14,081 businesses and individuals  in Switzerland filed for bankruptcy  in 2021 according to the Swiss Statistical Office, marking a 9.1 per cent  increase compared with 2020. The northern canton of Aargau recorded the highest year-on-year increase of 24.6 per cent. The significant increase coincided with the withdrawal of state-backed financial support during the COVID-19 pandemic. Whilst debt collections in the country also increased, the increase was  slight and collections remained within the average range of the past five years.

On 16 June 2022, Switzerland's central bank raised interest rates for the first time in 15 years. This marks a  shift in Switzerland's monetary policy. The Swiss National Bank (“SNB”) of Switzerland said its benchmark rate would rise by 50 basis points from minus 0.75 per cent to 0.25 per cent. Following this decision, the Swiss franc surged to its strongest level in nearly two years. This tighter monetary policy is aimed at preventing inflation from spreading more broadly to goods and services. The franc's strength was hindering the competitiveness of exports. Switzerland's status as a haven economy has meant the SNB must work to suppress serious and sustained upward pressure on the currency over the past decade and a half of international crises and low rates elsewhere in the “developed” world.


We appreciate the assistance of Patrick W. VogelEmilia Rebetez and Camille Tistounet of Walder Wyss Ltd with the following discussion of Swiss law, regulation and practice.


Switzerland's political system is based on the principles of federalism and direct democracy. The political system is three tiered:

  • the Swiss confederation;
  • cantons (26); and
  • municipalities (approximately 2,150).

The Swiss legal system is based on civil law. As with other civil law legal systems, Swiss law is divided into public law and private law. Private law (such as contractual and company laws), insolvency and bankruptcy laws, securities laws, and financial market regulation are predominantly dealt with on a federal level. The cantons and, to a lesser extent, the municipalities enjoy a certain degree of autonomy within the limits of the federal constitution and federal laws in many areas. These areas include taxes, public law and the administration of the courts.


  • 10/20 Non-Bank Lender Rules may apply and limit the number of funds or financial institutions that can act as lenders for Swiss debtors. It is expected that this limitation will become irrelevant once the pending reforms to capital markets are implemented.
  • Save for more favourable Double Tax Treaty provisions, 9 per cent  to 33 per cent source profit tax may apply on the profits derived from loans secured by Swiss real estate.
  • Generally, foreign parties lending to Swiss companies do not require  a banking licence.
  • The method(s) available for transfers/assignments are provided for in the loan/security documentation. Additional transfer formalities may apply depending on the chosen method but typically these are satisfied by default in the loan documentation.
  • The concept of a security agent is commonly used in Switzerland. It is also common, for additional protection, to put in place a “parallel debt structure.


Loan agreements may be requalified into bonds (thus triggering adverse Swiss withholding tax and transfer stamp tax consequences) if either the 10 Non-Bank Lender Rule and/or the 20 Non-Bank Lender Rule is not complied with.

  • 10 Non-Bank Lender Rule”: Loan agreements  in favour of a Swiss borrower  will be re-classified  as a “bond” where the number of non-Bank lenders (and, under certain conditions, sub-participants, credit default swap counterparties, etc.) exceeds 10, should the conditions of the loans be similar and the total amount of the credit is equal to or exceeds CH 500,000 (Anleihensobligation / emprunt obligatire).
  • 20 Non-Bank Lender Rule”: Loan agreements  in favour of a Swiss borrower  will be re-classified  as a “bond” where the number of non-Bank lenders (and, under certain conditions, sub-participants, credit default swap counterparties, etc.) exceeds 20, should the conditions of the loans be variable and the total amount of the credit is equal to or exceeds CHF 500,000 (Kassenobligation obligation de caisse).

Similar rules and/or tax ruling requirements apply where there is a Swiss guarantor/security provider and proceeds from the loan agreement are being directly or indirectly used in Switzerland (as interpreted by the Swiss tax authorities).

To ensure compliance with the 10/20 Non-Bank Lender Rules, the loan agreement must be drafted to include provisions restricting lenders from making transfers to non-banks (for example, through borrower consent requirements) and preventing lenders from entering into certain exposure transfers (for example, sub-participations, credit default swaps or similar transactions if they would give a new counterparty a direct right against an obligor).

Whilst interest payments under a loan agreement are generally not subject to Swiss withholding tax, interest payments on a bond issued by a Swiss issuer are subject to a 35 per cent Swiss withholding tax.

A breach of the 10/20 Non-Bank Lender Rules will lead to requalification of the loan agreement into a bond. Consequently, interest payments owed under such a loan agreement would be subject to Swiss withholding tax. Swiss withholding tax must be deducted from all interest payments received under the relevant loan agreement. Foreign lenders who face a requalification risk may seek to include a gross-up provision in the loan agreement.

Furthermore, a breach of the 10/20 Non-Bank Lender Rules may trigger Swiss transfer stamp tax in the case of a transfer/assignment of loan participations should a Swiss or Liechtenstein securities dealer  be involved in the transaction.

The Swiss Parliament has adopted a reform  that would eliminate:

  • withholding tax  on interest payments for bonds issued by a Swiss lender; and
  • the transfer stamp tax on Swiss bonds.

Should this reform come into force, the above issues would be rendered largely irrelevant. The results of a referendum on the reform means that it will be put to vote before the Swiss people.


No banking licence is required for foreign parties making commercial loans to borrowers in Switzerland. However, this does not apply to consumer loans where licensing requirements apply.


The following options are available:

  • Transfer of Contract: All or part of the lender's rights and obligations in connection with the loan documents will be transferred to the new lender. Consent to the transfer from other parties to the loan document is required to effect transfer. Consent is typically provided in advance in the loan documentation, with a simple notification of the transfer to the counterparty. This is the standard transfer method under loan agreements governed by Swiss law.
  • Assignment: Assignment allows for the transfer of contractual rights but not obligationsConsent to the transfer from other parties to the loan document may be required to effect the assignment and should be considered on a case-by-case basis. As with transfers, consent is typically provided for in advance in the loan documentation.
  • Sub-Participation: Sub-participations are permitted under Swiss law. However, unless all requirements established by the Swiss Federal Tax Authority's practice are met, sub-participants may  also qualify  as lenders  under the 10/20 Non-Bank Lender Rules.


Swiss law does not  have the concept of a trust. However, the Hague Convention on the Law Applicable to Trusts is applicable to transactions in Switzerland. This means that foreign trusts may be considered valid and recognizable in Switzerland. This has paved the way to a current proposal by the Federal Council to introduce the concept of a Swiss trust in the Swiss Code of Obligations as a new flexible institution that will allow for succession planning, as well as the preservation, management and insurance of assets for the purpose of financial investments and transactions. Notably, the new proposed tax treatment of an irrevocable discretionary trust is considered problematic.

Parallel debt structures are commonly used but have yet to be tested in Swiss courts.

The security agent's ability to enforce its rights will depend on the nature of the security:

  • Pledge: The doctrine of accessory (Akzessorietätsprinzip /principe de l'accessoriétéapplies to pledges under Swiss law. As such, a pledgee must be the creditor holding the secured claim. A pledge must be granted  to the lender(s) and cannot vest in a third party acting as a security holder in its own name and right. However, the lender(s) can be represented by a third party (security agent) acting on their behalf.
  • Security assignment or security transfer: The doctrine of accessory (Akzessorietätsprinzip/principe de l'accessoriété) does not apply. Consequently, a security agent can enter into the security agreement and hold the security in its own name and on its own account for the benefit of other lender(s).


Swiss profit tax, withholding tax, or transfer stamp tax may apply in relation to loans held by a foreign creditor in some instances.

There is generally no withholding tax payable on loan interest payments nor Swiss transfer stamp tax payable in relation to loan transfers unless the financing breaches the 10/20 Non-Bank Lender Rules (as detailed above).

Swiss federal and cantonal profit taxes may become due on profits related to loans (notably, interest payments to foreign investors) if such loans are secured by Swiss real estate. This would require a Swiss borrower to withhold  these taxes at source from the gross interest payments on the part of the loan secured by Swiss real estate. The applicable combined tax rate would be between 9 per cent and 33 per cent (as determined by the canton or commune where the real estate is located). If a Double Taxation Treaty between Switzerland and the jurisdiction of the relevant lender exists, a full exemption or a reduced tax rate may be applicable.


The creation and amendments of security interest on real estate located in Switzerland, i.e. mortgage note and land charge, require a public deed to be drawn by a public notary and a registration in the land register.

The two common forms of security over real estate in Switzerland are:

  • Mortgage Certificate (Schuldbrief/cédule hypothécaire): This includes both the personal claim and the security. It is a negotiable instrument. Mortgage certificates are the instruments most commonly used in financial transactions because once created they are easily transferred and pledged without the intervention of a notary.
  • Land Charge: This is a simple mortgage registered with the land register. Importantly, the land register registration only outlines the security and the secured party. The secured claim itself is not registered in the land register. The claim and the security interest are also not evidenced in a negotiable



On 23 June 2022, it was  reported that  Matalan may struggle to continue operating unless it is able to finance GBP 350m of its debt by January 2023. The news comes despite the British fashion and homeware retailer experiencing a recovery in trading.

The GBP 350m of secured debt is due to be repaid early on in 2023 and will need to be refinanced. Matalan has already taken out a  GBP 60m credit facility to replace its revolving credit facility and GBP 16.7m loan borrowed under the U.K. government's COVID-19 loan scheme. It also intends to repay GBP 27m of its high-interest loan notes from its cash reserves.

The Merseyside-based group  acknowledged that its ability to successfully refinance its debts involved “geopolitical, economic and market factors outside the direct control of the business” and that the consequent uncertainty may cast “significant” doubt on the group's ability to continue as a going concern.

Matalan went out to the market earlier this year but was unable to secure the required support for its debt financing. According to the  Financial Times, debt markets for riskier borrowers in Europe remain largely dormant following Russia's invasion of Ukraine. Nonetheless, Matalan has reported that its talks with lenders are at an “advanced stage” and that it is hopeful that the necessary refinancing could be completed before January 2023.

Matalan is being advised by Teneo on its restructuring. However, two groups of creditors have also appointed their own advisers, leading analysts to  speculate that bondholders could take control of Matalan's business, as was the case with New Look and Debenhams.


On 22 June, Norwegian supply shipping company, DOF,  announced that it required restructuring due to its inability to repay or refinance the NOK 18.7b debt of its group companies, DOF ASA and DOF Subsea AS's.  The announcement came despite DOF attempting to secure long-term refinancing since 2019.

DOF, which provides services to oil and gas industry along the offshore life cycle, reached an agreement on restructuring with a substantial group of creditors and certain stakeholders. The  resultant transaction aims to maximise recoveries to all stakeholders by:

  • addressing significant amounts of overdue and non-refinanceable debt;
  • creating a stable platform for the restructured group;
  • enabling enhancement of operating performance; and
  • creating a more sustainable financing structure.

The DOF restructuring agreement is  reported to include:

  • a substantial conversion of debt into NOK 5.7b of equity;
  • a material reduction in reinstated debt and a revision of terms to provide liquidity for operations and a significant runway prior to maturity of the reinstated debt;
  • the consolidation of most bilateral facilities at DOFSUB Group to create a single syndicated loan;
  • the existing DOF shares representing 4 per cent of DOF's issued shares with converting bondholders representing 33 per cent of DOF's shares and holders of all other conversion liabilities representing 42.67 per cent of DOF's shares, all on a fully diluted basis; and
  • identification of a world class board with industrial, strategic, finance and international expertise.


On 5 July, SAS, which, in the 1980s, was considered to be one of the pre-eminent airlines globally,  filed for Chapter 11 bankruptcy protection in the U.S. The news comes following strike action by the Scandanavian airline's pilots prompted by a breakdown in wage talks.

The court filing  set out that the strike would cost between USD 10-13m per day, grounding approximately 50 per cent of the airline's flights. SAS predicts that its cash balance of SEK 7.8b will be adequate to meet its near-term obligations but acknowledged that the strike will have a “negative impact” on its financial position, which, if prolonged, may become “material”.

SAS stated that the Chapter 11 protection, which is expected to conclude in 9-12 months,  was intended to accelerate its restructuring plan SAS Forward. SAS Forward was announced in February 2022  and is  reported to include the conversion of SEK 20b into shares.

SAS has three outstanding bonds totaling SEK 5.4m, trading at one third of face value, and is in “well advanced” talks with lenders in relation to a further USD 700m of financing.

The Swedish government  announced on 7 June, that it would not give any fresh capital to SAS but the Danish government stepped in on 10 June  announcing that it would support SAS by converting debt and investing new capital subject to stakeholders' participation in SAS Forward. The Swedish and Danish government are the largest owners of SAS, each  holding 21.8 per cent at the end of April 2022.

The Norwegian government, on 28 June said it too would support the SAS Forward transformation plan, by converting its debt holding into SAS equity but would not contribute new capital. This follows the decision by the Oslo Stock Exchange, on 2 June, to move SAS shares to its “recovery box” mechanism for additional supervision. This mechanism is utilized where the issuer of shares is subject to circumstances which make the pricing of its securities particularly uncertain.


Switzerland-headquartered fertilizer producer, EuroChem provided a second  update on 29 April 2022  on its Eurobond interest payment due on 14 March 2022  in respect of its USD 700m 5.5 per cent notes due in 2024. The notes are issued by EuroChem Finance Designated Activity Company and guaranteed by Mineral and Chemical Company EuroChemJoint Stock Company and EuroChem Group AG,  with Citibank, N.A., London Branch  as principal paying agent.

The update  reported that the March 2022 interest payment to Noteholders had been suspended by Citibank  pending completion of its internal compliance procedures. The update confirms that EuroChem Group has received written confirmation from the HM Treasury's Office of Financial Sanctions Implementation that it is not  subject to U.K. sanctions. This follows similar declarations received from the Swiss State Secretariat for Economic Affairs.

Following such confirmation and declarations and following completion of its own internal risk assessments, Citibank has now released funds to the custodians of the Noteholders and the March 2022 interest has been paid.


On 16 May 2022, the European Banking Authority published a  consultation paper regarding draft Implementing Technical Standards (“ITS”).

The ITS specify the information requirements that sellers of Non-Performing Loans (“NPLs”) must provide to prospective buyers.

The aim of the ITS is to provide a cross-country standardisation for EU based NPL transactions and reduce informational asymmetry between sellers and buyers.

The EBA envisage that this will make it easier to carry out transactions and reduce barriers to entry for smaller investors wishing to engage with the secondary market for NPLs.

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