Bankruptcy laws eased for Covid-affected companies

Many companies have been forced to stop doing business for the last few weeks. Keystone / Laurent Gillieron

The Swiss government has thrown a lifeline to businesses that are threatened with bankruptcy during the pandemic lockdown. Firms can delay declaring their financial difficulties to the courts, with smaller companies being given at least three months’ grace to pay off their debts.

The measures have been announced to save firms going under with a resultant loss of jobs. Non-essential businesses have been forced to close their doors for several weeks as part of a government plan to combat the coronavirus pandemic.

The Swiss state has provided more than CHF60 billion in the form of bridging loans, paying the wages of workers on shortened hours and cash injections into specific industries.

But many companies are still struggling to make ends meet with their business effectively shut down. For this reason, the government introduced on Thursday further measures to ease bankruptcy proceedings.

Companies must show they were in good health at the end of 2019, that their financial difficulties were caused by the pandemic, and that there is a reasonable chance business can be resumed when the restrictions are lifted.

If these criteria can be met, then the normal obligation to file for insolvency can be temporarily lifted. Small- and medium-sized enterprises (SMEs) will also be given an extra three months to pay off their debts – a period that could be extended to six months on application.

However, this does not excuse companies from paying the wages of employees. The government had previously decided not to extend a general debt payment amnesty beyond April 20, fearing this would encourage firms to default on debts.