8 June 2020

COVID-19 moratorium for SMEs - who benefits?

The COVID-19 regulation on insolvency law set out the conditions under which COVID-19-related over-indebtedness of the company does not to lead to a declaration of bankruptcy by the board of directors (see our blog post "COVID-19 Deferral of Bankruptcy Filing in Switzerland").

However, allowing the board of directors to postpone the notification of over-indebtedness, does not solve the company's liquidity problem. Unsatisfied creditors can still push the company into bankruptcy through debt collection proceedings if the company cannot meet its payment obligations.

The Swiss Federal Council has therefore introduced the COVID-19-moratorium so that small and medium-sized companies that were well positioned before the COVID-19 crisis and whose business model was functioning can protect themselves against COVID-19-related debt collection and the opening of bankruptcy proceedings.

Which companies can apply for a COVID-19-moratorium?

The only condition for the approval of the COVID-19-moratorium is that the company was not over-indebted on 31 December 2019; or - if it was over-indebted - that there were subordinations from the company's creditors to the full extent of the over-indebtedness.

The COVID 19-moratorium was created for small and medium-sized companies and the criteria are that they did not exceed two of the following thresholds in 2019: (a) balance sheet total of CHF 20 million; (b) sales revenue of CHF 40 million; (c) 250 full-time positions on an annual average.

These companies are to be given the opportunity to reorganize for a period of three months (renewable once for a maximum of three months), without pressure from creditors, and to prepare for after the COVID-19 crisis.

It applies to sole entrepreneurs, to partnerships such as general partnerships and legal entities such as corporations (AG) and limited liability companies (GmbH). Even micro-enterprises which do not have an entry in the commercial register can apply for a COVID-19-moratorium.

Public companies and large companies, on the other hand, cannot apply for COVID 19-moratorium. The only option available to them is the debt-restructuring moratorium under the Debt Enforcement and Bankruptcy Act (DEBA). The reason for this is that, due to their greater economic importance, they require the necessary control during the moratorium.

Which claims are subject to the COVID 19-moratorium?

The COVID-19 moratorium covers those claims that arose before the moratorium. These claims covered by the moratorium may not be paid by the company during the approved moratorium.

Claims incurred after the moratorium are not covered and may therefore be paid even after the moratorium has been granted. The company can therefore continue its business operations after the moratorium has been approved.

However, the COVID 19-moratorium is not effective for all claims. In particular, wage claims by employees are excluded from the moratorium, because the Federal Council had considered these claims to be an essential means of securing the employees' livelihood.

If the company also wants wage claims and other claims excluded from the COVID-19 moratorium to be covered by the moratorium, the company must examine whether a debt-restructuring moratorium under the DEBA can be considered as an alternative (see our blog post "Debt-Restructuring Moratorium under COVID-19").

What effect does the COVID-19 deferral have?

The COVID-19 moratorium has largely the same effect as the regular debt-restructuring moratorium.

The most important effect is that during the moratorium no debt collection proceedings can be initiated or continued against the company for claims covered by the moratorium. This does not apply to the enforcement of liens for claims secured by real estate liens, whereby the realization of the real estate lien is excluded.

Although wage claims are not covered by the moratorium, it is no longer possible to enforce them in bankruptcy, but only to enforce a pledge realization.

If the company agreed to assign a future claim before the moratorium and the claim only arises after the moratorium has been granted, this assignment has no effect. This enables the company to use the incoming funds for the restructuring instead of paying the assigned future claims.

How do I apply for the COVID 19-moratorium?

The company initiates the COVID 19-moratorium by submitting an application to the competent bankruptcy court. The courts provide forms for filing the application (e.g. "COVID-19 Stundung" - only German).

The application must be accompanied by the balance sheet and the income statement both as at 31 December 2019. These may be provisional and need not be audited. If these documents are not (yet) available, the financial situation must be presented in some other form.

In contrast to the provisional debt-restructuring moratorium, the approval and extension of the COVID-19-moratorium is always published. This transparency takes place mainly because the company receives the moratorium almost unconditionally and no administrator is appointed to monitor the company. Against this background, it is also recommended that the company actively informs its creditors about the approved COVID-19-moratorium. In this way, unnecessary debt enforcement actions by creditors who did not become aware of the COVID-19-moratorium through the announcement can be avoided. If the company wants to waive this transparency, it must apply for a provisional debt-restructuring moratorium under the DEBA and file a motion to waive publication. In justified cases, the public announcement can then be waived, provided the protection of third parties is guaranteed.


With a COVID-19-moratorium, a company can gain more time and space for successful reorganization. We therefore recommend that companies, regardless of their legal form, if confronted with debt collection or bankruptcy threats from creditors due to liquidity problems, should consider the possibility of applying for a COVID-19-moratorium.

If the board of directors initiates the COVID 19-moratorium in time, it simultaneously also fulfils its obligation to submit a notification of over-indebtedness. Thus, the board of directors cannot be accused of having breached the obligation to file for bankruptcy and can avoid civil and criminal liability.

In case of any question relating to the COVID-19-moratorium, please do not hesitate to contact our Restructuring & Insolvency Team.


Categories: Restructuring & Insolvency

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