Asset Realisation in Enforcement and Bankruptcy

Asset Realisation in Enforcement and Bankruptcy in Switzerland

Modes of Asset Realisation in Switzerland

The Swiss legal system offers a precise framework for the realisation of assets of insolvent debtors. This process constitutes the culmination of enforcement proceedings, allowing creditors to recover their claims through the sale of the debtor's assets. Whether in ordinary enforcement proceedings or bankruptcy, realisation mechanisms follow strict rules defined principally by the Federal Act on Debt Enforcement and Bankruptcy (DEBA). Our law firm daily assists creditors and debtors in these complex procedures, where knowledge of the legal subtleties often makes the difference between optimal realisation and significant loss of value.

Legal Foundations of Asset Realisation in Switzerland

Asset realisation in the context of enforcement proceedings in Switzerland rests on a solid legal framework, the cornerstone of which is the Federal Act on Debt Enforcement and Bankruptcy (DEBA). This legislation, supplemented by the Ordinance on the Seizure and Realisation of Shares in Communities and various implementing ordinances, precisely defines the modalities of forced sale of a debtor's assets.

The Swiss system makes a fundamental distinction between two paths of enforcement: enforcement by way of seizure and enforcement by way of bankruptcy. This distinction directly influences the rules applicable to asset realisation. In the first case, only certain specifically designated assets are realised, while in the second, the debtor's entire attachable assets are liquidated.

Swiss law nonetheless protects certain assets against forced realisation. Article 92 DEBA lists non-attachable assets, including in particular items necessary for the exercise of a profession, indispensable personal effects and a financial subsistence minimum. This protection aims to preserve human dignity and the debtor's basic means of subsistence despite their insolvency.

Guiding Principles of Realisation

Several fundamental principles govern asset realisation:

• The principle of proportionality: only assets necessary to satisfy creditors should be realised
• The principle of promptness: realisation must take place within reasonable periods
• The principle of value maximisation: the objective is to obtain the best possible price
• The principle of equality among creditors of the same rank

Our law firm systematically ensures respect for these principles, whether we represent a creditor or a debtor.

Realisation in Ordinary Enforcement Proceedings

In ordinary enforcement proceedings, realisation occurs as the final step after seizure. Once assets have been seized by the enforcement office, the creditor may request their realisation no earlier than one month after the seizure has been carried out, but no later than within a period of one year (art. 116 DEBA). This period constitutes a major strategic aspect that our law firm carefully explains to creditors to optimise their chances of recovery.

The realisation process in ordinary enforcement proceedings generally follows these steps:

Sale Request and Fixing of Terms

The creditor must address a sale request to the competent enforcement office. The latter then determines the practical modalities of the realisation: date, venue, form of sale, publicity. These elements are crucial as they directly influence the final proceeds of the sale.

Modes of Realisation in Ordinary Enforcement Proceedings

Swiss law provides for different realisation methods adapted to the nature of the assets:

• Public auctions: main mode of realisation, publicly announced and accessible to all
• Private sale: possible with the agreement of all interested parties or when assets are subject to rapid depreciation
• Tender process: used in certain particular cases
• Assignment at estimated value: the asset may be attributed to the pursuing creditor at its estimated value

For creditors and debtors we advise, the choice between these different methods represents a considerable issue. Our law firm carefully analyses the characteristics of the assets concerned to recommend the most advantageous method depending on our client's position.

Real property is subject to specific rules, with a more formalised procedure including a call to mortgage creditors and publication of a statement of encumbrances. The real estate auction sale process is governed by particular provisions aimed at guaranteeing transparency and obtaining the best possible price.

Once the sale is completed, the proceeds are distributed among creditors according to the priority order established by law, after deduction of procedure costs. Any surplus is returned to the debtor.

Realisation of Assets in Bankruptcy Proceedings

Asset realisation in the context of bankruptcy presents significant particularities compared to ordinary enforcement proceedings. First, it concerns the entirety of the debtor's attachable assets and not just certain specific assets. Second, it is managed by the bankruptcy administration, which may be either the bankruptcy office or a special administration designated by the creditors.

The first creditors' meeting plays a determining role in the realisation process. It may notably decide on the timing of realisation, choose between ordinary or summary liquidation, and designate a special administration. These strategic decisions considerably influence the efficiency and yield of the liquidation.

Modes of Realisation in Bankruptcy

As in ordinary enforcement proceedings, several realisation methods are possible:

• Public auctions: preferred method to guarantee transparency
• Private sale: possible with creditors' approval, particularly suitable for complex or specific assets
• Block realisation: concerning a set of assets forming an economic unit

The realisation of real property in bankruptcy follows a procedure similar to that of ordinary enforcement proceedings, with however some specificities linked to the bankruptcy context. The bankruptcy administration generally has greater latitude to determine the optimal moment of the sale, depending on market conditions.

A particular aspect of bankruptcy concerns the realisation of ongoing rights and claims of the bankrupt. The administration may decide either to collect them directly, assign them to interested creditors, or sell them to third parties. Our law firm frequently intervenes to advise creditors on the advisability of acquiring certain claims of the bankrupt, which may sometimes represent interesting opportunities.

The proceeds of realisation are then distributed among creditors according to the order of privileges established by law (art. 219 DEBA), after drawing up a collocation schedule which may be subject to judicial contests.

Particularities of Realisation of Certain Asset Types

Swiss legislation provides specific rules for certain categories of assets whose nature or legal regime justifies particular treatment upon realisation.

Real Property and Real Property Rights

The realisation of real property often constitutes the major financial issue of enforcement proceedings. Swiss law strictly governs this realisation through specific provisions (arts. 133 to 143b DEBA for enforcement proceedings, arts. 257 to 259 DEBA for bankruptcy).

Several particularities merit highlighting:

• The obligation to establish a statement of encumbrances detailing all real rights encumbering the property
• The mandatory publication of auctions in the Official Gazette
• The rules concerning the minimum price below which adjudication is not possible
• The treatment of easements and other real rights upon sale
• The conditions of assumption of mortgage debt by the purchaser

Specific Movable Assets

Certain movable assets require adapted treatment:

Securities and values (shares, bonds) are generally realised via financial markets when listed, or through specific sales when they are not. The valuation of these assets can prove complex, notably for unlisted securities of private companies.

Intellectual property (patents, trademarks, copyright) represents a particular challenge in terms of valuation and realisation. Their value strongly depends on the commercial context and their exploitation potential.

Shareholdings in companies, notably in GmbHs or partnerships, are subject to specific modalities taking into account any statutory restrictions on the transfer of shares.

Digital assets and cryptocurrencies raise new legal questions to which practice and case law are progressively providing answers. Our law firm closely follows these developments to offer advice adapted to contemporary technological realities.

Contemporary Challenges and Strategic Aspects of Realisation

Asset realisation in enforcement proceedings in Switzerland faces several challenges that require a sophisticated and up-to-date legal approach.

Optimising Realisation Value

One of the main current issues consists of obtaining the best possible price during realisation, in the interest of both creditors and the debtor. Several factors influence this valuation:

• The timing of realisation, particularly sensitive for assets subject to market fluctuations
• The judicious choice of realisation mode depending on the nature of the assets
• The quality of preparation and documentation of the sales
• The accessibility to potential buyers, notably international ones for certain specific assets

Our law firm regularly intervenes to contest undervalued assessments or to propose alternative realisation modalities more advantageous for our clients.

Protection of Legitimate Interests During Realisation

A frequently overlooked but fundamental aspect concerns the protection of the legitimate interests of all stakeholders during the realisation process:

• The protection of personal data upon sale of digital assets
• The preservation of trade secrets in the realisation of businesses
• The respect of third-party rights (tenants, licence holders, etc.)
• The prevention of delaying manoeuvres or fraudulent ones aimed at artificially depreciating the value of assets

These considerations require particular vigilance and anticipation capacity that our law firm puts at the service of its clients, whether creditors seeking to optimise their recovery or debtors wishing to ensure that their assets are not sold at a loss.

Frequently Asked Questions on Asset Realisation in Enforcement and Bankruptcy