On January 1, 2025, Switzerland will implement the new Federal Law on Combating Abusive Bankruptcies. This law is a response to the growing number of so-called bankruptcy abusers—individuals or companies who systematically misuse bankruptcy proceedings to evade debts or gain unfair economic advantages. In this blog post, we’ll explore the key elements of the law, the goals of the reform, and the practical implications for businesses and creditors.
Federal Act on Combating Abusive Bankruptcy
Overview of the most important new features
Stricter penalties
Extended duties to provide information and cooperate
Better identification of repeat offenders
Civil law instruments for liability
Background: What is an Abusive Bankruptcy?
Abusive bankruptcies often occur when the same individuals repeatedly set up companies that quickly go bankrupt. Assets may be deliberately hidden or removed, and debts intentionally left unpaid, while the same people remain behind multiple failed businesses. The real victims are creditors—especially small and medium-sized enterprises (SMEs) and social security institutions.
These practices not only damage trust in the economic system but also cause significant financial losses for both the private sector and the state.
Goals of the New Law
The new legislation aims to:
- Prevent bankruptcy abuse
- Facilitate prosecution of fraudulent behavior
- Strengthen creditor protection
- Improve coordination between bankruptcy authorities and law enforcement
Key Updates at a Glance
- Stricter Criminal Provisions
Repeated or organized triggering of bankruptcies under certain conditions is now explicitly punishable by law. Anyone who deliberately hides assets or abuses bankruptcy procedures to harm creditors will face severe penalties. - Expanded Disclosure and Cooperation Duties
Individuals involved in the management or administration of companies must now provide comprehensive information. Third parties who benefit from a bankruptcy may also be held accountable. - Improved Identification of Repeat Offenders
New registry and information systems will make it easier to detect patterns of abuse. Collaboration between bankruptcy offices, courts, and prosecutors will be enhanced. - Civil Law Tools for Liability
The law adds mechanisms to the Swiss Code of Obligations, including piercing the corporate veil, to hold individuals liable when a company is set up specifically to dodge legal obligations.
Impacts on Businesses and Creditors
- For Creditors:
The new law provides greater protection against fraudulent debtors and makes it easier to claim losses in cases of bankruptcy abuse. - For Companies:
The new requirements raise the bar for bookkeeping, transparency, and corporate governance. Entrepreneurs should ensure they comply fully with these obligations to avoid legal consequences. - For Authorities:
With improved tools and clearer legal foundations, bankruptcy cases can now be handled more efficiently, and abuse can be prosecuted more effectively.
Conclusion
The Federal Law on Combating Abusive Bankruptcies represents a major step forward in reinforcing the rule of law and trust in the Swiss economy. It sends a strong message against dishonest business practices and strengthens the position of fair market participants.
Businesses are well advised to review their internal procedures and become familiar with the new legal requirements—not just for legal compliance, but also to uphold ethical business conduct.
