Insolvency Law in Comparison: Switzerland – Austria – Liechtenstein

What happens when a company becomes insolvent? The legal answers to this question vary significantly depending on the country. This article provides a brief overview of the key differences between insolvency law in Switzerland, Austria, and Liechtenstein.

Insolvency Law in Switzerland

In Switzerland, the term 'insolvency' is not commonly used; instead, the process is referred to as bankruptcy proceedings. These can be initiated either by a creditor through debt enforcement or by the debtor in the event of over-indebtedness. Key points include:

• Central role of the bankruptcy office: Upon the opening of bankruptcy, the bankruptcy office takes over the administration of the assets.

• Two types of proceedings: The summary procedure (simplified process) is the norm, while the ordinary procedure includes creditors' meetings.

• Debt restructuring moratorium: Companies can apply for a court-supervised restructuring process to explore reorganization and debt relief.

Insolvency Law in Austria

Austria has a differentiated system with several types of proceedings:

• Reorganization proceedings (with or without self-administration)

• Insolvency proceedings

• Personal bankruptcy (debt regulation for natural persons)

An insolvency proceeding is initiated when insolvency or over-indebtedness is present. These are technical terms with significant legal implications.

Key features include:

• Reorganization plan: Companies can avoid insolvency by submitting a reorganization plan with a minimum quota of 20% within two years.

• Self-administration: With proper preparation, companies can reorganize under court supervision.

• Insolvency administrator: Manages the insolvency estate and represents creditors' interests.

Insolvency Law in Liechtenstein

At the beginning of 2021, Liechtenstein implemented a comprehensive reform of its insolvency law. The goal of the reform is to provide better opportunities for economic reorganization for both companies and individuals—in line with the guiding principle 'reorganization instead of liquidation'.

Key points of the reform include:

• Unified insolvency procedure: Reorganization and bankruptcy proceedings are grouped under the term 'insolvency proceedings'.

• Reorganization plan with self-administration: Companies can reorganize under certain conditions with a reduced minimum quota of 20%.

• Strengthening creditors' rights: Introduction of a creditors' committee for better oversight and participation.

• New personal bankruptcy rules: Introduction of three types of proceedings—reorganization plan, payment plan, and garnishment procedure with debt discharge after five years.

• Contract protection: Termination and withdrawal rights of contractual partners are restricted during reorganization.

The reform is strongly based on Austrian insolvency law and international standards (UNCITRAL) and represents a significant step toward modernizing Liechtenstein's business law.

Would you like to know what opportunities and risks cross-border insolvency law entails? Maier Attorneys at Law will support you.