RESHAPING OF THE CONCORDAT IN THE NEW ENFORCEMENT AND BANKRUPTCY LAW (DRAFT COMPULSORY ENFORCEMENT LAW)

Under the current regulation, a creditor is required to submit a concordat request through a “reasoned petition,” whereas in the draft regulation this requirement has been removed. The basis for this change lies in the practice under Switzerland’s Federal Act on Debt Enforcement and Bankruptcy. According to Swiss doctrine, it is sufficient for a creditor seeking concordat to prove that they are entitled to file for bankruptcy; there is no obligation to explain the reasoning behind the request. 
As a result, the draft regulation simplifies the creditor’s application procedure and provides a facilitation in favor of the creditor by reducing formal obligations. 

While no such provision exists in the current regulation, the third paragraph added to the draft provides that after a concordat request has been rejected by the court, a new ordinary concordat proposal cannot be submitted unless there has been a significant change in the resources available to repay the debt, or such a change is concretely demonstrated for the future. 
This provision is aimed at preventing abuses observed in practice. Indeed, some debtors whose concordat requests were rejected could, despite no change in circumstances, modify their repayment proposals or change their registered office and resubmit an ordinary concordat application through a creditor. With the draft paragraph, the debtor is effectively prevented from sequentially benefiting from the protective provisions of the concordat, thereby strengthening the protection of creditors’ rights. 

In the draft regulation, the competent and authorized court is determined as the bankruptcy court specified in the third and fourth paragraphs of Article 269 for debtors subject to bankruptcy, and as the bankruptcy court of the place of residence for debtors not subject to bankruptcy; it is also stipulated that changes of location within six months prior to the application date shall not be taken into account. In the current regulation, the commercial courts of first instance specified in the first or second paragraphs of Article 154 were competent for debtors subject to bankruptcy, while the commercial court of first instance in the debtor’s place of residence was competent for debtors not subject to bankruptcy. 
This change is particularly significant in terms of preventing malicious applications and protecting creditors’ rights. In practice, it was common for debtors whose concordat requests were rejected to change their location and submit a new application to a different court, even though there had been no change in circumstances. The draft regulation prevents such situations. 
As a result, this innovation in the regulation of the competent and authorized court establishes a safeguard mechanism in favor of creditors and strengthens the protection of creditors’ rights by preventing abuse of the concordat process.  

Under the current regulation, the concordat claims list is required to show the creditors, the amounts of their claims, and the priority status of the creditors. In the draft regulation, it is further required that the list also indicate the creditors’ right of preference, if any. With this change, the document showing the creditors and the amounts of their claims, as specified in subparagraph (c) of the first paragraph, aims to eliminate any omissions. Consequently, not only the priority status but also the right of preference of claims is transparently presented, thereby enhancing access to information and strengthening the protection of creditors’ rights. 

In the draft regulation, it is stipulated that if the initiation of concordat proceedings is requested by one of the creditors, a temporary moratorium shall be granted on the condition that the debtor submits the documents and records specified in Article 375 to the court within the definite period set by the court and in complete form. Under the current regulation, these documents were specified in Article 286, and the debtor’s submission period was described as a reasonable period determined by the court. 
The draft regulation, by specifying the period as definite, aims in particular to minimize the possibility of the debtor delaying the process and to enhance the effectiveness of the application procedure in favor of the creditor.  

In the draft regulation, the duration of the temporary moratorium has been increased to four months, and the possibility of extension has been removed. The court may set a shorter period based on the circumstances; however, in such cases, an extension may be granted upon request provided that the total duration does not exceed four months. This change enhances the predictability of the process and limits the debtor’s ability to abuse the temporary moratorium by extending the period, thereby acting in favor of the creditors. 

Under the draft regulation, if it is clearly understood that the concordat cannot succeed, the court is required to reject the concordat request, and if the debtor is an insolvent capital company or cooperative, the court shall declare its bankruptcy ex officio. This provision both protects the interests of creditors by preventing abuse of the process and obliges the court to actively assess the debtor’s financial situation rather than taking a passive role, thereby objectively monitoring the likelihood of the concordat’s success.  

Under the current regulation, if it is understood that the concordat can possibly succeed, the debtor is directly granted a definitive moratorium of one year. The draft text changes this provision by allowing the court to grant a definitive moratorium of up to one year, but not less than six months. In this way, a more flexible system regarding the duration of the concordat is adopted, giving the court broad discretion to determine the period based on the debtor’s financial situation and the likelihood of the concordat’s success. This change aims both to prevent unnecessarily long moratoriums and to ensure that the concordat mechanism is applied more effectively and proportionately.  

In the draft regulation, it is explicitly stipulated that the moratorium decision shall not halt the accrual of interest on secured claims. This prevents the value of secured creditors’ claims from eroding over time and provides an important safeguard for the protection of collateralized claims.  

Under the current regulation, the commissioner’s deadline for submitting the report is seven days, whereas the draft extends this period to two weeks. This change, made in consideration of the fact that a one-week period often does not allow for a comprehensive examination of the concordat file and the preparation of a thorough report, aims to address practical difficulties encountered in practice. In this way, the commissioner is enabled to assess more thoroughly and with justification whether the concordat project has been accepted and whether its approval is appropriate, thereby ensuring that judicial oversight is conducted more effectively.