<h3>Swiss Federal Supreme Court provides helpful guidance in respect of pre-negotiated sales of a company&#8217;s business in the context of a restructuring («pre-pack»)</h3>
<p>In UK and US law, so-called «pre-packs» have long been established as an effective restructuring measure. In its recently published decision 5A_827/2019 dated March 18, 2021 (announced for publication as a leading decision), the Federal Supreme Court has now for the first time confirmed the previous legal practice of privately pre-negotiated, confidential pre-pack restructurings in Switzerland and thus provided legal certainty under Swiss law.</p>
<h4>Facts and Decision</h4>
<p>The Federal Supreme Court decision concerned the sale of an IT company with around 70 employees. Initially, the applicant, a company in financial distress, founded a subsidiary company and prepared the transfer of its IT business by means of an asset transfer agreement. In a private bidding process, a purchase price of approximately CHF 1.3 million was determined for the newco. A few days after the establishment of newco, the insolvent company applied for the opening of the provisional moratorium (<em>provisorische Nachlassstundung</em>) with the following elements:</p>
<ul>
<li>appointment of an administrator</li>
<li>waiving of the publication of the debt-restructuring moratorium (so-called «silent moratorium», <em>stille Stundung</em>).</li>
</ul>
<p>On December 13, 2018, the competent court approved the request for provisional moratorium of the insolvent company without publishing the decision.</p>
<p>Shortly thereafter, the competent court approved the request of the administrator to transfer certain assets and liabilities to the newco and the subsequent sale of all shares of the newco to the previously selected bidder. The decision was disclosed only to the insolvent company as the applicant and the administrator. Less than four months after the court approval of the pre-pack, the competent court granted the definitive moratorium. This decision was published. A creditor filed an appeal against it, claiming, <em>inter alia</em>, that the bankruptcy of the insolvent applicant should have been opened already as of December 13, 2018 and that the approval of the pre-pack should be declared null and void.</p>
<p>The Federal Supreme Court dismissed the creditor&#8217;s appeal on all points to the extent that it was upheld.</p>
<h4>Main Considerations of the Federal Supreme Court</h4>
<ul>
<li>The creditor cannot challenge the granting of the provisional moratorium and request its revocation with retroactive effects.</li>
<li>Approval of a pre-pack may be envisaged if negotiations with a buyer are at an advanced stage and a better result for the creditors can be expected with such an immediate sale compared to a bankruptcy.</li>
<li>The creditor did not have to be heard for the approval of the pre-pack and had no rights to participate in the decision making process.</li>
<li>The contract negotiations, the determination of the sale price, the execution of the contract and its approval by the court could be carried out confidentially and without the need to involve the creditor.</li>
<li>Even if the creditor would have been informed about the approval of the pre-pack, the creditor would not have been entitled to challenge the decision.</li>
<li>In the case at hand, there were no indications that the decision of the competent court was null and void.</li>
</ul>
<h4>Assessment and Outlook</h4>
<p>In Switzerland, pre-packs are increasingly gaining importance as a restructuring solution which, compared to bankruptcy, often allows for a better preservation of value for the debtor, employees and business partners concerned. The decision of the Federal Supreme Court confirms previous court practice of regional competent courts, some of which approved a pre-pack within a few days. This previous practice underscores the following advantages of the Swiss pre-pack:</p>
<ul>
<li>The business transfer can be prepared confidentially.</li>
<li>In contrast to certain foreign procedures, there is no need for a public bidding process.</li>
<li>The restructuring can be completed quickly.</li>
<li>Upon receipt of court approval, the bar for contesting a pre-pack is set high and therefore such transactions provide more security for buyers.</li>
<li>The sale of a business unit by means of a pre-pack often generates higher proceeds than in bankruptcy liquidation.</li>
</ul>
<p>In addition to the foregoing advantages, the Swiss pre-pack has following remarkable features:</p>
<ul>
<li>Buyer may choose to acquire only selected assets, liabilities and contracts (albeit subject to administrator and court approval);</li>
<li>buyer may take over certain, but not all, employees in connection with the transferred business, without being liable for pre-existing claims of the employees against the insolvent debtor (<em>e.g</em>., outstanding salary);</li>
<li>no joint liability of debtor and buyer for employee claims.</li>
</ul>
<p>Thanks to the advantages and increasing practice of Swiss pre-packs, they are likely to gain in importance, also in an international context in the future.</p>


RZ_Preview_Wirtschaft_Paragraph_Gesetz Verpackt_CB_03

New «leading case» on Swiss pre-pack restructurings

Restructuring / Insolvency

Marco Rostetter Homburger

<p>On March 31, 2022, Homburger associate Marco Rostetter was selected as one of GRR’s 40 under 40 2022 and has been recognized as a rising star in cross-border restructuring and insolvency within the global cross-border restructuring community. Marco Rostetter is a member of Homburger&#8217;s Restructuring / Insolvency working group.</p>
<p>Global Restructuring Review (GRR) is a source of worldwide news and analysis for restructuring and insolvency practitioners.</p>


Homburger associate Marco Rostetter has been recognized by Global Restructuring Review as one of GRR's 40 under 40 2022

Corporate / M&A

Employment and Executive Compensation

coinbase

<p>Homburger advised Coinbase (Nasdaq: COIN), a leading provider of end-to-end financial infrastructure and technology for the cryptoeconomy, in its acquihire of BRD, a consumer wallet app.</p>
<p>Homburger acted as Swiss counsel to Coinbase. The Homburger team was led by partner Dieter Gericke and lead associate Margrit Marti (both Corporate / M&amp;A) and included partner Stefan Oesterhelt and associates Philippe Gobet and Kevin Müller (all Tax), associate Jeremy Reichlin (Employment and Executive Compensation), associates Angela Oppliger and Marco Rostetter and junior associates Magdalena Stock and Ferdinand Berthold (all Corporate / M&amp;A).</p>


Homburger advised Coinbase in an Acquihire of BRD

Financing and Investment Products

Capital Markets

Santhera

<p>On May 4, 2021, Santhera Pharmaceuticals Holding AG (SIX: SANN) announced the settlement of the first exchange offer for a convertible bond in Switzerland. Holders of Santhera&#8217;s existing CHF 60 m Senior Unsecured Convertible Bonds due 2022 received one new CHF 30,270,375 Senior Unsecured Convertible Bond due 2024 and 26 Santhera shares per existing bond. The offer had been accepted by holders of 74.7% of the former bonds.</p>
<p>Homburger acted as transaction counsel in this matter. The team was led by partners Dieter Gericke and Daniel Häusermann (both Corporate / M&amp;A, Capital Markets). Key members of the team included partner Stefan Oesterhelt (Tax), counsel Eduard De Zordi (Financing and Investment Products) and associates Marco Rostetter and Romain Fakhoury (both Corporate / M&amp;A, Capital Markets), as well as Pierina Janett-Seiler and Daniel Junginger (both Financing and Investment Products) and junior associate Daniel Bötticher.</p>


Homburger advises Santhera on the First Exchange Offer for a Convertible Bond in Switzerland and Issuance of New Senior Unsecured Convertible Bonds due 2024

Marco
Rostetter

Homburger associate Marco Rostetter has been recognized by Global Restructuring Review as one of GRR's 40 under 40 2022

Homburger advised Coinbase in an Acquihire of BRD

Homburger advises Santhera on the First Exchange Offer for a Convertible Bond in Switzerland and Issuance of New Senior Unsecured Convertible Bonds due 2024

New «leading case» on Swiss pre-pack restructurings

«Stille» Pre-Pack Sanierung ohne Mitwirkung der Gläubiger. Besprechung des Urteils des Bundesgerichts 5A_827/2019 vom 18. März 2021

Die Verjährung im Recht der direkten Bundessteuer und der harmonierten kantonalen Steuern

Join the Team

Marco Rostetter

Career

Languages

Teams