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Swiss amend bankruptcy laws to protect firms hit by coronavirus crisis

Reuters | Bern | Updated: 09-04-2020 15:03 IST | Created: 09-04-2020 13:49 IST
Swiss amend bankruptcy laws to protect firms hit by coronavirus crisis
Representative Image Image Credit: Pixabay

The Swiss government will look at temporarily changing its bankruptcy laws to protect companies hit by cash-flow problems and mounting debts during the coronavirus crisis, it said on Thursday. Companies would be able to wait to file for insolvency if they are threatened with coronavirus-related problems, provided there is a chance their debt problems can be resolved after the crisis, the Justice Ministry said, according to the proposal it is considering.

Despite launching a 62 billion Swiss franc ($63.85 billion)aid package to support the Swiss economy, "the coronavirus pandemic threatens many companies with over-indebtedness and therefore bankruptcy," the government said. "A wave of bankruptcies would have serious consequences for the economy, in particular for jobs," it said. The government warned on Wednesday the Swiss economy could shrink by up to 10.4% this year due to the epidemic.

Justice minister Karin Keller-Sutter said many previously healthy companies needed support, as the end of the crisis was not yet in sight. "Today, there are many companies that are confronted by liquidity problems and losses in value that are caused by the coronavirus," she told a press conference.

"The simple aim of the government is to cushion the impact as much as possible, support and limit the damage for people in this country. We must wherever possible protect jobs." Keller-Sutter said that the new measures were meant to help businesses hurt by the coronavirus over the hump, but not to keep failing operations on life support.

"When a company cannot be rescued, it still must be allowed to go bankrupt in order to protect the creditors," she said. The measures were also aimed at helping Switzerland's exporters, which were being hit by falling demand in other countries.

"There's, for example, the automobile industry in Germany, where the conveyor belts are silent but they have lots of suppliers," she said, adding some businesses in Switzerland had to adopt short-time working simply because the supply chain had been interrupted. The Swiss government also said that a halt on debt collections and a so-called court holiday in which cases were put on hold would end on April 19, but it would look at using teleconferences in civil proceedings to maintain the operation of the justice system.

A long-term freeze on bankruptcy proceedings was not feasible as it could lead to a chain reaction of unpaid debts, spreading the problems for creditors and causing liquidity problems across the economy, Keller-Sutter said. In 1914, when neutral Switzerland called up troops to protect its borders, a two-month deadline debt collection stop led to serious problems with no debts being paid, she said. ($1 = 0.9710 Swiss francs)



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