Suspension of notification duties in case of overindebtedness
The Board of Directors of a Swiss company (Board) is normally under quite a strict duty (and liability) to notify the bankruptcy judge if, at any point in time, the company is overindebted, i.e., a balance sheet, on a stand-alone basis, shows that the liabilities of the company are covered neither if the assets are appraised on a going-concern basis nor if they are appraised at liquidation values. Such interim balance sheet must be prepared and submitted to the auditors for examination «if there is reasoned concern of overindebtedness» (art. 725 of the Swiss Code of Obligations, CO). Moreover, the balance sheet has to be drawn up in accordance with Swiss accounting principles, which provide that a company must switch from going concern to liquidation values if, in the twelve months from the balance sheet date, «it is intended or probably inevitable» to cease the business activities in whole or in part (art. 958a CO). Facing the current economic uncertainty and actual or potential liquidity squeezes, directors are therefore concerned whether they have to switch the company&#8217;s accounting to liquidation values and that such switch would show an overindebtedness, forcing the company to file for insolvency.
Against this background, the Federal Council has decided to temporarily exempt the Board from its duty to notify the judge, provided that (i) the company was not overindebted on December 31, 2019; and (ii) there is «a prospect» that the overindebtedness will be eliminated until December 31, 2020. With this measure, the Federal Council wants to prevent that fundamentally sound companies, which only ran into financial difficulties because of the corona crisis, are forced to file for bankruptcy or a moratorium.
Note, however, that given the current lack of visibility it will in our view not be an easy task for the Board to underpin and document its positive outlook in a way that stands a review in a subsequent insolvency of the company. This temporary exemption does not therefore necessarily shield the members of the Board from directors&#8217; liability suits. Moreover, the exemption only covers the duty to notify the judge. It does not address the accounting issue of a forced switch to liquidation values.
Covid-19 moratorium for small and medium-sized enterprises
General principles
The Covid-19 moratorium is designed as an alternative to the ordinary moratorium under the DEBA and can be applied for during the effective term of the ordinance. It provides small and medium-sized enterprises (SME) with a simple procedure to obtain a temporary deferral of their payment obligations in order to reorganize and prepare for the time after the crisis. For the purpose of the Covid-19 moratorium, an SME is defined as a company whose shares are not publicly traded and that did not exceed at least two of the following three thresholds in 2019:
<ul>
<li>a balance sheet total of CHF 20 million;</li>
<li>sales revenues of CHF 40 million or more;</li>
<li>250 full-time employees on annual average.</li>
</ul>
Procedural aspects
Any such SME may request the court to grant such a moratorium for an initial period of up to three months provided, however, that (i) it was not already overindebted on December 31, 2019; or (ii) if there was an overindebtedness, certain creditors subordinate their claims to those of all other creditors to the extent of the overindebtedness. Upon request of the SME, the court may extend the moratorium for an additional period of up three months.
By submitting the request for a Covid-19 moratorium, the company&#8217;s Board is deemed to have satisfied its duty to notify the judge in case of an overindebtedness. Once the moratorium has ended, the Board will, however, have to reassess the company&#8217;s solvency under the rules then applicable.
The Covid-19 moratorium shall be granted by the court in a simple and straightforward procedure. The SME applying for such a moratorium has to submit a corresponding request, in which it must credibly establish its financial situation and provide to the best possible extent the respective evidence. The debtor has to immediately notify all known creditors of the moratorium. If the debtor has made false statements to the court, the court may ex officio revoke the Covid-19 moratorium at any time. Other than under the rules regarding an ordinary moratorium, the SME is under no obligation to file a re-structuring plan. The implementation of a Covid-19 moratorium as well as a possible extension of the moratorium are made public and the relevant authorities (such as the bankruptcy authority, the land register and the commercial register) are notified ex officio by the court granting the moratorium.
The SME and its creditors have the right to challenge the bankruptcy court&#8217;s decision by filing an appeal (Beschwerde) according to the Swiss Civil Procedure Code.
As a rule, no judicial administrator is appointed in the case of a Covid-19 moratorium. This takes into account the nature of the Covid-19 moratorium as a routine measure for a large number of debtors, and it aims at keeping the administrative work and the costs low. However, if the circumstances so require, the court may – either ex officio or at the request of the SME or a creditor – appoint an administrator at any time. In such a case, the administrator has the power to supervise the SME, issue instructions and support the SME by taking the necessary measures and reaching agreements with the SME&#8217;s creditors.
Effects of the Covid-19 moratorium
The effects of the Covid-19 moratorium are comprehensive. It affects all claims against the SME that have arisen prior to the granting of the moratorium (with the exception of claims that would be ranked in the first priority in case of a bankruptcy [so-called first-class claims], such as certain claims of employees). During the Covid-19 moratorium, the SME&#8217;s creditors are precluded from commencing (or continuing) enforcement proceedings (debt collection proceedings pursuant to the DEBA) against the SME for such claims. This does not apply to first-class claims and to the enforcement of a mortgage; however, the realization of the relevant charge over the real estate is suspended under the moratorium. Furthermore, during the Covid-19 moratorium, no attachment orders (or similar preliminary measures) can be obtained for the deferred claims. Limitation and forfeiture periods concerning deferred claims are suspended during the moratorium.
If the Covid-19 moratorium is granted, the SME is prohibited from satisfying claims that are subject to the moratorium. In case on non-compliance, the court may ex officio declare the SME bankrupt. The purpose of the ban on payment is to provide the SME that is under financial pressure with a justification for refusing to pay his creditors. At the same time, the payment ban is meant to facilitate the payment of new liabilities, as the available funds may be used only for this purpose. However, it remains to be seen whether a forced non-payment of old trade creditors will enhance the liquidity situation of the company, given that unpaid suppliers may start to make further supplies subject to advance payment or security.
Claims arising after the granting of the Covid-19 moratorium are not affected by the moratorium. This shall allow the SME to continue its business operations during the moratorium. However, during the Covid-19 moratorium, the debtor may not perform any legal acts that impair the legitimate interests of the creditors or favor individual creditors to the detriment of others. If the court appoints an administrator, it may also order that certain acts need the administrator&#8217;s consent or authorize the administrator to take over the management of the business.
If the SME wishes to conclude a composition agreement or benefit from the additional effects of an ordinary moratorium, it can apply to the court for a provisional moratorium at any time.
Additional modifications of the existing restructuring regime
The Federal Council has also implemented additional measures in the restructuring and insolvency area, from which all debtors – not only SME – can benefit. These measures include the following:
<ul>
<li>In order to reduce the workload of the bankruptcy courts during the coronavirus crisis, the Federal Council suspended the existing requirement of art. 293 lit. a DEBA, according to which a debtor that intends to obtain an ordinary provisional moratorium has to submit a provisional restructuring plan (provisorischer Sanierungs­plan). Consequently, the court seized with a request for a provisional moratorium does not have to examine whether or not the debtor will be able to recover during the moratorium.</li>
<li>The Federal Council extended the maximum period for which a provisional moratorium can be granted from four to six months. This measure is intended to promote direct restructuring during the temporary moratorium.</li>
</ul>
Legal text and further information
The legal text of the ordinance discussed herein as well as further information about the extraordinary situation are available on our <a href="https://www.homburger.ch/en/home">Covid-19 information hub</a>.

Covid-19: Temporary Changes to the Swiss Insolvency and Restructuring Regime

Corporate / M&A

Financing and Investment Products

Restructuring / Insolvency

Litigation

Gategroup

On November 13, 2020, gategroup Holding AG (gategroup, together with its subsidiaries the Group) announced that its shareholders, RRJ Capital and Temasek, and all bank lenders providing syndicated loans to the Group have reached an agreement in principle, under a binding term sheet, to support a comprehensive restructuring of the Group’s financial indebtedness (Transaction). The proposed Transaction will provide the Group with significant new liquidity to address short and medium-term needs and will help establish a stable capital structure.
The Transaction will be conditional on the extension of the maturity of the Group’s CHF denominated bond to February 2027, whilst maintaining the cash coupon.
The Transaction is subject to the execution of definitive documentation, customary conditions and regulatory and other approvals.
gategroup is a global player in airline catering, retail-on-board and hospitality products and services. Headquartered in Zurich, Switzerland, gategroup delivers its services through its extensive catering network, serving more than 700 m passengers annually from over 200 operating units in over 60 countries/territories across all continents. In 2019, gategroup reached CHF 4.9 bn in revenues generated by approximately 43,000 employees worldwide.
Homburger advises the board of directors of gategroup in connection with the Transaction as to Swiss law. The Homburger team includes partners Frank Gerhard (Corporate / M&amp;A), Benedikt Maurenbrecher (Financing and Investment Products; Restructuring / Insolvency), Stefan Kramer (Financing and Investment Products; Restructuring / Insolvency), senior counsel Ueli Huber (Restructuring / Insolvency), associates Marco Rostetter (Corporate / M&amp;A; Restructuring / Insolvency), Miguel Sogo (Litigation; Restructuring / Insolvency) and Richard Meyer (Litigation; Restructuring / Insolvency).

Homburger advises the board of directors of gategroup Holding AG on its restructuring consisting of CHF 500 m new funding provided by the shareholders, CHF 200 m senior secured interim liquidity facility extended by shareholders and extension of the maturity of the Group’s syndicated loan facilities to October 2026 as well as certain other amendments

Swissport

On August 31, 2020, Swissport International AG (SPI) announced that SPI together with certain other entities of the Swissport group (Swissport) entered into a lock-up agreement for comprehensive restructuring which envisages debt-for-equity swap with approx. EUR 1.9 bn of existing debt converted into equity or extinguished and EUR 500 m in new long-term facility. Swissport also entered into binding documentation for a EUR 300 m super senior interim facility. This additional financing provides Swissport with liquidity to trade through the COVID-19 pandemic and to facilitate the restructuring process. Under the terms of the lock-up agreement, Swissport will shortly be launching an M&amp;A process to run in parallel with other restructuring steps as customary in such situations. The financial restructuring is expected to be completed in late 2020.
Swissport is world&#8217;s leader in airport ground services and air cargo handling, with 64,000 employees, achieved consolidated operating revenue of EUR 3.13 bn in 2019. At the end of December 2019, Swissport was active at 300 airports in 47 countries on six continents.
Homburger advises SPI in connection with the restructuring as to Swiss law. The Homburger team is led by partners Claude Lambert (Corporate / M&amp;A) and Stefan Kramer (Financing and Investment Products; Restructuring / Insolvency) and includes senior counsels Ueli Huber (Restructuring / Insolvency) and Georg Naegeli (Litigation; Restructuring / Insolvency), associates Marco Rostetter, Daniel Kuhn, Aron Waltuch and Nina Hagmann (all Corporate / M&amp;A; Restructuring / Insolvency), Miguel Sogo (Litigation; Restructuring / Insolvency) and Simon Bachmann (Litigation) as well as junior associates Lars Göldi (Financing and Investment Products) and Vincent Croisier (Corporate / M&amp;A).

Homburger advises Swissport International AG on its comprehensive restructuring with creditors and shareholders including a debt-for-equity swap and a new 500 m euros long-term debt facility

Ueli Huber has profound knowledge and experience in representing different stakeholders in insolvency and restructuring cases. With his corporate and M&amp;A background, his practice focuses on restructurings, transactions involving distressed companies and similar matters. Ueli Huber has published articles on issues related to insolvency and restructuring and to corporate law. He has also contributed to two commentaries on the Swiss Federal Bankruptcy Act.

Ueli
Huber

Covid-19: Temporary Changes to the Swiss Insolvency and Restructuring Regime

Homburger advises Swissport International AG on its comprehensive restructuring with creditors and shareholders including a debt-for-equity swap and a new 500 m euros long-term debt facility

Regulation of state and supplementary pension schemes in Switzerland: overview

Regulation of state and supplementary pension schemes in Switzerland: overview 2018

Switzerland

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Ueli Huber

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UeliHuber

Covid-19: Temporary Changes to the Swiss Insolvency and Restructuring Regime

Homburger advises Swissport International AG on its comprehensive restructuring with creditors and shareholders including a debt-for-equity swap and a new 500 m euros long-term debt facility

Regulation of state and supplementary pension schemes in Switzerland: overview

Regulation of state and supplementary pension schemes in Switzerland: overview 2018

Switzerland

Join the Team

Ueli Huber

Career

Languages

Bar Registration

Teams

Ueli
Huber