Board Responsibilities In Case Of Over-Indebtedness

In addition to the solvency (see our previous blog), the board must under Swiss law monitor the balance sheet: In case over-indebtedness, the board must balance continuing operations with protecting creditor interests. If restructuring seems more likely to succeed than fail, the board should pursue it to fulfill its duty of care and loyalty. At the same time the board must closely monitor that all claims with potential personal liability (e.g. social security contributions, employee pension contributions, often also withholding tax) are fully settled.

The board must determine the extent of over-indebtedness through interim financial statements (not just a simple balance sheet). These statements must first assume the company will continue operating. If this assumption is valid and there is no over-indebtedness based on these values, liquidation values do not need to be calculated.