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Switzerland

Security interest law in Switzerland

Table of contents
  1. Guarantees
  2. Security
  3. Perfection
  4. Enforcement
Switzerland

Guarantees

1. Can an intercompany guarantee be granted?

1.1 Upstream?

Yes, under certain conditions (see 3 below).

1.2 Downstream?

Yes, provided that the subsidiary is solvent and has no negative equity.

1.3 Lateral?

Yes, under certain conditions (see 3 below).

2. Can a guarantee be given under foreign law (e.g. English law)?

Yes

3. Any special arrangements (e.g. to deal with transfer pricing/corporate benefit)?

The grant of an upstream/lateral guarantee is limited by the Swiss law provisions on capital maintenance and profit distribution. 
The board of directors of the company granting a guarantee has an obligation to act in the interest of such company. 
For Swiss tax purposes, the Swiss guarantor is obliged to collect an arm’s length guarantee fee.

Security

4. Can a security interest be granted in the following type of asset?

4.1 Real property

Yes

4.2 Shares (privately held)

Yes

4.3 Shares (marketable securities)

Yes

4.4 Receivables

Yes

4.5 Bank account 

Yes

4.6 IP/Trademark

Yes

4.7 Equipment/Plant/Machinery

Yes, but it is generally burdensome and costly.

4.8 Inventory

Yes, but it is generally burdensome and costly.

4.9 Insurance

Yes

4.10 Rights under a contract

Yes

5. Can security interests be granted to a foreign lender?

Yes, but there are restrictions in limited circumstances.

6. Can multiple security interests be granted over the same asset?

Yes, depending on the type of security.

7. Can a security interest be granted to secure liabilities of a holding company, a subsidiary or any other affiliate?

Yes, but the grant of a security interest to secure liabilities of a holding company (upstream security) or another affiliate (lateral security) is limited.

Perfection

8. In order to be enforceable against third parties, must a security interest be?

8.1 Notarised?

Yes

8.2 Registered?

Yes, required/recommended (depends on asset).

8.3 Other? 

The perfection of a pledge or a transfer for security purposes over movable property (exceptions) requires the movable property to be transferred into the physical possession of the secured party. 
The perfection of a security interest over certificated shares requires the secured party to obtain physical possession of the share certificates. To perfect without certificates requires a written pledge, transfer or assignment agreement. 
Specific rules apply to security interest over intermediated (book-entry) securities.

9. Does registration in most cases protect the secured creditor against the debtor’s subsequent dealings with the secured asset?

Registration is only exceptionally available. Where available, it does not protect in most cases.

10. Is there any stamp or similar tax or duty payable on the security document?

On a federal level, no. In certain cantons and municipalities a stamp or similar tax or duty may apply.

Enforcement

11. For a security interest to be legally enforceable which items must be filed as part of the registration or notarisation process?

11.1 Entire security agreement?

Yes, real estate.

11.2 Names of pledgor and pledgee? 

Yes, real estate.

11.3 Description of secured asset in general terms?

Yes, real estate.

11.4 Description of each individual secured asset?

Yes, real estate.

11.5 Documents concerning ownership of secured asset?

Yes, real estate.

11.6 Documents concerning debt in respect of which the asset is being secured?

Yes, real estate.

12. Can a right to enforce security arise: 

12.1 When the secured debt is unpaid and due?

Yes

12.2 When there is some other breach of the pledge/security agreement?

Yes, if contractually stipulated.

12.3 When the debtor becomes insolvent? 

Yes

13. Can the creditor enforce its security interest by taking possession of the asset and selling it without court assistance?

Yes, by way of official debt enforcement proceedings or by way of private enforcement proceedings.

14. Is an instrument for direct enforcement necessary/available/market practice?

Yes, market practice, but parties must agree to it. Enforcement is not possible upon the commencement of bankruptcy proceedings.

15. Are powers of attorney to the secured party used to facilitate a sale of secured assets in an enforcement situation? 

Yes, however, a power of attorney is revocable.

16. If a sale is permitted without court assistance does it have to be made by public auction?

For official enforcement proceedings, a public auction can be carried out (private sale under certain circumstances). 
Within private enforcement proceedings, a public auction, private sale or self sale is possible.

17. Can a transfer of all or part of the debt be made without affecting the security over the assets?

Yes (depends on type of security granted).

18. Is there anything else of which a lender should be aware as unusual or particularly difficult?

 Pledges and a number of other security interests are accessory by nature. 
Only a creditor can be a secured party of an accessory security and only up to the amount of its claims. It is, therefore, usual to use a “parallel debt” concept where a security agent acts on behalf of the secured parties.