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ARTICLE · 10 JUNE 2025

Subordination In Financial Distress

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Creditor subordination agreements are crucial in financial distress situations. They defer claims and represent economic equity, often necessary to protect other creditors and improve restructuring prospects.

SwitzerlandCorporate/Commercial Law
Matthias Staehelin
Matthias Staehelin

Creditor subordination agreements are crucial in financial distress situations. They defer claims and represent economic equity, often necessary to protect other creditors and improve restructuring prospects. Including interest is essential for full subordination. Agreements concluded before 2023 without interest remain valid, as the legal change is not retroactive. ExpertSuisse's position on this matter is overly strict.

German version published in Jusletter 24. März 2025, see https://jusletter.weblaw.ch/juslissues/2025/1234.html

1. Background

Subordinated loans or subordination agreements are key instruments when companies face financial distress. Four key questions arise:

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