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In the context of the Swiss legal framework, the terms over-indebtedness, loss of capital, and loss of half of the capital are critical factors that can significantly affect a company's financial health and its obligations under Swiss law.
1. Over-indebtedness: This occurs when a company's liabilities exceed its assets, as shown in its financial statement. According to Swiss law, particularly Article 725 of the Swiss Code of Obligations, if there is justified concern of over-indebtedness, the board must prepare an interim balance sheet at going concern and liquidation values. If this interim balance sheet shows that the claims of the creditors are not covered, either at going concern or liquidation values, the board must notify the court unless creditors waive their claims to the extent of the uncovered deficit.
2. Loss of Capital: This situation arises when the company's equity falls below certain thresholds. Specifically, if the financial statement shows that half of the share capital and legal reserves are no longer covered by the company's assets, the board is required to convene a general meeting of shareholders and propose remedial measures.
3. Loss of Half of the Capital: This term refers specifically to the threshold mentioned above, where half of the company's share capital and legal reserves are lost.
With the amendment of the Federal Act on Combating Abusive Bankruptcy, there is a heightened emphasis on the timely submission of the audit report. Failure to submit the audit report on time can lead to severe consequences, including legal actions under the revised laws concerning debt enforcement and bankruptcy. The timely submission helps ensure that all stakeholders, including creditors and the court, have an accurate and current understanding of the company's financial situation, which is crucial for taking necessary actions to prevent fraudulent bankruptcies and protect the interests of all parties involved.
For companies, it's essential to maintain regular and thorough audits, either limited audit or ordinary audit, depending on their size and legal requirements. This not only helps in complying with legal obligations but also in maintaining financial health and transparency.
In summary, the changes in the Swiss legal framework, including the stringent requirements for handling cases of over-indebtedness, loss of capital, and timely audit reporting, underscore the importance of rigorous financial management and compliance with audit regulations to prevent legal complications and ensure corporate longevity.
