructuring proceedings which consider the particularities of each bank in the event of a crisis.
The Supreme Court recently ruled that a signed outstanding current account balance document can qualify as a title for the provisional removal of a debtor's obligations only if the document was issued after cancellation of the contract determining the current account balance, the account balance approved by the debtor is not carried forward to a new accounting period and the balance sheet shows no other account transactions.
The Zurich High Court recently dismissed a liability claim initiated by the liquidator of Swissair against former members of Swissair's board of directors. In 2001 the board decided to increase Swissair's capital in order to use these funds for the re-capitalisation of Belgian airline Sabena to avoid Sabena's bankruptcy. The court decided that the payment to Sabena was a lawful and reasonable business decision.
The Federal Debt Collection and Bankruptcy Act is being revised with a focus on facilitated corporate restructuring. The proposal sets forth a number of measures that should facilitate restructuring; and it is expected that the revision process will conclude in the next few months. However, some of the amendments – in particular, the social plan obligation – will likely lead to numerous discussions, which may delay the revision.
In a recent decision the Federal Supreme Court specified the prerequisites for a restructuring measure that is often termed the 'restructuring harmonica'. In essence, the court ruled that if a harmonica by itself – and without giving credit to any subordination of claims by creditors – eliminates the over-indebtedness of a company, it is a permissible restructuring measure.
In a recent case the Federal Supreme Court has once again had the opportunity to establish the dos and don'ts for a foreign administrator acting in Switzerland. The court's main argument for not admitting the foreign administrator before the foreign insolvency decree was recognised in Switzerland was that such admittance would have led to deviation from a so-called 'mini-bankruptcy' proceeding.
The introduction of two new statutes has entailed various amendments to the Bankruptcy Code, particularly in respect of attachment or freezing orders. In particular, all kinds of executory titles, including enforceable Swiss or foreign judgments and Swiss or foreign arbitral awards, now allow for the attachment of assets of a debtor located in Switzerland, notwithstanding whether the debtor is domiciled in Switzerland.