The provisions regarding reorganisation measures were amended in the course of the revision of company law. Within the scope of these amendments, the revised provisions on over-indebtedness and loss of capital as well as the new offence of imminent insolvency were introduced. With the amendments, the legislator wanted to concretise and expand the duties of the board of directors in particular. The revised provisions are found in Art. 725 – 725c CO. The aim is to promote the earliest possible restructuring steps and thus to better protect creditors in the future. It should be noted that the provisions apply equally to the GmbH.
Violation of the provisions may result in liability for damages under Art. 754 CO (liability under company law), and criminal consequences under Art. 165 SCC (mismanagement) may come into consideration.
Imminent insolvency (Art. 725 CO)
The new offence of imminent insolvency is intended to heighten the board’s awareness of liquidity and to establish duties to act to avoid insolvency. The board of directors is obliged to continuously monitor the financial stability of the company. If there are signs of insolvency, he must immediately take appropriate steps to secure the financial situation. If necessary, it must take further restructuring measures or propose them to the general meeting. If necessary, the board of directors must submit an application for a moratorium. The law does not define the term “imminent insolvency”, so the board has considerable discretion.
Loss of capital (Art. 725a CO)
If the last annual financial statements show that assets less liabilities no longer cover half of the sum of share capital, statutory capital reserve not repayable to shareholders and statutory profit reserve, the board of directors must take measures to eliminate the capital loss. It shall, if necessary, take further measures to reorganise the company or propose such measures to the general meeting. If the company does not have an auditor, the last annual financial statements must also be subjected to a limited audit by a licensed auditor before they are approved by the general meeting. The audit obligation does not apply if the board of directors submits an application for a debt-restructuring moratorium.
Over-indebtedness (Art. 725b CO)
If there is reasonable concern that the company’s liabilities are no longer covered by its assets, the board of directors must immediately prepare interim financial statements at going concern values and at realisable values. In certain cases, one of these two interim financial statements may be waived. The board of directors must have the interim financial statements audited by the auditors or, in the absence thereof, by an approved auditor. If the company is over-indebted according to the two interim financial statements, the board of directors shall notify the court. The court shall declare bankruptcy or proceed in accordance with Article 173a SchKG. Art. 725b para. 4 CO defines cases in which the notification of the court can be omitted.
