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OCTOBER 2013
Legal Expert Board
37
they need to proceed with private restructuring measures within six weeks after the balance sheet shows negative equity. Also, if an agreement to restructure is not reached after all, it is still possible to file either for a debt restructuring moratorium or insolvency. It must then be considered that the value of a company's assets will in most cases be higher when valued on a going concern rather than when applying liquidation values. What legal challenges and complexities arise when dealing with insolvency and restructuring in your jurisdiction? How can you assist clients in navigating/solving these challenges and complexities?
Switzerland, as one of the major financial hubs worldwide,
is home to many
internationally operating companies and their subsidiaries. The increased difficulties experienced by corporations when seeking financing in the wake of the financial crisis has led to quite some of these firms facing financial difficulties that have resulted, if not in insolvency, in restructuring processes.
Today's
interdependences within corporate groups, for example by means of the granting of guarantees from the parent company to an affiliate or through the distribution of intercompany-loans, such insolvency or restructuring proceedings inevitably lead to highly complex cross- border cases demanding smooth cooperation and coordination between law firms as well as with bankruptcy administrators from all the different jurisdictions.
From a legal point of view, the coming- into-effect of the new unified Swiss Code of Civil Procedure (CCP) in January 2011 may in itself present a challenge. The new procedural laws have a significant impact on bankruptcy proceedings. Since only a few court decisions regarding bankruptcy litigation cases have been decided under the new
CCP, there remains uncertainty on the interpretation of various new provisions. Actions to contest the schedule of claims for example are no longer dealt with in the special accelerated proceedings, but the ordinary procedural rules for commercial litigation apply. To institute litigation, a plaintiff must now file a full statement of claim within the brief non- extendable deadline of 20 days after the schedule of claims was published and can no longer only submit a first summary brief as required under most of the previous cantonal procedural laws. While this short deadline seems appropriate in small bankruptcy litigation cases, it poses serious challenges when it comes to complex cross-border litigation. Parties can limit their risks by starting to prepare litigation in good time before the schedule of claims is expected and by seeking the dialogue with the bankruptcy administrators in order to understand what position they tend to take regarding the admittance of a certain claim.
Another complexity that must be taken into account is that with regard to the amounts of distribution unsecured third class creditors might be confronted with uncertainties. They might be confronted with estimates on expected third class dividends, given by bankruptcy administrators, that can easily range to a maximum that constitutes the quadruple of the lowest estimate. This complicates the litigation risk assessment of the parties, in particular since the amount in dispute forms the basis for the levying of security for court and party fees.
What must be kept in mind furthermore is that in July 2013 the two chambers of the Swiss Parliament have decided to amend certain rules within the Federal Statute on Debt Enforcement and Bankruptcy. If no referendum against
some considerable changes will come about such as a reversal of the burden of proof if a preference claim is initiated due to a donation the debtor has made or because of a legal act the debtor has contracted shortly before he fell into bankruptcy: It is intended that close third parties, such as related companies, that allegedly profited from the contested action will need to substantiate that they have not received any advantages.
can you talk about any recent cases you have been involved in?
We have recently been involved in large insolvency cases such as the already mentioned insolvency proceedings of Swissair. Within this case the litigation was and still is primarily concerned with aircraft leasing agreements and directors liability claims. Other bankruptcy cases we have worked on are the ones of Petroplus and Lehman Brothers. Litigation that I have been involved in was based on agreements to finance or hedge assets of the debtor. Amongst others, we have been involved in claims to contest the schedule of claims amounting to sums of several hundred million dollars due to terminated aircraft leasing contracts, terminated and failed syndicated loans and over-the-counter derivatives contracts based on ISDA Master Agreements. LM
contact: daniel Hayek
Prager dreifuss aG Mühlebachstrasse 6, cH-8008 Zürich
Email: daniel.Hayek@prager-dreifuss.com tel: +41 44 254 55 55 Fax: +41 44 254 55 99
these planned
amendments is initiated by October 2013, they will enter into force, very likely already in January 2014. In that case,