Bills are accumulating, funding is delayed and the bank account is running down. Is the company already bankrupt? Not necessarily. But waiting for the next annual balance sheet can make matters worse and reduce the options available.
Bankruptcy is a procedure ordered by a court. A loss, a cash shortage and overindebtedness are different financial situations requiring different responses. Directors of a Swiss SA/AG or LLC must monitor these warning signs and act promptly.
Key points
- A profitable company can run out of cash; a company with money in the bank can still be overindebted.
- Articles 725–725b CO set out measures for impending insolvency, loss of capital and overindebtedness.
- The maximum ninety-day period available in a qualifying restructuring case is not an automatic grace period.
- Since 2025, public-law claims can also follow the bankruptcy route against debtors subject to it, after the applicable procedural steps.
- Bankruptcy of an LLC or SA/AG does not automatically make its owner liable for every debt. Personal guarantees and management liability must still be assessed.
Recognise three different warning signs
A cash shortage
Liquidity is the ability to meet payments when due. Sales may be profitable but still unpaid, while salaries, suppliers and social contributions are due now.
Example. A company has CHF 8,000 in the bank and expects CHF 70,000 from customers. It must pay CHF 35,000 within fifteen days. If customers will not pay for another two months, it has a short-term liquidity problem even if the receivables are genuine and recoverable.
Article 725 CO requires the board to monitor solvency and take necessary measures when insolvency threatens. This may require financing, restructuring measures or, where appropriate, an application for a debt restructuring moratorium.
Review the working capital requirement to understand the cash tied up in stock and unpaid customer invoices.
Loss of capital
Understanding the calculation: assets are what the company owns; liabilities are what it owes. The difference is equity. Loss of capital means that cushion has fallen substantially. Overindebtedness means liabilities exceed assets.
Loss of capital is a statutory threshold assessed from the annual accounts, not simply any loss during the year. Under Article 725a CO, assess whether assets less liabilities still cover half the sum of capital and the relevant statutory reserves that cannot be repaid to the owners.
Directors must take remedial measures. If the company has no statutory auditor, the accounts generally need a limited audit by a licensed auditor before approval. The law provides exceptions, including where an application for a debt restructuring moratorium is filed.
Example with no relevant statutory reserves: an SA/AG has CHF 100,000 of share capital. Assets after deducting liabilities leave only CHF 40,000 of equity. This is below the CHF 50,000 threshold, so there is a loss of capital. Equity is still positive: the company is not necessarily overindebted.
Overindebtedness
Overindebtedness arises when liabilities are no longer covered by assets valued under the relevant rules. You cannot establish it from the bank balance alone.
Simplified example. A company has CHF 25,000 in the bank and CHF 45,000 of other realisable assets. Liabilities are CHF 100,000. Despite positive cash, there is a CHF 30,000 shortfall. The statutory process for preparing and examining interim accounts is still needed to assess the position.
| Signal | Main question | Initial management response |
|---|---|---|
| Cash pressure | Can we pay on the due dates? | Forecast receipts and payments; arrange liquidity measures |
| Loss of capital | Has the statutory threshold been reached in the accounts? | Remedial measures and the required audit |
| Suspected overindebtedness | Do assets still cover liabilities? | Prepare and have interim accounts examined under Article 725b CO |
These provisions apply by analogy to Swiss LLCs within the statutory framework.
What should directors do if overindebtedness is suspected?
Where there are serious grounds to believe liabilities are no longer covered, the board must immediately prepare interim accounts at going-concern and liquidation values.
The law allows liquidation-value accounts to be omitted where continued operation is intended and going-concern accounts do not show overindebtedness. Where continuation is no longer envisaged, liquidation-value accounts are sufficient.
The accounts must be examined by the statutory auditor or, if there is none, a licensed auditor appointed for that purpose. An audit opting-out does not remove this specific examination requirement.
If the relevant accounts show overindebtedness, the court must be notified unless a statutory exception applies. Directors cannot replace this assessment with hope of a future sale or an imprecise promise from an investor.
Subordination of claims
Certain creditors may agree to defer their claims and rank behind other creditors to the extent needed. To qualify for the statutory exception from notifying the court, subordination must also cover interest due throughout the period of overindebtedness.
The arrangement must be properly drafted and sufficient. It does not, by itself, provide new cash or cancel the debt. A company can therefore obtain subordination and still be unable to pay current expenses.
Restructuring within a limited period
Court notification may also be deferred while there are serious grounds to believe overindebtedness will be eliminated in good time, at most within ninety days after the interim accounts are prepared, without further jeopardising creditors’ claims.
This is not general permission to wait three months. It requires a credible plan, concrete measures, monitoring and fulfilment of all conditions. Assess the starting date and position promptly with the relevant professionals.
Five situations that can weaken a business
These are monitoring priorities, not a statistical ranking: insufficient funding for the operating cycle, dependence on one large customer, neglected unpaid invoices, accumulating tax or social contribution debts and withdrawals beyond the business’s capacity. Pair each with a number and an action: a cash forecast, the largest customer’s revenue share, overdue receivables, public payment deadlines and a drawings budget.
Act without making the position worse
Four documents to gather immediately
- Weekly cash forecast: available funds, realistic receipts and payments on their due dates.
- Debt list: amount, creditor, due date, arrears, enforcement proceedings and any security.
- Recent accounts: identify doubtful receivables, unsaleable stock and other potential losses.
- Funding and commitments: shareholder loans, guarantees, credit facilities and decisions already taken by management.
This lets the accountant, auditor and legal adviser work from the same figures. Do not wait for a perfect file before reporting an emergency or taking legally required action.
Prepare a short-term cash forecast, for example week by week over thirteen weeks, distinguishing confirmed from hypothetical receipts. List all debts, due dates, security and off-balance-sheet commitments. Our cash-flow budget guide helps structure this work.
Reassess assets: an insolvent customer, unsaleable inventory or a project without a market may make the balance sheet look too favourable. Document assumptions and the measures agreed.
Contact the accountant, statutory auditor where appointed and a suitable legal adviser promptly. Coordinate the financial assessment with the governing bodies’ duties.
Avoid improvised responses such as preferentially repaying a shareholder loan, transferring assets cheaply to a new company, emptying an account or taking orders the business cannot reasonably fulfil. Depending on the facts, these transactions can be challenged and create liability.
A debt restructuring moratorium can provide a court-supervised framework to explore a recovery where the conditions are met. It does not guarantee survival, but financial difficulty does not always require immediate liquidation without considering the lawful alternatives.
How bankruptcy proceedings can begin
Bankruptcy may follow debt enforcement by a creditor against a debtor subject to that route, notification of overindebtedness or other cases provided by law.
The ordinary creditor-led route generally includes an enforcement request, a summons for payment, resolution of any objection, continuation of enforcement, a notice of impending bankruptcy and an application to the court. Sending an invoice or reminder does not automatically place a company in bankruptcy. Our unpaid invoices guide explains the earlier collection stages.
The court decides according to the statutory conditions and the evidence. Never ignore a hearing or official document because informal negotiations are taking place.
Since 2025, public debts can also lead to bankruptcy
On 1 January 2025, paragraphs 1 and 1bis of Article 43 of the Federal Act on Debt Enforcement and Bankruptcy (DEBA) were repealed. Public-law claims, including taxes, VAT, contributions, fees and fines, as well as compulsory accident insurance premiums, can therefore follow the bankruptcy route against a debtor subject to it under Article 39 DEBA. The remaining Article 43 exceptions concern the specified family or registered-partnership maintenance claims and the provision of security.
This affects SA/AG companies, LLCs and, where the legal conditions apply, registered sole proprietors. It does not give authorities a general power to order immediate bankruptcy without the applicable steps. Nevertheless, allowing VAT, tax and contribution debts to build up can now lead to this outcome through bankruptcy enforcement.
Main deadlines in bankruptcy enforcement
These are reference points for the ordinary creditor-led procedure. They do not replace an obligation to notify the court promptly where overindebtedness requires it.
| Stage | Period and starting point | Legal basis |
|---|---|---|
| Object to the summons for payment | 10 days from service | Article 74 DEBA |
| Request continuation of enforcement | From 20 days after service of the summons; the right expires after one year, subject to periods excluded from the calculation | Article 88 DEBA |
| Apply for bankruptcy | From 20 days after service of the notice of impending bankruptcy; no later than 15 months after service of the summons, subject to excluded periods | Article 166 DEBA |
| Submit a claim to the bankruptcy office | One month from publication of the call to creditors | Article 232 DEBA |
| Discontinuation for lack of assets | 20 days from publication to request liquidation and provide the required security for costs | Article 230 DEBA |
An objection must be dealt with before enforcement continues. Where court proceedings are needed to set it aside, certain periods are excluded from the one-year and fifteen-month calculations. Publication in the Swiss Official Gazette of Commerce, SOGC/FOSC, is authoritative under Article 35 DEBA. Always read the official notice for the responsible office and case-specific deadline.
Where can you find Swiss bankruptcy notices?
The Swiss Official Gazette of Commerce publishes bankruptcy notices. It is called FOSC in French and SHAB in German. To search for a company or notices in a canton:
- Open the publication search and select the bankruptcy category.
- Enter the company name or UID number. For a local list, filter by canton, such as Geneva or Vaud, and date range.
- Read the full notice: opening of bankruptcy, a call to creditors, discontinuation for lack of assets and closure have different meanings.
- Record the office, case reference and deadline before submitting your claim with supporting documents.
A Zefix search supplements this by showing commercial register entries, including dissolution. It does not replace reading the bankruptcy notices. No result within a limited date range is not proof of solvency.
What happens after bankruptcy is opened?
Administration and inventory
The bankruptcy is administered under DEBA, usually by the bankruptcy office.
Assets are inventoried and the position assessed. The debtor and its governing officers must cooperate and provide the required information and documents. They lose the freedom to dispose of assets forming part of the bankruptcy estate. Those assets cannot continue to be used as though no proceedings existed.
Filing creditors’ claims
Creditors are asked to submit claims and supporting evidence to the competent administration within the published deadlines. An invoice already sent to the company is not necessarily a claim filed in the bankruptcy.
Claims are examined and ranked. Any challenge follows the prescribed procedure and time limits.
Realising assets and distributing proceeds
Assets are sold and available proceeds distributed under the legal rules, after costs and the particular treatment of secured claims. Ordinary creditors do not all rank ahead of or behind a single uniform category of “tax debts”.
Certain employee and social insurance claims enjoy priority under specified conditions. A tax claim is not automatically privileged simply because an authority holds it. Determine priority according to the nature of each claim.
If assets cannot even cover the costs, proceedings may be discontinued for lack of assets, with the statutory consequences. There is not always a lengthy liquidation followed by a partial payment to every creditor.
Proceedings are then closed according to the case. For a company, removal from the register follows the applicable formalities.
Consequences for owners and directors
An SA/AG or LLC owner can lose the value of their equity and loans to the company. They do not automatically become personally liable for every company invoice.
Exposure may nevertheless arise from unpaid capital, personal guarantees, an LLC’s statutory additional-contribution obligations, benefits that must be repaid or management liability.
A board member’s or managing director’s liability is not restricted to fraud or gross misconduct. A culpable breach of duties, including negligence where the applicable rule provides for it, can create liability when the other conditions are met. Specific rules, including those concerning social insurance contributions, may also apply. See our Swiss board of directors guide.
For a sole proprietorship, the person and the business do not have legally separate estates. Personal bankruptcy does not automatically erase unpaid debts. Certificates of loss and the conditions for later enforcement need to be considered.
Creating a new company does not make personal obligations disappear or allow assets to be removed from the old company’s creditors. Any restart must respect the proceedings and affected rights.
Voluntary liquidation or bankruptcy: what is the difference?
If the company can pay its debts and you want to stop trading, see the steps for closing and voluntarily liquidating a Swiss company.
A solvent company can choose to cease business and organise closure through dissolution and liquidation. Bankruptcy is a judicial procedure in which assets are administered and realised for creditors. Simply announcing that you are “closing the company” does not replace the duties triggered by overindebtedness.
How to close a Swiss LLC or company limited by shares
This French-language video explains company closure, from dissolution to removal from the register. It complements the guide’s distinction between voluntary liquidation and court-ordered bankruptcy.
Explore the Entreprendre en Suisse avec Sarah et Romain channel →
Our guide to business liability explains how exposure differs between the business, its owners and its directors.
Address warning signs while options remain
The first objective is to understand the position early enough to make the right decisions. Cash monitoring, reliable interim accounts and documented decisions are useful long before proceedings begin.
If payments can no longer be met or equity is deteriorating, review your accounting and financial position and coordinate the necessary legal action promptly. The statutory timetable should not depend on the date of the next annual balance sheet.
Book a call to clarify your accounting position with our team, without postponing any urgent legal measures.
Frequently asked questions
Does a low bank balance mean the company is overindebted?
No. A liquidity shortage concerns the ability to pay on time. Overindebtedness concerns whether assets cover liabilities. Both can occur together, but require separate analyses.
Can directors wait ninety days before notifying the court?
Not automatically. The restructuring exception requires, among other things, serious grounds to expect overindebtedness to be eliminated within the statutory period without further jeopardising creditors’ claims.
Does opting out of an audit remove the need to examine interim accounts?
No. Where Article 725b CO applies, a licensed auditor must examine the interim accounts even if the company has no permanent statutory auditor.
Can unpaid VAT lead to bankruptcy in Switzerland?
Yes, for a debtor subject to bankruptcy enforcement, under the rules applying since 2025 and after the applicable procedural steps. A tax bill alone does not trigger immediate bankruptcy.
Are tax debts always paid before suppliers?
No. Ranking depends on the nature of the claim and statutory priorities. Tax claims do not all automatically rank ahead of ordinary creditors.
Must the director repay all company debts?
Not simply because an SA/AG or LLC becomes bankrupt. Personal commitments and the conditions for any management liability must be assessed. A sole proprietorship has a different legal position.
Where can I find companies in bankruptcy in Switzerland?
Search the bankruptcy publications in the Swiss Official Gazette of Commerce, SOGC/FOSC/SHAB. Use a company name or UID number, or filter by canton and date. Read the full notice for the office, type of publication and case deadlines.
Sources and references
- Federal Act on Debt Enforcement and Bankruptcy — English: Articles 35, 39, 43, 74, 88, 166, 230 and 232.
- Swiss Code of Obligations — English: Articles 725–725b, 754, 820 and 827.
- Geneva judiciary: bankruptcy procedure — French.
- Geneva: the bankruptcy procedure and 2025 changes — French.
- Geneva: effects of opening bankruptcy — French.
- Federal Office of Justice: preventing abuse of bankruptcy proceedings — French.
Last editorial review: 5 November 2026. Examples are simplified. Legal measures depend on the accounts and actual circumstances; official-language legislative texts are authoritative.
Romain Prieur is a Swiss Certified Public Accountant and founder of Entreprendre.ch. With more than ten years of experience in audit and business advisory in Switzerland, he advises entrepreneurs on company formation, accounting and tax.
