In the revisions to the law, a number of areas are impacted and in particular the following elements:

- Capital loss and over-indebtedness (art. 725 CO)

- Share capital and reserves (art. 672 CO)

- Intermediary dividends (art. 675a CO)

Capital loss and over-indebtedness (art. 725 CO):

All companies in a situation of capital loss or over-indebtedness now have to subject their annual financial statements to a limited statutory audit before their approval by the Annual General Meeting.

Companies having opted-out from a limited statutory examination are also affected by this new obligation and Boards of Directors or Managing Officers will have to appoint an approved auditor that will carry out the limited statutory audit of the financial statements on the basis of a mandate.

Capital loss is a situation in which the company's shareholders’ or partners equity is less than half of the value of the protected equity (art. 725a CO) (protected equity is considered as share capital, and legal capital reserves and legal retained earnings reserves). The legal capital reserves exceeding the threshold of 50% of the share capital are no longer considered as protected equity, but as free equity and must therefore not be taken into account in the calculation.

A company is over-indebted if it has a negative shareholders’ / partners’ equity (art. 725b CO). There are few differences between the current and the revised law regarding the procedures to be performed in the case of over-indebtedness. The revised law provides greater clarity by using terms that are more consistent with other legal provisions. Nevertheless, a supplementary exception regarding the notice to the judge is now allowed, in addition to the debt subordination already applicable in the current law. In fact, it is now possible to avoid the obligation to notice a judge if the over-indebtedness can be resolved within a maximum of 90 days, provided that the settlement of all debt claims is not jeopardized.

Furthermore, there is a risk that pre-existing subordination agreements, in which an explicit deferral of interest is not addressed, will be considered invalid under the new legislation. This is because the new law requires that as of January 1st, 2023, in addition to the principal amount due in connection with the subordination, all interest accrued during the period of the over-indebtedness must also be subordinated.

The board of directors should therefore agree with creditors on an amendment corresponding to the subordination in order to ensure that the interest is deferred and that no accrued interest is paid during the period of over-indebtedness.

Please note that in case of replacement of a subordination contract with an appropriately updated amount and content, the amount of the subordination should in principle not be reduced. However, certain exceptions are possible.


Share capital and reserves (art. 672 CO):

Provisions relating to the appropriation of profits have also been modified.

As of January 1st, 2023, only the mandatory allocation of 5% to the General legal retained earnings reserve must be complied with (1st allocation). This allocation must be made in each accounting period until the general legal reserve, together with the legal capital reserves, reaches 50% of the share capital (20% of the share capital in the case of holding companies). 

On the other hand, there is no longer an additional allocation obligation when a dividend representing more than 5% of the share capital is distributed (“superdividend”).

As regards losses, these must be offset in the following order:

  • with the retained earnings carried forwards ; 
  • with the voluntary retained earnings; 
  • with the legal reserves from retained earnings ; and finally ; 
  • with the General legal retained earnings reserve .


Interim dividends (art. 675a CO):

Interim distributions of profits during the year are now possible. However, several conditions must be met :

  • Interim financial statements must be prepared (in general: a balance sheet, income statement and notes for SMEs); these accounts must be established on the basis of the same principles as those applied
  • for ordinary annual accounts;
  • A valid decision by the general assembly;
  • Compliance with the provisions relating to the distribution of dividends; and
  • An interim audit or limited statutory examination by the auditors, unless the company is the subject of an opting out, i.e. if the company has waived the right to submit its accounts to a limited audit. However, it
  • is possible to waive this audit / limited statutory examination under certain conditions.


Other changes:

Other changes not addressed above can also be found in the amendments of the Swiss company law (e.g. increased flexibility in the share capital structure, modernization of general meetings, strengthening of shareholders' rights, etc.). The full text can be found by clicking here. We remain at your disposal to discuss these other topics as well.