Switzerland: The Restructuring Review

Last Updated: 14 September 2018
Article by Daniel Hayek and Chantal Joris


Switzerland's GDP rose by 0.6 per cent in the fourth quarter of 2017. Positive impulses on the production side came from various sectors, namely the manufacturing industry, the construction industry and most service industries, including financial services. GDP growth was hampered by foreign trade in goods and services, with exports in goods and services dropping by 1.4 per cent and 2.7 per cent, respectively, and imports of services falling by 5.1 per cent. In total, Switzerland's real GDP growth amounted to 1.0 per cent in 2017.2 The Swiss federal government's Expert Group spring 2018 expects the GDP to grow by 2.4 per cent in 2018, mainly because of the healthy global economy, which is boosting international demand for Swiss products, and to an overall growth on the expenditure side of the GDP. The favourable economic environment also has a positive impact on the labour market, with unemployment gradually declining since mid-2016. In 2017, the unemployment rate was at 3.2 per cent, decreasing from 3.3 per cent in 2016. The Expert Group is predicting a further drop in unemployment to 2.9 per cent in 2018 and 2.8 per cent in 2019.3

As a result of a slightly stronger Swiss franc than anticipated, the Swiss National Bank (SNB) has revised its inflation forecast downwards and anticipates an inflation rate of 0.6 per cent for 2018. For 2019 and 2020, the SNB predicts inflation of 0.9 per cent and 1.9 per cent, respectively.4

In Switzerland, no official statistics are published with regard to 'composition proceedings', that is, formal restructuring proceedings. With regard to bankruptcy proceedings, in 2017, 13,257 bankruptcy proceedings were opened, which equals an increase of 2.6 per cent compared to 2016. Although this is the highest number of bankruptcy proceedings since 2008, losses resulting from bankruptcy proceedings has been decreasing since 2015, and has in particular sharply decreased by 33.5 per cent compared to 2016, equalling in losses of 1.7 billion Swiss francs.5


Switzerland does not have a comprehensive law on insolvency and restructuring procedures. While insolvency matters are mainly governed by the Swiss Debt Enforcement and Bankruptcy Law (DEBL), formal restructuring procedures are provided for in both the DEBL and the Swiss Code of Obligations (CO), with the latter also containing provisions on informal restructuring methods.6

i Informal restructuring techniques

Normally, a company in financial difficulties will first try to improve its situation through informal restructuring, avoiding the involvement of courts unless inevitable. Operational restructuring measures may include changes in management or the disposal of underperforming businesses. Other informal restructuring techniques are provided for by company law. The CO allows for the revaluation of immovable property and participations at their real value (as compared to the purchase value at which they are usually evaluated) if half of the company's equity and its legal reserves are no longer covered by its assets. Further, a company can gain capital through issuing new shares for consideration and thereby improving its debt-to-equity ratio. Another measure often used is the reduction, possibly to zero, of the share capital, followed by an immediate share capital increase.

Some creditors may have a special interest in the distressed company's survival, for instance as shareholders of that company or if they are part of the same group of companies, and in one way or another contribute to its restructuring. This could be through the granting of a bridge loan until the company secures permanent financing or through waiving part or all of their claims. A creditor may also agree to subordinate instead of waving their claims. This is a technique often used, as Article 725 II CO allows postponing the notification of a judge in case of over-indebtedness, if claims in the amount of the capital deficit are subordinated to all other liabilities (i.e., generally subordinated). Although a subordination agreement itself does not constitute restructuring measures, as the financial situation of the company remains unchanged, it increases the chances for a distressed company to financially recover as it allows for more time to adopt restructuring measures.

ii Formal procedures

The two main types of formal restructuring and insolvency proceedings provided for in the DEBL are bankruptcy and composition proceedings.7 Unlike bankruptcy, composition proceedings do not necessarily lead to the dissolution of the company. In addition, the CO provides for a 'corporate law moratorium'.


1 Daniel Hayek is partner and Chantal Joris is a junior associate at Prager Dreifuss.

2 Press release of the State Secretariat for Economic Affairs (SECO) dated 1 March 2018.

3 Press release of the SECO dated 20 March 2018 containing the economic forecasts by the federal government's Expert Group of spring 2018; press release of the SECO dated 9 January 2018 'The labour market situation in December 2017'.

4 Press release of the Swiss National Bank dated 15 March 2018 containing a monetary policy assessment.

5 Press release of the Federal Statistical Office dated 29 March 2018 containing figures on insolvency proceedings in the year 2016.

6 A number of laws and ordinances other than the DEBL contain additional provisions on insolvency, providing special insolvency regimes for certain types of debtors, namely financial institutions, collective investment schemes or insurance companies.

7 This chapter will only describe insolvency proceedings applicable to companies.

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