Capital loss and over-indebtedness - the obligations in the Code of Obligations

Important changes in Swiss Code of Obligations (OR) concern in particular obligations in the event of loss of capital and over-indebtedness as well as the auditor. These changes have far-reaching effects on companies, regardless of their size. In this article, we summarize the most important information and legal requirements.

Capital loss and over-indebtedness: duty to audit

Another significant change concerns the obligation to audit in the event of loss of capital and over-indebtedness. Until now, companies with less than 10 employees were exempted from the audit obligation (opting-out). However, these companies must now also have a limited audit carried out if there is a loss of capital or over-indebtedness.

Capital loss

A capital loss exists when the company's equity falls below 50% of the paid-up share capital and statutory reserves. In this case, the Board of Directors is required to take immediate measures to redress the capital loss and to submit appropriate restructuring proposals to the General Assembly (Art. 725a (1) OR).

over-indebtedness

Overindebtedness exists when the company's liabilities exceed its assets, even if the assets are valued at continuing value. In this case, the Board of Directors must prepare an interim balance sheet of continuing and liquidation values and have them audited by an approved auditor (Art. 725b OR). Should over-indebtedness be confirmed, the Board of Directors is obliged to notify the judge unless there are enough resignations in rank to eliminate the over-indebtedness.

Auditor: Dismissal only for important reasons

According to the new provisions of the OR, the auditor of a company may only be dismissed for important reasons. This means that a dismissal can no longer be carried out arbitrarily, but only if there are serious reasons that make further cooperation unreasonable. This regulation strengthens the independence and continuity of the auditor and helps to ensure an objective and reliable audit.

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Conclusion

The new regulations in the Code of Obligations ensure that the financial stability of companies is better monitored and protected. Limiting the dismissal of the auditor to important reasons and the extended audit obligation in the event of loss of capital and over-indebtedness help to strengthen trust in corporate management and financial reporting. Companies should familiarise themselves with these changes at an early stage and, if necessary, adapt their internal processes to meet the new requirements.

A thorough analysis is essential to accurately assess your company's situation. We offer this service upon request. Please note that the responsibility lies with management.

Your MKY Treuhandpartner GmbH

Sources: Code of Obligations (OR) Art. 725a and 725b

Disclaimer: The content of this blog post is for informational purposes only and does not constitute professional advice.
Each individual case should be reviewed individually and we recommend that you seek professional advice for specific questions.