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Hans Caspar von der Crone, Bettina Kopta-Stutz, Loïc Pfister Some Theses Concerning Modern Swiss Reorganization Law Going Concern and Corporate Governance

The Swiss reorganization law [1] does not meet the ence on debtor’s behavior before bank- ruptcy [6]. This legal enforcement should demands of a modern reorganization law in many re- strengthen the creditors’ expectations spects. A radical reform is overdue [2]. It is today largely that the debtor would meet its obliga- tions. Thus, it offers an incentive for the approved that reorganization proceedings under judi- creditors to give (more) credit [7]. From cial protection are initiated too late. As a consequence, this point of view, a «debtor-friendly» reorganization law can provide incen- business operations collapse. One of the main goals of tives that adversely affect the economy. a future reformation has therefore to be the mainte- On the other hand, a company’s bank- nance of business operations. Below, some basic con- ruptcy and liquidation normally causes siderations about these goals and – to begin with – high costs to the economy. The transi- tion from a running company to mere the legal purpose of reorganization law are taken into assets typically involves a substantial account.* loss of value [8]. Moreover, employees, suppliers, and customers depend on the company for their subsistence or finan- cial prosperity. They all stand to suffer from the collapse of the company [9]. 1. Legal Purpose resources in the economy. The alloca- These additional losses to the economy tion function ensures that the resources have to be taken into account in order Looking into the reorganization law in- of the economy are allocated to compa- to attain allocative efficiency. Liquida- duces us, first of all, to question wheth- nies that make the best use of them [5]. tion does not always result in efficient er the policy of law demands a reor- Furthermore, bankruptcy not only as- allocation of resources. In fact, a more ganization law and, if so, what its legal sumes the liability, but also has, through efficient allocation of resources can be purpose should be. The main issue of threat of sanction, a preventive influ- in some cases achieved by reorganizing these considerations is whether a com- the company [10]. pany’s bankruptcy and liquidation – as a painful, but inevitable consequence Concerning the prevention of frivolous of the market-based mechanism – or its running into debt, it is important to no- reorganization is the more reasonable tice that threat of bankruptcy often fails solution in terms of economic and so- to have its intended preventive effect. cial policy. In order to discuss this issue The preventive effect is based on the as- it is necessary to contemplate it from sumption that those who manage the two different points of view [3]: company are also the company’s own- ers [11]. Indeed, there are many sole On the one hand, bankruptcy is the proprietorships in the Swiss economy. legal enforcement measure by which However, most of the major enterprises unprofitable companies are liquidated, with a large damage potential are incor- thus freeing the economy from these porated companies [12]. In all these harmful elements [4]. In doing so, bank- companies, ownership and management ruptcy serves the efficient allocation of are separated with the consequence that bankruptcy all too often affects in- Hans Caspar von der Crone, Prof. Dr., nocent people [13]. Moreover, it must * This article is a part of the project «Corporate Professor of Private, Commercial, and be pointed out that economic progress Governance and Reorganization of Companies» Corporate Law at the Faculty of Law, supported by the Swiss National Science Founda- University of Zurich, Zurich depends on the willingness to take ex- tion [project number 101411-104138]. tended risks [14].

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Hans Caspar von der Crone, Bettina Kopta-Stutz, Loïc Pfister, Some Theses Concerning Modern Swiss Reorganization Law

In our opinion, the reasons backing the ity there are empirical ratios concerning Assuming the shareholders have decid- need of a reorganization law prevail. both indicators, which can be consult- ed to establish an early warning system, Therefore, it is the responsibility of a ed [23]. the board of directors is the body quali- progressive legal system to offer finan- fied to select and determine in detail cially distressed companies an up-to- In view of companies’ diverse econo- the expedient liquidity and equity ratios date reorganization procedure as a real mic circumstances and their fluctuating in the company’s articles of corporation. alternative to bankruptcy. In doing so, need for liquidity and equity capital It has, due to its duties, the required the legal purpose should not be to avoid depending on the sector and the stage of know-how as well as the specific know- bankruptcy at any price, but to achieve development, concrete legislative regu- ledge of the company and its line of a «symbiosis» between reorganization lation is not appropriate [24]. Instead, business [26]. and bankruptcy [15]. Each individual for flexibility, companies decide them- case should be analyzed as to whether selves on the adequate ratios suitable for The proposition given above may be reorganizing the company makes sense their business. To maintain transparen- outlined by the following: The statutory from an economic point of view. At cy, they should write them in the articles power is conferred at the shareholders’ the same time, the reorganization pro- of corporation. In doing so, it is up to meeting to enable the board of direc- cedure has to be implemented in such the shareholders to decide whether to tors to write down the suitable liquidity a manner that the going concern is establish such a system [25]. This option and equity ratios in the company’s ar- kept [16]. is justified by the fact that an early ticles of corporation. In doing so, the warning system can have momentous board of directors is responsible for the consequences on the future of the com- appropriate selection of the ratios, tak- 2. Going Concern pany, and thus on the shareholders’ in- ing into consideration the specific eco- terests. The system allows the board of nomic circumstance of the company 2.1 Current Law directors to file for reorganization pro- and its line of business. ceedings with direct consequences on Under the current Swiss reorganization the shareholders’ interests before the law, the board of directors of a company company’s liabilities exceed its assets. 2.3 Initiation of is de facto not able to file for bank- Considering this fact, even the credi- Reorganization Proceedings ruptcy until the company’s liabilities tors’ interests do not justify the legal exceed its assets [17]. But by that time, duty to establish an early warning sys- As mentioned above, an early warning a company is normally no longer finan- tem. Furthermore, it should be taken system can form a trigger mechanism to cially able to continue its business [18]. into account that the institution of such file for reorganization proceedings in Maintaining the ability to remain in a system is in the interest of the share- good time. However, there is no incen- business requires earlier initiation of holders as well. The owners acquire an tive for the board of directors to file for reorganization proceedings [19]. Reor- additional instrument for monitoring reorganization proceedings [27]. There- ganization proceedings should be ini- the management’s performance. This fore, the board of directors should tiated at a time when there are still allows them to exercise their member- be legally obligated to take care of the enough equity capital and liquid assets ship rights earlier than today in an emer- going concern. It must take action at to maintain the business operations. gency. the very moment when the require- ments for the continuation of business, i. e. equity capital and liquidity, will not 2.2 Early Warning System be met in the foreseeable future [28]. As a consequence, the board of direc- For this purpose, the current trigger tors has to be able to file for reorgani- mechanism that the company’s liabili- zation proceedings under judicial pro- ties have to exceed its assets, should be tection at the time when the going con- complemented by an early warning sys- cern is no longer guaranteed in the tem based on equity ratio and liquidity foreseeable future [29]. The court must ratios. Liquidity squeezes are critical have the power to grant the petition for for the going concern: When the ability reorganization proceedings as soon as to pay in the foreseeable future is not the board of directors substantiates by guaranteed, the going concern is com- prima facie evidence that the going promised as well [20]. Furthermore, in concern is compromised in the short to every commercial activity an adequate middle term. The opening of reorgani- amount of equity capital is needed to be zation proceedings does not require the able to provide the company with the Bettina Kopta-Stutz, lic. iur., research company’s liabilities exceed its assets. necessary working funds and to cover fellow in the project «Corporate Gover- Moreover, the company does not have loss [21]. Therefore, liquidity ratios and nance and Reorganization of Companies» to be insolvent. an equity ratio are suitable indicators led by Professor Hans Caspar von der Crone, currently visiting scholar at Yale for a financial crisis in any company [22]. Law School, New Haven/USA According to the current law, the in- Moreover, for every commercial activ- junction that stops foreclosure, garnish-

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ments, and collection activity against the they vote on the plan and other relevant priate management is of such impor- debtor does not automatically go into matters. tance for the success of reorganization, effect when the petition is filed [30]. The the trustee and all parties in interest injunction, also called stay, has to be should be able to raise a motion at any granted by the court. This procedure 3.2 Corporate Management time prior to the confirmation of the can take several days. During this pe- 3.2.1 Management’s Duties reorganization plan. The power to ap- riod of time the debtor is generally not point or dismiss should be given to the able to keep his business alive, at least In reorganization proceedings, much court. The competence of the court can in lines of business which need many more than in any other situation, the guarantee efficient proceedings as well liquid funds. The reason for this is that qualified and coherent conduct of bu- as the neutrality of the decision, which the filing for reorganization proceedings siness is a question of survival [38]. The helps its acceptance. For practical rea- publicizes the financial distress of the management has the required know- sons, the trustee nominates some eligi- company. This publicity typically cau- how and experience as well as the spe- ble persons for election. Moreover, the ses additional cash flow problems [31]. cific knowledge of the company, its col- right of nomination should be accorded In order to remove this risk for the going laborators, its sector of activities, and its every creditor and shareholder. concern, the stay of creditor actions stage of development. Therefore, the against the debtor should automatically present management should remain in Concerning the executive management be effective at the moment the petition charge of the conduct of business during the board of directors should have the is filed [32]. reorganization proceedings [39]. How- statutory power to elect and dismiss ever, in some cases total or partial re- these members during reorganization placement of the management body is proceedings [43]. In doing so, the exclu- 3. Corporate Governance in needed in order to avoid keeping detri- sive power makes the board’s sphere of Reorganization Proceedings mental conduct of business. In other responsibility coincide with its sphere cases the engagement of persons with of influence [44]. Good corporate governance is a decid- experience in reorganization or other ing factor for successful reorganization experts can be recommended [40]. In 3.2.2 Role of Trustee proceedings [33]. What legislation can these cases, it is a moot point how and and should provide to ensure good cor- especially by whom these persons should The rapidity and quality of decision- porate governance in reorganization be appointed or dismissed [41]. making is essential in the reorganization proceedings, is the subject of this sec- of a company. Efficient continuation of tion. On this matter, we have to distinguish business requires a clear separation of between appointment or dismissal of the powers assigned to the management members to the board of directors and and the trustee. The court should assign 3.1 Decision-Makers members to the executive management. neither strategic nor executive functions Concerning the board of directors, every to the trustee [45]. The exclusive power In a corporation, fundamental decisions creditor and shareholder as well as the to conduct business has to be assigned to are made by the shareholders [34]. trustee [42] should have the right to re- the management. This exclusive power Transferring the decision-making power quest the appointment or the dismissal avoids negative redundancy in the deci- from the shareholders to the creditors of members of this body. Since appro- sion-making process and ensures con- is not justified as long as the corporation duct in the general interest [46]. Fur- is solvent and has no excess of liabilities thermore, it draws a clear dividing line over assets. Therefore, if the reorgani- between the sphere of responsibility of zation proceedings are instituted while the management and the trustee [47]. the company still has liquid funds and equity capital disposable, the sharehold- The trustee is responsible for super- ers have to participate in the corpora- vising the management in general and tion’s decision-making process during monitoring the compliance of the man- reorganization proceedings. Sharehold- agement with the plan of reorganiza- ers and creditors have to make funda- tion and with the law [48]. Due to this mental decisions such as voting on the crucial function the trustee should be reorganization plan [35]. independent and therefore, not be in- volved in management. In a situation in As a consequence, there are two cate- which many creditors are disappointed gories of decision-makers within a mod- in their expectations, the aspect of inde- ern reorganization procedure [36]. The pendence should not be neglected [49]. shareholders could be involved in the However, the independence is not en- decision-making process by judicial ar- Loïc Pfister, lic. jur., research fellow in dangered when the trustee cooperates rangement: The court allocates share- the aformentioned project, research with the board of directors in the pre- assistant at the Faculty of Law, Univer- holders and creditors to groups with si- sity of Zurich, Zurich paration of the reorganization plan. On milar interests [37]. Within these groups, the contrary, it is a good opportunity to

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present the concerns of the creditors the interest in successful reorganization seq.; Axel Flessner, p. 172, p. 176 seqq.; Karl early in the process and to prevent un- should prevail over the indemnity of the Spühler, p. 27. 5 Concerning allocative efficiency see Samuel- necessary loss of time. creditors. For this reason, the provision son/Nordhaus, p. 158; Hans Caspar von der of security should be abolished [55]. The Crone, Markt und Intervention, p. 60. court should be able to confirm a re- 6 See Reinhard H. Schmidt, p. 32 seqq. 3.3 Excursus: organization plan if the plan is likely to 7 See Milgrom/Roberts, p. 183 seq. Competence of the Court be accomplished during the scheduled 8 See Bernhard König, p. 4; Siegwart/Caytas/ Mahari, p. 132; Forstmoser/Meier-Hayoz/ time [56]. In addition, the complete sett- Nobel, § 50 note 207; Andres Baumgartner, The reorganization procedure runs lement of the privileged claims as well p. 38; Reinhart H. Schmidt, p. 37. under judicial protection. In order to im- as the obligations contract during the 9 See Siegwart/Caytas/Mahari, p. 130. A «snow- plement a balance of interests between stay must also seem likely. Thus, essen- ball effect» is often observed when major companies collapse. They are «too big to fail». creditors and shareholders, the powers tial working funds would be available Concerning the lack of employees’ diversifi- of the court should be extended. Par- for reorganization. cation see von der Crone/Beyeler/Dédeyan, ticularly, it must have the power to p. 450 seqq. and Karsten Schmidt, p. 4. An ef- ficient protection of the employees requires confirm a reorganization plan notwith- an according improvement of the protection standing the vote of the creditors and 5. Conclusion provisions; see von der Crone/Beyeler/Dé- the shareholders, if the plan is fair, deyan, p. 470 seq. represents the best solution for the par- Modern reorganization law has to meet 10 If inappropriate management is the main cause of the company’s crisis, it does not seem ties in interest, and its accomplishment different interests, and at the same time reasonable and efficient to immediately liqui- seems to be likely [50]. be practicable and efficient. In view of date the company. First, the management these requirements, the postulated re- should be replaced. Cf. Axel Flessner, who stated that the difference between reorgani- A reorganization procedure makes high form of the Swiss reorganization law is zation and liquidation is only a question of ex- demands on the court. It has to decide a great challenge which nevertheless re- tent (Axel Flessner, p. 180). on legal as well as economic matters quires our every endeavor. Successful 11 See Axel Flessner, p. 177 seq. competently and quickly. Since such reorganization proceedings are not only 12 Concerning the importance of corporations in procedures are rare, the competent in the interest of companies, sharehold- Switzerland cf. Walter A. Stoffel, note 1 seq. 13 The members of the management have to be courts often do not have the required ers and employees, but also in the inter- elected; cf. article 698 para. 2 subsec. 2 CO and knowledge. Therefore, the competence est of creditors and the public. Thus, the Meier-Hayoz/Forstmoser, § 2 note 112 seqq. to administrate these procedures should reform would contribute to greater ac- 14 See Siegwart/Caytas/Mahari, p. 136 seqq. be given to a few courts in order to im- ceptance of the economic system. 15 See Carsten Rohde, p. 50; Siegwart/Caytas/ plement the modern reorganization law Mahari, p. 140; Karsten Schmidt, p. 8 seq.; Ross/Westerfield/Jordan, p. 494. in an optimal way [51]. 16 Cf. Isaak Meier, Weiterführung des Unter- nehmens, p. 5, concerning the fundamentals Notes for successful reorganization; furthermore, see Siegwart/Caytas/Mahari, p. 183. 4. Financing of Going Concern An earlier incomplete version of the article was 17 This trigger mechanism for bankruptcy is reg- presented at the international conference «Fi- ulated by article 725 para. 2 CO. According to For successful reorganization, it is essen- nancing and Refinancing Companies in the Pros- the current law a debtor can file for composi- pective of Insolvency – International Legal De- tial that legislation makes it easier for tion proceedings at any time (see article 293 bate», held by the University of Geneva on Sep- para. 1 DEBA in conjunction with article 295 companies to procure the working funds tember 17–18, 2004. Many thanks go to Mrs. para. 1 DEBA). But, the court is not able to required for the going concern [52]. Judith Turcati-Riley and Mr. Dave Röthlisberger grant this petition before the company’s lia- for their kind help with the translation. However, current Swiss legislation does bilities exceed its assets. The granting of a pe- 1 Swiss legislation provides two instruments for tition would deprive the shareholders of their not comply with this demand. Accord- reorganization of financially distressed com- power too early since they do not have any ing to the Swiss Debt Enforcement and panies: The composition proceedings to avoid rights in reorganization proceedings. The Bankruptcy Act, the court is entitled to compulsory liquidation of an estate (Nachlass- shareholders’ deprivation is not justified as verfahren, procédure concordataire) accord- long as the company is able to pay and its lia- confirm the reorganization plan only if ing to article 293 seqq. Debt Enforcement and bilities do not exceed its assets. the statutory requirements are fulfilled. Bankruptcy Act, hereinafter DEBA, and the 18 Cf. Expertenbericht, p. 13. The current law al- One of these requirements is as fol- grant of a stay of bankruptcy proceedings lows the board of directors to wait until it is lows [53]: The performance of the re- (Konkursaufschub, ajournement de la faillite) too late for reorganization of the company (cf. according to article 725a Code of Obligations, Vincent Jeanneret, p. 1; Siegwart/Caytas/Ma- organization plan, the complete settle- hereinafter CO. The CO encompasses the hari, p. 147). Therefore, almost all composi- ment of the privileged claims, as well as Swiss corporation law. In this article, the term tion proceedings under DEBA end in liquida- the obligations contract during the stay «Swiss reorganization law» comprises these tion, or the composition plan is used to liqui- two instruments. date the business instead of reorganizing (see with the approval of the trustee must be 2 This issue is controversial; cf. as a demonstra- Lukas Glanzmann, p. 56; cf. Expertenbericht, sufficiently secured. In most cases they tive example for this dispute Meier/Peyer/ p. 17). The liquidation of a business results in are secured by cash deposit or by means Rutschmann, p. 15 and Daniel Hunkeler, Ver- a dramatic decrease in the assets’ value be- cause in most practical cases it is inevitable of a bank guarantee [54]. As a result of säumnis des Gesetzgebers as well as Daniel Hunkeler, Nachlassvertragsrecht. See also that the assets are divided up into pieces. Con- these security rights, urgently needed Issak Meier, Helvetischer Weg, p. 691. cerning the dramatic decrease in the assets’ working funds are pledged and no lon- value cf. Forstmoser/Meier-Hayoz/Nobel, § 3 Concerning these two points of view see Axel 50 note 207; Reinhard H. Schmidt, p. 37. ger available for reorganization of the Flessner, p. 172. 19 Earlier initiation of reorganization proceed- company. That can strongly compromise 4 See Milgrom/Roberts, p. 183 seq.; Siegwart/ ings is demanded, for example, by Henry Peter, the success of reorganization. However, Caytas/Mahari, p. 132; Karsten Schmidt, p. 7 p. 3; Vincent Jeanneret, p. 1; Bernhard König,

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p. 2; Lutz Häussermann, p. 206; Markus L. tions, which are not stopped by the stay, see ways has a handicap compared with the man- Schmid, p. 72. article 297 para. 2 DEBA. agement, and is hardly able to effectively di- 20 Cf. Expertenbericht, p. 15 seq. As a suitable 31 See, for example, Lukas Glanzmann, p. 55 seq. rect the management. Furthermore, the trustee is caught between protection of inter- liquidity ratio the cash flow is to be taken into 32 The following authors are of the same opinion: consideration; see also Henry Peter, p. 3, as ests of the company and the creditors. Con- Andreas Feuz, p. 22; Meier/Peyer/Rutsch- cerning the effects of exclusive power to con- well as Clarence Peter, p. 4. Cash flow analy- mann, p. 15. Concerning the automatic stay in sis is a crucial tool for measuring insolvency. duct business assigned to the management see the U.S. Bankruptcy Code (Title 11 of the U.S. Hans Caspar von der Crone, Strategische A company with a sustained negative opera- Code; 11 USC §362) and its importance see tional cash flow cannot create enough liquid- Leitung und Qualitätssicherung, p. 1 and con- Warren/Bussel, p. 23, p. 203 seqq. However cf. cerning the required knowledge, p. 7. ity from the ongoing business operations. The Expertenbericht, p. 30. company is unable to pay due debts without 47 In doing so, the exclusive power makes the additional external finance. See Schwarz- 33 The «Cadbury Report» refers to corporate go- management’s sphere of responsibility coin- ecker/Spandl, p. 49; Ross/Westerfield/Jordan, vernance as «the system by which companies cide with its sphere of influence. See the ref- p. 23, p. 485; Aswath Damodaran, p. 101 seq. are directed and controlled»; see para. 2.5. erence in footnote 46. Furthermore, see Hans Caspar von der Crone, 21 See Peter Böckli, p. 725, p. 727; Jürg A. Koe- Publikumsgesellschaft, p. 239. 48 Cf. article 295 para. 2 subsec. a DEBA, article ferli, p. 19 seq. The newer Austrian reorgani- 298 para. 1 sentence 1 DEBA. zation law (Unternehmensreorganisationsge- 34 See Forstmoser/Meier-Hayoz/Nobel, § 20 note 3, note 11. 49 See Karl Wüthrich, p. 6. This is especially im- setz, hereinafter URG, in effective since 1997) portant regarding the trustee’s investigation works, in addition to a notional time of debt 35 Cf. the U.S. Bankruptcy Code under which into whether or not the management can be redemption, with an equity ratio regulated by the shareholders participate in the decision- made responsible. The independent perfor- the law in order to forecast insolvency (see making process (11 USC §1126, 11 USC mance of this investigation is hardly feasible § 22 para. 1 subsec. 1 URG in conjunction §501). Under the U.S. Bankruptcy Code, a if the trustee cooperates with the manage- with § 23 and § 24 URG; see Paul Oberham- company may file a voluntary bankruptcy pe- ment. mer, p. 2). An equity ratio, regulated by the tition regardless of the financial condition; law but in the amount very different from that Leif M. Clark, p. 1. 50 Whereas the Swiss reorganization law in force requires that at least one-third in number of in the Austrian Reorganization Law, was pre- 36 Whereas, the current law provides only one sented by Vincent Jeanneret, p. 1 seq. the creditors which hold at least three-quarter category of decision-makers at any time: Until in amount of the allowed claims has to con- 22 See Aswath Damodaran, p. 107. the commencement of reorganization pro- sent to reorganization plan so that the court is 23 Concerning the equity ratio see Peter Böckli ceedings it is up to the shareholders to decide, entitled to confirm the plan (cf. article 305 p. 725; generally see Brealey/Myers, p. 822 seqq. after that, up to the creditors (cf. article 305 DEBA). See the similar provision according DEBA). 24 This fundamental conclusion is confirmed by to Chapter 11 of the U.S. Bankruptcy Code, the animadversion on the Austrian reorgani- 37 Cf. the similar procedure during reorganiza- 11 USC §1129(b) and Meier/Peyer/ Rutsch- zation law and the equity ratio therein regu- tion under Chapter 11 of the U.S. Bankruptcy mann, p. 15. lated (see footnote 21); see Herbert Hocheg- Code, 11 USC §1122. See the critics in the Ex- 51 The same opinion is represented, for example, ger, p. 83 seq. pertenbericht, p. 30 seq. by Isaak Meier, Chapter 11, p. 463 and Markus 25 Making modifications of the articles of cor- 38 See Klaus Oesch, p. 36 and generally, Hans L. Schmid, p. 65. poration is a non-transferable power of the Caspar von der Crone, Strategische Leitung 52 This becomes even more important as the shareholders’ meeting according to article 698 und Qualitätssicherung, p. 7 seq. adverse publicity created by the company’s para. 2 subsec. 1 CO. 39 The following authors agree in opinion: Lutz financial crisis typically causes additional 26 Concerning the duties of the board cf. article Häussermann, p. 209; Klaus Oesch, p. 89; liquidity requirements; see Lukas Glanzmann 716a para. 1 CO, especially subsec. 3; see Forst- Meier/Peyer/Rutschmann, p. 15. p. 55. moser/Meier-Hayoz/Nobe, § 30 note 39 seqq. 40 See NZZ of 16th March 2002, Sanierung als 53 Cf. article 306 para. 2 subsec. 2 DEBA. It is 27 Since filing for reorganization proceedings Managementaufgabe/Erste Lehren aus dem often difficult for a company to fulfill this re- has momentous consequences on the future Zusammenbruch der SAirGroup, p. 29. quirement; see Amonn/Walther, § 54 note 77. of the company and thus on the shareholders’ 41 If a company is not in reorganization proceed- 54 Cf. Expertenbericht, p. 29. See Hans-Ulrich interests (see footnote 17), the board is hesi- ings, on the one hand the shareholders have Hardmeier, p. 23 footnote 111. tant to file for it. Moreover, in order to avoid the power to appoint or dismiss members of 55 See Meier/Peyer/Rutschmann, p. 15; Andreas a damaged reputation, it will try to avoid re- the board of directors according to article 698 Feuz, p. 22; Lutz Häussermann, p. 213. organization proceedings as long as possible. para. 2 subsec. 2 CO and on the other hand 56 Cf. the similar provision according to Chapter Concerning the relevance of reputation for the board is entitled to appoint or dismiss managers see Hans Caspar von der Crone, 11 of the U.S. Bankruptcy Code, 11 USC members of the executive management ac- §1129(a)(11). Reputation, p. 29. cording to article 716a para. 1 subsec. 4 CO. 28 At this stage, the duties of the board accord- 42 The term «trustee» means «Sachwalter» ac- ing to article 716a para. 1 subsec. 3 CO encom- cording to the current Swiss reorganization pass liquidity planning; see Lukas Glanzmann, law. References p. 19 seqq., p. 34; Lukas Handschin, p. 436 seq. 43 This regulation corresponds with article 716a Amonn, Kurt/Walther, Fridolin, Grundriss des 29 In certain circumstances, a legal duty to initi- para. 1 subsec. 4 CO (see footnote 41). th ate reorganization proceedings can be op- Schuldbetreibungs- und Konkursrechts, 7 edi- posed to the duty of the management to at- 44 Cf. article 754 para. 2 CO concerning the re- tion, Bern 2003. tend at the best possible rate to the interests sponsibility of the board for the election of the Baumgartner, Andres, Fortführung eines Un- of the company (cf. article 717 para. 1 CO). executive management. ternehmens nach Konkurseröffnung, AISUF 77 Therefore, the board of directors should not 45 According to the law in force, the court is en- (= Doctoral Thesis Freiburg), Freiburg 1987. be legally bound, but entitled to file for reor- titled to delegate strategic and executive func- Böckli, Peter, Revisionsfelder im Aktienrecht ganization proceedings. File for reorganiza- tions to the trustee (see article 298 DEBA). und Corporate Governance, ZBJV 138 (2002) tion proceedings has to become a real action The legal purpose of this provision is to en- p. 709 seqq. alternative in a company’s crisis. Obviously, it able the court to stipulate, in each individual Brealey, Richard A./Myers, Stewart C., Principles is possible that the board of directors abuses case, the scope of the trustee’s power to con- th this right (for U.S. law see Leif M. Clark, p. 4). duct business. In particular, the goal is to of Corporate Finance, 7 edition, international But, it has to be taken into consideration that avoid ongoing detrimental conduct of busi- edition, Boston etc. 2003. the sword of Damocles of bankruptcy still ness by an unqualified management. But this «Cadbury Report» (Report of the Committee on overhangs the responsible persons (see problem can and should be resolved by the the Financial Aspects of Corporate Gover- Markus L. Schmid, p. 72). In addition, the power of the court to appoint and dismiss nance), London 1992. management will try to avoid reorganization members of the board of directors (see above Clark, Leif M., Triggering Criteria for Starting proceedings as long as possible in order to be- 1.3.2.1). and Stopping Bankruptcy – U.S. Legal Principles, ware of a tattered reputation. 46 Normally, the trustee does not have the re- Working Paper available under http://www.unige. 30 See article 293 para. 3 DEBA and article 295 quired know-how and experience in the field ch/droit/insolvency-symposium2004/wp.htm (last para. 1 DEBA. Concerning the creditor ac- of business of the company. The trustee al- visit: 18.10.05).

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Damodaran Aswath, Corporate Finance, 2nd edi- DACH (editor), Unternehmenssanierung, vol- cially Distressed Companies, Working Paper avai- tion, international edition, New York 2001. ume 9, Köln/Zürich/Wien 1998, p. 1 seqq. lable under http://www.unige.ch/droit/insolvency- symposium2004/wp.htm (last visit: 18.10.05). Expertengruppe Nachlassverfahren, Ist das Häussermann, Lutz, Sanierung der Aktiengesell- schweizerische Sanierungsrecht revisionsbedürf- schaft gemäss Chapter 11 des amerikanischen Meier-Hayoz, Arthur/Forstmoser, Peter, Schwei- tig?, Report of April 2005 – available at the Bankruptcy Code aus schweizerischer Sicht, zerisches Gesellschaftsrecht, 9th edition, Bern Bundesamt für Justiz in Bern (cited: Experten- Doctoral Thesis Bern 1986. 2004. bericht). Hochegger, Herbert, Die Unternehmenssanie- Meier, Isaak, Helvetischer Weg zum Chapter 11, rung im Spannungsfeld zwischen gesetzlicher ST 9/2005 p. 688 seqq. (cited: Isaak Meier, Hel- Feuz, Andreas, Sanierung mittels Nachlassver- Regelung und Eigeninitiative (-verantwortung), vetischer Weg). fahren – gerichtlicher oder aussergerichtlicher in: Europäische Anwaltsvereinigung DACH (ed- Nachlassvertrag?, Trex 2004 p. 18 seqq. Meier, Isaak, Die Weiterführung des Unter- itor), Unternehmenssanierung, volume 9, Köln/ nehmens nach Konkurseröffnung, BlSchK 2003 Flessner, Axel, Sanierung und Reorganisation, Zürich/Wien 1998, p. 73 seqq. p. 1 seqq. (cited: Isaak Meier, Weiterführung des in: Max-Planck-Institut für ausländisches und in- Hunkeler, Daniel, Versäumnis des Gesetzgebers Unternehmens). ternationales Privatrecht (editor), Beiträge zum als Mitursache für das Swissair-Debakel?, BlSchK Meier, Isaak, Chapter 11 im Vergleich mit dem ausländischen und internationalen Privatrecht, 66 (2002) p. 7 seqq. (cited: Daniel Hunkeler, Ver- schweizerischen Nachlassverfahren, in: Jürgen 48, Tübingen 1982. säumnis des Gesetzgebers). Basedow/Isaak Meier/Anton K. Schnyder/Talia Forstmoser, Peter/Meier-Hayoz, Arthur/Nobel, Hunkeler, Daniel, Ist das schweizerische Nach- Einhorn/Daniel Girsberger (editor), Private Law Peter, Schweizerisches Aktienrecht, Bern 1996. lassvertragsrecht revisionsbedürftig?, in: Juslet- in the International Arena, Liber Amicorum ter of 10th June 2002 (cited: Daniel Hunkeler, Kurt Siehr, The Hague/Zürich 2000, p. 445 seqq. Glanzmann, Lukas, Die Pflichten des Verwal- Nachlassvertragsrecht). (cited: Isaak Meier, Chapter 11). tungsrates und der Geschäftsführung in finan- ziellen Krisensituationen, in: Vito Roberto (edi- Jeanneret, Vincent, Reorganization: Compel the Meier, Isaak/Peyer, Jürg/Rutschmann, Felix, Auf- tor), Sanierung der AG, SnA 17, Zürich/Basel/ Companies in Distress to Apply at an Earlier fanggesellschaft als Lösung: Zur Restrukturie- Genf 2003, p. 19 seqq. Stage, Working Paper available under http:// rung der Swissair im Nachlassverfahren, NZZ of www.unige.ch/droit/insolvency-symposium2004/ 19th October 2001, number 243, p. 15. Handschin, Lukas, Die Pflichten und die Verant- wp.htm (last visit: 18.10.05). Milgrom, Paul/Roberts, John, Economics, Orga- wortlichkeit des Verwaltungsrats im Sanierungs- Koeferli, Jürg A., Der Sanierer einer Aktienge- nization & Management, New Jersey 1992. fall, ZBJV 136 (2000) p. 433 seqq. sellschaft, SSHW, volume 158 (= Doctoral Thesis Oberhammer, Paul, The Procedure According Hardmeier, Hans-Ulrich, Voraussetzungen und Zürich), Zürich 1994. to the «Unternehmensreorganisationsgesetz» rechtliche Möglichkeiten von Sanierungen in der König, Bernhard, Guidelines to a «Safe Haven» Under Austrian Law: A Failed Attempt of a Reg- Schweiz, in: Europäische Anwaltsvereinigung for Continuation and Reorganization of Finan- ulation on Pre-Insolvency Reorganisation, Work-

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ZUSAMMENFASSUNG Thesen zu einem modernen Schweizer Sanierungsrecht

Eine erfolgreiche Unternehmenssanie- nicht mehr in der Lage, den Geschäfts- de Mittel, in absehbarer Zukunft nicht rung liegt nicht nur im Interesse des betrieb aufrechtzuerhalten. Der Siche- mehr sichergestellt sind. Wird das ge- Unternehmens, dessen Aktionäre und rung des Going Concern kommt des- richtliche Sanierungsverfahren zu ei- Arbeitnehmer, sondern auch im Inter- halb zentraler Stellenwert in einer zu- nem Zeitpunkt vor der Überschuldung esse der Gläubiger sowie der Allge- künftigen Reform zu. des Unternehmens eingeleitet, müssen meinheit. Es ist daher Aufgabe jeder die Aktionäre folgerichtig am Willens- modernen Rechtsordnung, Unterneh- Nach geltendem Recht ist der Verwal- bildungsprozess im Sanierungsverfah- men in finanziellen Schwierigkeiten tungsrat eines Unternehmens de facto ren beteiligt werden. ein effektives Sanierungsverfahren als nicht in der Lage, ein gerichtliches Sa- echte Alternative zum Konkurs an- nierungsverfahren vor Überschuldung Einer guten Corporate Governance zubieten. Dabei geht es nicht um die des Unternehmens einzuleiten. Die kommt ausschlaggebende Bedeutung Verhinderung des Konkurses um jeden Aufrechterhaltung des Going Concern im Hinblick auf den Sanierungserfolg Preis, sondern um eine «Symbiose» erfordert jedoch ein früheres Einset- zu. So gilt es, eine rechtzeitige Einlei- von Sanierung und Konkurs. zen des Sanierungsverfahrens. Das tung des Sanierungsverfahrens durch Kriterium der Überschuldung gemäss das Management zu fördern, indem Die vergangene Wirtschaftskrise hat Art. 725 Abs. 2 OR ist deshalb um ein dessen Führungsverantwortung grund- gezeigt, dass das geltende schweize- Frühwarnsystem basierend auf Liquidi- sätzlich aufrechterhalten bleibt. Eine rische Sanierungsrecht den heutigen tätskennzahlen und einer Eigenkapi- effiziente Unternehmensführung be- unternehmerischen Anforderungen an talquote zu ergänzen. Künftig muss es dingt ferner eine klare Trennung der ein modernes Sanierungsverfahren in dem Verwaltungsrat ermöglicht wer- Zuständigkeiten von Management und vielerlei Hinsicht nicht gerecht wird. den, ein gerichtliches Sanierungsver- Sachwalter. Diese und weitere grund- Es ist weitgehend anerkannt, dass die fahren bereits dann einzuleiten, wenn legende Thesen zu einem schweizeri- Einleitung des gerichtlichen Sanie- die Voraussetzungen zur Aufrecht- schen Unternehmenssanierungsrecht rungsverfahrens zu spät erfolgt. In der erhaltung der operativen Tätigkeit, sind Gegenstand des vorliegenden Folge ist ein Unternehmen zumeist d. h. genügend Eigenkapital und liqui- Artikels. HCvdC/BKS/LP

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