The Swiss Federal Council has decided not to extend the COVID-19 Insolvency Regulation beyond October 20, 2020. There is an urgent need for action for companies that have relied on the temporary suspension of the over-indebtedness notification.

With the ordinance of April 16, 2020, the Swiss Federal Council had put together a package of measures to deal with the corona crisis. The measures were adopted for a period of 6 months and are valid until October 19, 2020. Among other things, the temporary suspension of the notification of over-indebtedness pursuant to Art. 725 of the Swiss Code of Obligations (CO) was intended to prevent a wave of bankruptcies caused by COVID-19.

With its decision on October 14, 2020, the Federal Council decided that the suspension of over-indebtedness notice will not be extended. This means that from October 20, 2020 the ordinary regulation according to Art. 725 CO will apply.

Given the increasing number of COVID-19 cases over the past few days and the resulting new measures, certain assumptions and scenarios need to be reassessed. For certain Boards of Directors, which have relied on the temporary suspension of the over-indebtedness notification, there is an urgent need for action. Similarly, companies that have or are likely to get into a distressed situation as a result of recent developments will also need to react promptly, as they will not be able to rely on the special regulation.

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