Liquidating a Swiss company: solvent winding-up versus bankruptcy

Two ways a Swiss company ends

Ending a company is not a single procedure but a choice between two, and the choice is not the directors' to make freely. Swiss law separates the orderly winding-up of a company that can pay everyone from the insolvency liquidation of one that cannot, and it assigns each to a different statute, a different set of officials and a different order of priorities.

Solvent liquidation lives in the Code of Obligations and serves the shareholders: once every creditor has been paid in full, the surplus belongs to the owners, and the procedure exists to make sure that "paid in full" is true before anyone takes a distribution. Bankruptcy lives in the SchKG and serves the creditors: there is not enough to go round, so the law takes the estate out of the company's hands, ranks the claims and shares out what exists. A board that liquidates voluntarily when the company is in fact over-indebted has used the shareholders' procedure to defeat the creditors' one, which is exactly what art. 725b is written to prevent. So the threshold question in every wind-up is the balance sheet, covered in our guide to over-indebtedness and the board's duties.

Solvent voluntary liquidation, step by step

A solvent liquidation is a defined sequence under arts. 736 and following of the Code of Obligations, and each step has a legal form that the commercial register will check. The company does not vanish on the day the shareholders decide to close it; it passes into a liquidation state and stays there, trading only to wind itself down, until the estate is settled.

Dissolution is a shareholders' decision taken by public deed, after which the company carries the suffix "in liquidation" so that everyone dealing with it is on notice. The liquidators, normally the sitting directors, take over the running of the wind-up, and at least one of them must be resident in Switzerland with authority to represent the company, the same representation requirement that applies to a trading company. Their first substantive act is the call to creditors, and from there the work is the unglamorous core of any liquidation: pay the debts, sell the assets, close the contracts, and produce accounts that show the estate is clear. Only then does the question of distributing anything to the owners arise, and only then does the waiting period start to matter. Confirming the company's seat and bodies in the commercial register is part of getting the dissolution entry accepted.

The call to creditors and the waiting year

Two creditor-protection mechanisms govern the back half of a solvent liquidation, and together they decide how long it takes. The first is the call to creditors (Schuldenruf): the liquidators publish a notice three times in the Swiss Official Gazette of Commerce inviting anyone owed money to register their claim. The point is to flush out creditors the company may have forgotten or never recorded, before its assets leave for the shareholders. A debt that is known is simply paid; the call exists for the ones that are not.

The second is the waiting period, the Sperrjahr. Under art. 745 of the Code of Obligations, the surplus may be distributed to shareholders only after the debts are settled and one year has passed from the day of the third call to creditors. That year is the creditors' window to come forward. Since the company-law revision in force on 1 January 2023, the wait can be shortened to three months where a licensed audit expert confirms that the debts are settled and no third-party interests are jeopardised, a welcome route for clean liquidations that previously had to sit idle for a full year. The period is not a formality a hurried seller can skip: distributing before it runs, without the audit confirmation, exposes the liquidators, because it is exactly the act the rule is there to stop.

When the company is insolvent: bankruptcy

Bankruptcy is the other path, and a company reaches it when solvency fails. Where the company is over-indebted, its assets no longer covering its liabilities, the board may not wind it up voluntarily and pay out the owners. Under art. 725b of the Code of Obligations it must draw up interim balance sheets at going-concern and liquidation values, have them audited, and notify the court unless a sufficient subordination of claims or a realistic, prompt restructuring closes the gap. The court then generally opens bankruptcy (Konkurs).

From that point the company loses control of its estate. The bankruptcy office (Konkursamt) takes over, calls in the assets, and administers them under the SchKG for all the creditors together. The creditors register their claims, the office draws up a schedule of claims (Kollokationsplan) that ranks them into the statutory classes, and the proceeds are distributed by rank: the first-class claims, such as defined employee entitlements, before the second class, and the ordinary unsecured creditors of the third class last, often for a fraction of what they are owed. Where a viable business is trapped inside the failing company, the better answer may be a composition moratorium or a sale rather than a straight bankruptcy, which is the judgment to make before the court notice, not after. When the bankruptcy closes, the company is deleted.

What liquidation does not do

A wind-up is often treated as a clean exit that ends every loose thread at once. It is narrower than that, and three points catch people out.

Deletion does not erase the directors' liability. Removing the company from the register ends the entity, not the claims against the people who ran it. Liability for breach of duty, above all for distributing assets or trading on while the company was over-indebted, survives deletion and is routinely pursued out of a later bankruptcy. A correct liquidation is part of how directors protect themselves; a sloppy one is where the liability is created.

Solvent liquidation is not available to an insolvent company. The voluntary, shareholder-serving procedure is lawful only while the company can pay its creditors in full. Once it is over-indebted, choosing liquidation over the art. 725b court notice is not a saving of time but a breach of duty. The procedures are not interchangeable, and solvency is what decides which one the law permits.

It does not let a company outrun its creditors. The call to creditors and the waiting year exist precisely so that winding up is not a way to empty a company before the people it owes can act. Claims that are registered, or that surface during the wait, have to be met before anything reaches the shareholders, and an unpaid creditor can still enforce against the estate. Liquidation closes a company; it does not discharge its debts behind the creditors' backs.

How a wind-up is run in practice

The work divides cleanly along the solvency line, and so does our role. For a solvent company, we run the liquidation from the dissolution deed through the calls to creditors, the settling and realisation of the estate, the waiting period and the final deletion, keeping the liquidators on the right side of the distribution rules throughout. Our company liquidation service covers that whole sequence. For an over-indebted company, we handle the art. 725b notice and act through the bankruptcy, whether for the board that has to file, the company, or a creditor protecting its position.

The decision that matters most comes first and is the same one the statute turns on: is the company actually solvent. We answer that honestly before choosing a procedure, because a voluntary liquidation built on an over-optimistic balance sheet is how an orderly exit becomes a personal claim against the directors. The rest of our litigation, debt and insolvency guides set out the enforcement, moratorium and over-indebtedness rules that surround the wind-up.