{"id":142790,"date":"2026-06-01T10:46:33","date_gmt":"2026-06-01T10:46:33","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=hot_topics&p=142790"},"modified":"2026-06-01T10:46:33","modified_gmt":"2026-06-01T10:46:33","slug":"financing-and-related-developments-in-switzerland","status":"publish","type":"hot_topics","link":"https:\/\/my.legal500.com\/guides\/hot-topic\/financing-and-related-developments-in-switzerland\/","title":{"rendered":"Financing and related developments in Switzerland"},"content":{"rendered":"

<\/a>1. Introduction \/ Overview<\/h4>\n

The Swiss finance market has remained resilient in recent years and continues to benefit from a combination of legal predictability, sophisticated institutional lenders and an active transaction environment involving both domestic and international participants. Although Switzerland is a comparatively small jurisdiction compared with the largest European leveraged finance markets, it plays an important role in acquisition finance, corporate lending, refinancing transactions, fund-backed structures, real estate financing and special situations transactions involving Swiss borrowers, Swiss collateral or Swiss target groups.<\/p>\n

The market for financial transactions involving Swiss obligors is shaped by both domestic and cross-border dynamics. Smaller and medium-sized transactions are frequently arranged through the Swiss market and often involve domestic banks acting on a bilateral, club or syndicated basis. In contrast, larger transactions, particularly those involving private equity sponsors or multinational groups, are often coordinated from London, New York or other international financial centres and commonly rely on LMA-style documentation, supplemented by Swiss law-governed guarantees, security documents and tax-related provisions. Swiss law questions thus arise not only in purely domestic financings, but also in complex international structures where Swiss entities are part of a broader group of borrowers and guarantors.<\/p>\n

A defining feature of Swiss finance practice remains the central importance of security packages and their enforceability. Swiss law does not provide for a universal floating charge or a single all-assets security instrument as seen in some other jurisdictions. Instead, security is taken over identified asset classes through specific types of security interests, each with its own creation, perfection and enforcement rules. As a result, the commercial quality of a security package depends less on how broad it appears in theory and more on whether the relevant collateral has been validly granted, properly perfected, and structured in a way that can be implemented and enforced without undue friction if the borrower enters distress.<\/p>\n

For that reason, \u201chot topics\u201d in Swiss finance are typically not driven by headline legislative change but by the legal and structuring issues that determine how transactions are executed and protected. These include, amongst others, \u00a0the constraints imposed by Swiss corporate law on upstream and cross-stream support, the interaction between security, guarantees and Swiss withholding tax rules and the importance of ensuring that enforcement readiness is incorporated into the structure from the outset.<\/p>\n

At the same time, financings for distressed and special situations have become more prominent in practice. In financially challenged businesses, interim liquidity support often comes not only from banks and debt funds, but also from shareholders, sponsors and affiliates. This raises questions not only about the ranking of such funding but also about how it interacts with broader capital structures and secured lender positions. A recent Federal Supreme Court decision has now provided welcome guidance on the treatment of related-party loans in bankruptcy and is likely to be relevant for future bridge financings, shareholder support packages and restructuring transactions.<\/p>\n

<\/a>2. Transaction structures<\/h4>\n

Acquisition financing arrangements typically consist of a combination of equity elements (such as share capital, capital contributions or quasi-equity in the form of subordinated shareholder loans) and debt elements. The debt structure primarily depends on the required leverage for the transaction and usually comprises senior debt in the form of a term loan facility to finance the target\u2019s purchase price, combined with a revolving credit facility to cover its working capital needs. In transactions involving higher leverage, the financing structure may additionally include mezzanine loans or high-yield bond instruments forming part of a second lien or junior debt structure.<\/p>\n

The debt structure may include incremental debt, which provides borrowers with additional flexibility by allowing the total commitments to be increased through an incremental facility.<\/p>\n

<\/a>3. Security and guarantees<\/h4>\n

When structuring a Swiss security package, timing is a key consideration. While certain security interests are customarily established at closing, others are typically implemented post-closing. The identity of the security provider is also important, since security can be granted by both the acquisition vehicle and the target group (including their respective group companies).<\/p>\n

The scope of a typical Swiss security package depends on the specific type of financing. For acquisition financings, the security package commonly includes security over the shares of the acquisition vehicle and the target, security over claims and rights under the share purchase agreement relating to the target as well as related documents (such as due diligence reports), pledges over the bank accounts of the acquisition vehicle and the target, as well as guarantees by material group companies. At the target group level, the package may be expanded to include security over shares in subsidiaries, the assignment of intercompany receivables and trade receivables, security over real estate and security over intellectual property rights.<\/p>\n

Most of these security interests can be created before closing. By contrast, a pledge over the target\u2019s shares can only be perfected once those shares have been acquired. The same applies to guarantees granted by material companies of the target group, which generally become available only upon accession. Security at the target level is therefore often structured as a condition subsequent.<\/p>\n

<\/a>3.1.\u00a0 \u00a0 Security over shares and quotas<\/h4>\n

Shares in Swiss stock corporations (Aktiengesellschaften<\/em>) and quotas in Swiss limited liability companies (Gesellschaften mit beschr\u00e4nkter Haftung<\/em>) are usually pledged rather than assigned. This is primarily to avoid the assignee becoming the formal holder of the relevant shares or quotas with full legal title. The pledge must be documented in writing and, where share or quota certificates have been issued, such certificates typically must be duly endorsed (in blank) and delivered to the pledgee to perfect the security.<\/p>\n

Where the articles of association contain transfer restrictions, it is advisable to have such restrictions removed. This generally affords a prospective third-party acquirer greater certainty than relying on board resolutions approving the transfer of the pledged shares or quotas, as such resolutions may be amended at a later stage.<\/p>\n

<\/a>3.2.\u00a0 Bank accounts<\/h4>\n

For similar reasons to those applying to shares and quotas, bank accounts \u2013 more precisely, the account holder\u2019s claims against the account bank \u2013 are generally pledged rather than assigned, although Swiss law permits an assignment. As banks typically include a right of pledge in their general terms and conditions, notice must be given to the account bank after the account pledge agreement has been executed to perfect the pledge. It is customary to request that the account bank waives any such prior-ranking rights it may have over the relevant account under its general terms and conditions.<\/p>\n

A further reason why assignments are less common is that account banks have become increasingly focused on know-your-customer and beneficial owner identification issues, which are more directly implicated where a claim is assigned, since an assignment results in a full transfer of legal title, whereas a pledge creates only a limited right in rem. Conversely, some banks are hesitant to accept pledges and may even threaten to terminate the client relationship and close the relevant account. In practice, one way of addressing this issue is to enter into a tripartite agreement involving the account bank, the pledgor and the pledgee.<\/p>\n

<\/a>3.3.\u00a0 Claims and receivables<\/h4>\n

The assignment of claims is another common type of security, particularly at target level where such claims may form a substantial part of the business. Security over receivables is generally taken by way of a general assignment and may also cover future claims, provided they can be clearly identified. Such security assignment is, however, only valid if the underlying contract does not prohibit the assignment (pactum de non cedendo<\/em>). Therefore, for key transaction documents, such as the share purchase agreement, it is advisable to expressly state that claims arising thereunder may be assigned. While an assignee will typically have the contractual right to notify the relevant debtors of the assignment, third-party debtors are usually not notified of the assignment until an event of default has occurred. For as long as such debtor is not notified of the assignment, it may validly discharge its obligations in good faith by paying the assignor.<\/p>\n

<\/a>3.4.\u00a0 Real estate<\/h4>\n

For the vast majority of collateral, Swiss law generally does not require filings, registrations or approvals for the creation of security. An important exception concerns real estate security, which is typically taken by way of taking security over mortgage certificates (Schuldbriefe<\/em>) creating a personal claim secured by a property lien. Alternatively, a mortgage assignment (Grundpfandverschreibung<\/em>) may be used. Unlike a mortgage certificate, however, it does not constitute a negotiable security instrument, which is why mortgage certificates are more frequently used in practice.<\/p>\n

The creation of a new mortgage certificate requires notarisation and registration in the land register. Once established, such certificates may generally be transferred without any further notarisation.<\/p>\n

If real estate security is granted, the tax consequences must be considered carefully. Swiss real estate should generally only be used as collateral for loans from foreign lenders located in jurisdictions that have an advantageous double taxation treaty with Switzerland (so-called Swiss treaty lenders), since interest payments made thereunder to non-Swiss resident creditors may become subject to a special withholding tax at source.<\/p>\n

<\/a>3.5.\u00a0 Intellectual property<\/h4>\n

Intellectual property rights are usually included in the security package only where they are material to the business of the security provider or its group companies and have a certain economic value. Rights such as trademarks, patents and designs may be taken as security by way of pledge or security assignment. The creation of such security requires only a written agreement. In practice, however, it is generally advisable to register the security in the relevant public register, both for publicity purposes and to place the secured party in a stronger position in the event of enforcement.<\/p>\n

<\/a>3.6.\u00a0 Movable assets<\/h4>\n

Under Swiss law, security over movable assets can generally only be created if the relevant assets are placed into the sole possession of the pledgee or if the security provider otherwise gives up exclusive control over them, so that it can no longer access or dispose of the assets without the pledgee\u2019s involvement. In practice, however, the movable assets that could potentially serve as collateral \u2013 such as inventory, machinery or vehicle fleets \u2013 are usually required for the pledgor\u2019s day-to-day business operations. As a result, security over movable assets is rarely a feasible solution in ordinary financing transactions. An exception to this strict de-possession requirement exists for ships and aircraft, over which a lien may be created by registration in a public ownership register.<\/p>\n

While certain structural alternatives may be considered, including pledgeholder arrangements or OpCo\/PropCo structures, these are rarely used in practice. They tend to be relevant only in cases involving particularly valuable assets and may, in addition, be vulnerable to challenge if regarded by a court as an impermissible circumvention of the applicable Swiss law requirements.<\/p>\n

<\/a>3.7.\u00a0 Limitations on financial assistance<\/h4>\n

Although Swiss law does not provide for a standalone financial assistance regime, Swiss corporate law contains mandatory capital maintenance rules intended to preserve a Swiss company\u2019s nominal share capital and reserves. As a result, upstream and cross-stream guarantees, and security granted in favour of a parent or affiliate company are only permissible if certain requirements are satisfied. In particular, these include the following:\u00a0 that the relevant arrangement is on arm\u2019s length terms; that the amount secured does not exceed the freely distributable equity capital and reserves of the relevant security provider or guarantor; and that the company\u2019s articles of association expressly allow it to enter into such undertakings.<\/p>\n

In addition, the relevant transaction documents must be properly approved by the competent corporate bodies and should contain provisions limiting the use potential use of enforcement proceeds and addressing Swiss withholding tax issues (commonly referred to as Swiss limitation language).<\/p>\n

<\/a>4. Insolvency and enforcement<\/h4>\n

Swiss law-governed security may generally be enforced either by way of private enforcement (Privatverwertung<\/em>) or through official enforcement proceedings under Swiss debt enforcement and bankruptcy law. For a Swiss law pledge, private enforcement is available only if the pledgor has consented to this form of enforcement \u00a0(as is customary in Swiss law pledge agreements). Where security is taken by way of assignment and full legal title has been transferred to the assignee, private enforcement is the only available method.<\/p>\n

In practice, private enforcement is generally the more attractive option, as official enforcement proceedings are often lengthier and typically involve the participation of a court or enforcement authority. However, once a Swiss company is declared bankrupt, official enforcement is the only option. Swiss bankruptcy law establishes a clear statutory order of priority. Secured claims and claims incurred by the bankruptcy or liquidation estate rank ahead of unsecured claims. Within the unsecured class, employee and pension fund claims rank ahead of social security and tax claims, followed by all other unsecured claims. It is only within this final class that creditors may contractually agree to a different ranking among themselves, for example by way of an intercreditor agreement.<\/p>\n

<\/a>5.Legal framework<\/h4>\n

<\/a>5.1.\u00a0 Governing law and jurisdiction<\/h4>\n

Smaller financings involving a single bank or a limited number of lenders are typically entered into on the basis of simple Swiss law-governed loan agreements, usually drafted in the language of the borrower and the relevant lender(s). Local banks will often use their in-house templates for such purposes. Larger syndicated financings, by contrast, are typically documented on the basis of LMA-style loan agreements adapted to Swiss market standards and transaction-specific requirements. Depending on the composition of the lending syndicate and the broader financing structure, such agreements may be governed either by Swiss law or by another governing law customary in the relevant financing market and preferred by the lenders. In Switzerland, the recognition and enforcement of foreign laws and judgments are governed principally by the Swiss Federal Act on Private International Law (PILA) and applicable bilateral and multilateral treaties, including the Lugano Convention. The Swiss legal framework is generally regarded as favourable to the recognition and enforcement of foreign judgments, subject to compliance with a limited number of core statutory requirements.<\/p>\n

<\/a>5.2. Regulatory matters<\/h4>\n

Foreign entities are, in principle, not restricted from financing acquisitions in Switzerland and generally do not require a licence for that purpose. However, licensing requirements may arise under the Swiss Banking Act or the Swiss Financial Services Act for other reasons (for instance if funds are accepted from the public for refinancing purposes).<\/p>\n

Likewise, cross-border lending into Switzerland without any physical presence of the lender in Switzerland remains generally unregulated. Limited exceptions apply with respect to the granting of loans to finance transactions with financial instruments (which qualifies as a financial service under the Swiss Financial Services Act) and certain loans to consumers (which are subject to the Swiss Consumer Credit Act).<\/p>\n

<\/a>5.3. Taxation<\/h4>\n

Switzerland generally does not levy withholding tax on interest paid under private or commercial loan arrangements. Instead, Swiss federal withholding tax of 35% applies mainly to interest on bonds and similar collective debt instruments issued by, or on behalf of, Swiss-resident issuers. Under Swiss Federal Tax Administration practice, certain syndicated facilities may also be treated as collective debt instruments if they are syndicated beyond the traditional banking market and involve more than ten non-bank lenders. Because debt subject to Swiss withholding tax is typically unattractive to international investors, Swiss groups often raise capital through non-Swiss issuers. However, foreign-issued debt may in some cases be recharacterised as Swiss debt if the proceeds are substantially used in Switzerland beyond specified thresholds.<\/p>\n

In syndicated financings, particular care is therefore taken to avoid triggering Swiss withholding tax. Facilities involving a Swiss borrower \u2013 or a foreign borrower supported by guarantees from a Swiss parent \u2013 typically include transfer and syndication restrictions to comply with the “10\/20 non-bank rules”. These are designed to prevent the lender thresholds from being exceeded and the facility from being treated as a collective debt instrument subject to Swiss withholding tax. Similar issues arise where non-Swiss acquisition or financing vehicles benefit from Swiss guarantees or security and upstream proceeds into Switzerland, often requiring careful structuring and advance confirmation from the Swiss Federal Tax Administration through a tax ruling.<\/p>\n

Further, particular attention must be paid to loans secured by Swiss real estate, since interest payments made thereunder to non-Swiss resident creditors may become subject to a special withholding tax at source. An exception may apply where the relevant lender is resident in a jurisdiction benefiting from a double taxation treaty with Switzerland providing for a zero rate and the lender qualifies for treaty protection.<\/p>\n

<\/a>6.\u00a0 Recent developments: Federal Supreme Court clarifies treatment of related-party loans in distressed situations<\/h4>\n

A notable recent development for Swiss finance and restructuring practice is the Federal Supreme Court\u2019s decision 5A_440\/2024 of 31 March 2025. The decision addresses a question that has long been debated in doctrine and cantonal case law: how unsecured loans granted by shareholders and other related parties to a company in financial distress should be treated if the restructuring fails and bankruptcy follows. Shareholder or affiliate funding frequently appears in stressed and distressed transactions, providing bridge liquidity, rescue financing or broader support alongside secured bank or debt fund lending.<\/p>\n

The case in question concerned a construction company whose shareholders and board members granted loans during a period when the company was in a precarious financial situation. The company had suffered negative operating results for several years, faced significant liquidity difficulties and, according to the decision, was exposed to a serious risk of bankruptcy from the end of 2016 onwards. Third-party financing was no longer available. However, the company was not yet technically overindebted when the relevant loans were advanced.<\/p>\n

Following the opening of bankruptcy proceedings, the related-party loans were recorded in the insolvency as subordinated third-class claims. The bankruptcy administration argued that the loans had been granted abusively in order to prolong the business artificially and postpone the practical consequences of earlier asset transfers. The lower court upheld that approach and treated the claims as ranking behind other ordinary unsecured creditors.<\/p>\n

The Federal Supreme Court overturned that decision. It held that Swiss law does not provide a general statutory basis for recharacterizing shareholder or affiliate loans as equity simply because they are granted in a distressed setting. As a matter of principle, unsecured related-party loans remain ordinary unsecured claims and therefore rank in the third class together with other non-privileged unsecured claims. This clarification is significant because older scholarship and certain lower court approaches had entertained broader ideas of \u201cequity-replacing loans\u201d or equitable subordination in financial distress.<\/p>\n

Nevertheless, the Court recognised that equitable subordination may arise in exceptional circumstances. In particular, such equitable subordination may be justified where the assertion of the claim constitutes an obvious abuse of rights under Swiss law. Importantly, however, the Court set a high threshold for such abuse. Hence, a loan can only be treated as clearly abusive if, at the time it was granted, the borrower was already formally overindebted on a balance-sheet basis under applicable legal rules. In other words, it is not sufficient for the borrower to be in financial difficulty or faced with an increased credit risk. There must have been an actual legal state of overindebtedness when the loan was made.<\/p>\n

This aspect of the ruling significantly restricts the circumstances in which a related-party loan may be equitably subordinated. The mere fact that a company is experiencing serious liquidity difficulties, is unable to obtain third-party financing, or is receiving support from related parties is insufficient. Nor is it enough that, from a purely economic perspective, only an equity injection rather than further debt might have offered a realistic restructuring path. According to the Court, those considerations do not replace the need for the objective element of overindebtedness when assessing whether a later assertion of the claim is abusively inconsistent with creditor expectations.<\/p>\n

<\/a>7.Outlook<\/h4>\n

Swiss finance transactions continue to be characterised by a stable and sophisticated legal framework in which security packages, guarantees, and enforcement mechanisms remain central. The market\u2019s core tools are well established, including share and account pledges, receivables assignments, guarantees and, where relevant, real estate and intellectual property security. The decisive issues are not novelty, but quality of execution.<\/p>\n

At the same time, current market practice shows that finance transactions in Switzerland increasingly intersect with special situations and restructuring questions. Lenders are focused on real enforceability, not just notional collateral coverage. Boards and shareholders are more frequently asked to support stressed businesses through bridge funding or guarantees. And recent case law has clarified at least one important aspect of that landscape by confirming the limited circumstances in which related-party loans may be subordinated in bankruptcy.<\/p>\n

Taken together, these developments reinforce a familiar lesson. Switzerland remains an attractive and pragmatic jurisdiction for secured lending and acquisition finance, but it rewards careful structuring. Parties that address local law issues early, document their transactions rigorously and build enforcement readiness into the package from the outset will generally find the Swiss market both predictable and commercially workable.<\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-142790","hot_topics","type-hot_topics","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/hot_topics\/142790","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/hot_topics"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/hot_topics"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=142790"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}