New law inflates bankruptcy rate

2008 saw bankruptcies in the canton of Zug rise by over 20%, from 240 to 289. The majority of these cases came in the second half of the year, as the economic climate took a turn for the worse.

 

However, a change in the Swiss Code of Obligations (OR) led to 42 of the extra 49 cases. A new clause entitled "Organisational deficiencies within a company" (Article 731b of the OR) came into force on 1 January 2008 and applies to firms whose boards are not correctly constituted in the eyes of the law. Shareholders, creditors or the chamber of commerce are then entitled to apply to the courts for appropriate measures to be taken. If the company does not cooperate then it can be wound up by the court and then its assets liquidated by the bankruptcy office.

 

Once the "Article 731b" companies are removed, there is little difference between the 2007 and 2008 figures, and the most common reason for opening bankruptcy proceedings remains debt recovery, followed by the company itself filing for bankruptcy or declaring insolvency.

 

The certificates of unpaid debts in 2008 were only half as high as the previous year (CHF 212.8 million compared with 424.8 million in 2007), despite virtually the same number of bankruptcy proceedings being opened. Also, despite the change in the law, the number of bankruptcies in 2008 is still below the "record" of 2005, when 305 proceedings were opened. Until Article 731b was introduced, cases had steadily fallen until reaching 240 in 2007.