Adjudication of Bankruptcy Without Prior Debt Enforcement
Legal entities and partnerships registered in the commercial register may be subject to bankruptcy proceedings. In contrast to debt enforcement aimed at seizure or the realization of pledges, in bankruptcy all the debtor's assets are realized for the benefit of the creditors.
Adjudication of bankruptcy at the request of a creditor
As a general rule, creditors with outstanding claims must first initiate debt enforcement before they can file a bankruptcy petition.
However, if creditors' interests are particularly at risk, it is possible to file a petition in bankruptcy without prior debt enforcement (article 190 of the Swiss Federal Law on Debt Collection and Bankruptcy, "SchKG"). A particular risk is assumed to exist if the debtor has stopped making payments.
According to case-law it is necessary that the debtor fails to discharge undisputed and due payment claims, systematically raises legal objections regardless of the justification of the claims pursued and no longer pays even small amounts. It is sufficient that the refusal to pay affects a significant part of the business activities or that the debtor no longer meets the payment demands of one main creditor. The failure to pay must not merely result from short-term liquidity difficulties, but the debtor must be in this situation for an unforeseeable period of time. The failure to pay public creditors or wages may indicate that payments have been suspended.
Declaration of insolvency and notice of overindebtedness by the debtor
In addition to the creditors, the executive body of the company concerned can also file a petition in bankruptcy by declaring to the competent court that it is unable to discharge its debts (declaration of insolvency pursuant to article 191 SchKG).
Finally, the responsible bodies of a corporation must notify the court in the event of overindebtedness. Overindebtedness exists if the net loss as shown by the balance sheet exceeds the total net assets, meaning that the debt capital is therefore no longer covered (article 725b of the Swiss Code of Obligations, "OR"). The declaration of insolvency may only be omitted if creditors have given up their positions of priority in a binding manner in the amount of the shortfall, or if other measures can eliminate the position of overindebtedness within a reasonable period of time.
Proceedings and required evidence
Bankruptcy is always pronounced by the court. The bankruptcy petition must therefore be submitted to the court with jurisdiction at the registered office of the insolvent company. A single judge is responsible for adjudicating bankruptcy by way of summary proceedings. The special feature of summary proceedings is that the court proceedings are not preceded by an attempt at conciliation, the case is only examined summarily, and the parties must prove the facts presented by means of documents. Other forms of evidence, such as witness statements, are excluded in summary proceedings.
Despite the limitation in terms of evidence and the mere summary examination, strict proof is required with regard to the debtor's suspension of payments. Due to the serious consequences of bankruptcy, mere prima facie evidence does not suffice in this case.
The petitioning creditor must therefore be able to prove by documentary evidence that the insolvent company has stopped making payments and that bankruptcy is unavoidable.