Home / All CMS Expert Guides / CMS Expert Guide to coronavirus related loan mora... /
Switzerland

Law and regulation of Covid-19 loan moratoriums in Switzerland

Table of contents
  1.  Description of the legislation
    1.  Is there a moratorium on loans legislation implemented in your jurisdiction?
    2. If no: Are there any ongoing discussions regarding a potential introduction of such measures?
    3.  What is the name of the relevant legislation (the “Relevant Act”)?
    4.  What is the duration of the measures (period of moratorium)?
    5. Does the legislation provide for an extension of the period of moratorium?
    6. Is the moratorium mandatory, or can each borrower opt out should they wish to simply continue payments, or opt in if they want to be protected by the moratorium?
  2. Parties and agreements affected by the Relevant Act
    1. Is the moratorium available for both corporate and consumer loans?
    2. Who are the affected Lenders?
    3.  Does it make a difference whether loans are granted by a foreign entity and governed by foreign law?
  3. Impact on the loan agreements
    1.  Is there a cut-off date with respect to loan agreements to which the Relevant Act will apply (e.g. not applicable to loan agreements entered into after the cut-off date)?
    2.  Does the moratorium apply to principal only, or also to interest and/or fees?
    3. Will the maturity of the loan automatically be extended by the moratorium period?
    4.  Are repayments and interest which have become due and payable under the contract before the Relevant Act has come into force covered by the moratorium?
    5. Will lenders be able to terminate a loan due to an event of default other than non-payment (e.g. breach of financial covenants)?
Switzerland
Add jurisdiction
Choose a jurisdiction to compare with

1. Description of the legislation

1.1 Is there a moratorium on loans legislation implemented in your jurisdiction?

Due to the Coronavirus pandemic the Swiss Federal Council (Bundesrat) enacted on 18/20 March 2020 a general standstill/moratorium concerning all time limits in debt enforcement proceedings as well as, more generally, civil and administrative proceedings until 19 April 2020. Hence all pending debt enforcement proceedings were suspended, and it was no longer possible to start debt enforcement proceedings against debtors. This included debt enforcement proceedings of lenders against borrowers. However, these measures have not been extended and are thus – as of today (27 April 2020) – no longer in effect.

On 16 April 2020, the Swiss Federal Council enacted new temporary regulations aimed at protecting companies which are experiencing financial problems/the threat of bankruptcy due to the pandemic. These measures are still in place, but do not provide for an eo ipso moratorium. Rather, they concern:

  •  a temporary exemption from the obligation to report over-indebtedness
  • some facilitations regarding the existing debt-restructuring proceedings
  • a moratorium (the “COVID-19 Moratorium”) which SMEs may apply to a court for under certain circumstances.

During the COVID-19 Moratorium, no debt enforcement proceedings can be initiated against the debtor for the claims covered by the moratorium, nor can such proceedings be continued. However, the COVID-19 Moratorium is of procedural nature and, as such, does not have a direct impact on the contractual rights and obligations of the parties. Hence, claims under a contract remain, in principle, due and payable, but cannot be enforced anymore.

Loans are, as a rule, covered. There is, however, an exemption concerning mortgage-backed claims, which may still be pursued by way of specific enforcement proceedings (proceedings concerning enforcement of pledges (Betreibung auf Pfandverwertung)).

The following explanations concern the COVID-19 Moratorium.

1.2 If no: Are there any ongoing discussions regarding a potential introduction of such measures?

Not applicable.

1.3 What is the name of the relevant legislation (the “Relevant Act”)?

The legal basis of the COVID-19 Moratorium is the Ordinance on insolvency law measures to address the Coronavirus crisis (Verordnung über insolvenzrechtliche Massnahmen zur Bewältigung der Coronakrise;

https://www.admin.ch/opc/de/classified-compilation/20201083/index.html (available in German, French and Italian)).

1.4 What is the duration of the measures (period of moratorium)?

The COVID-19 Moratorium may be applied for an initial duration of up to 3 months.

1.5 Does the legislation provide for an extension of the period of moratorium?

Yes, the court may grant an extension of the COVID-19 Moratorium for up to another 3 months. 

1.6 Is the moratorium mandatory, or can each borrower opt out should they wish to simply continue payments, or opt in if they want to be protected by the moratorium?

The moratorium will be granted by a court upon application by the debtor. Hence, debtors must – so to speak – opt in by way of such application to a court.

2. Parties and agreements affected by the Relevant Act

2.1 Is the moratorium available for both corporate and consumer loans?

The moratorium may only be applied for by companies (sole proprietorship, partnerships or legal entities such as stock corporations or limited liability companies). Moreover, only SMEs may apply for the moratorium. Listed companies and large companies can thus not apply for the moratorium. Large companies are companies that exceeded two of the following thresholds in 2019:

  • a balance sheet total of CHF 20 million
  • revenues of CHF 40 million, or
  • 250 full-time employment equivalents on an annual average.

2.2 Who are the affected Lenders?

With the exemption mentioned under answer 1.1 (mortgage-backed claims which may still be enforced), all loans and the respective lenders are affected by the COVID-19 Moratorium.

2.3 Does it make a difference whether loans are granted by a foreign entity and governed by foreign law?

No, this does not make a difference. Only the debtor’s domicile in Switzerland is of relevance.

3. Impact on the loan agreements

3.1 Is there a cut-off date with respect to loan agreements to which the Relevant Act will apply (e.g. not applicable to loan agreements entered into after the cut-off date)?

The statutory rules on the COVID-19 Moratorium apply only to loans granted before the debtor obtained a COVID-19 Moratorium. If a loan is granted after the COVID-19 Moratorium has been obtained, claims under such loan can be enforced without limitations.

3.2 Does the moratorium apply to principal only, or also to interest and/or fees?

The COVID-19 Moratorium concerns all claims under loans which are covered, including such for interest and fees.

3.3 Will the maturity of the loan automatically be extended by the moratorium period?

No, the statutory rules on the COVID-19 Moratorium do not provide for such an automatic extension of the maturity date. However, they provide for a standstill of limitation and forfeiture periods concerning claims which are subject to the COVID-19 Moratorium.

3.4 Are repayments and interest which have become due and payable under the contract before the Relevant Act has come into force covered by the moratorium?

Yes, the COVID-19 Moratorium concerns also debt enforcement proceedings regarding such repayment and interest claims under loans, which are covered.

3.5 Will lenders be able to terminate a loan due to an event of default other than non-payment (e.g. breach of financial covenants)?

The COVID-19 Moratorium does not change the contractual rights and obligations of the parties. If provided for in the loan agreement, the contract may thus be terminated for payment default by the borrower even if a COVID-19 Moratorium was granted.

Whether a termination for payment default or any other event of default is possible depends on the individual terms of the loan agreement. It is therefore advisable to study the relevant terms carefully.

Authors

Show more Show less
Portrait ofReto Hunsperger
Reto Hunsperger, LL.M.
Partner
Zurich
Portrait ofMatthias Kuert
Dr Matthias Kuert, LL.M.
Partner
Zurich