The most recent developments at SAir Group and Switzerland's flag carrier SAirLines (Swissair) merit a short outline of the formal proceedings regarding moratorium and composition agreement under Swiss Debt Collection and Insolvency Law. The following three steps are to be distinguished:
The application and provisional granting of the moratorium
Upon the application by the debtor, the court may provisionally grant a moratorium for up to two months and appoint a commissioner to examine, from the creditors' point of view, the debtor's financial situation and the prospects of recovery. The commissioner then publishes a notice that all creditors must lodge their claims within 20 days in order to have a vote in the approval of the composition agreement. During the moratorium, enforcement proceedings may neither be initiated nor continued and the right to set-off is limited. The debtor may continue its business under the supervision of the commissioner. Without the permission of the court, however, the debtor may not divest or pledge assets.
The moratorium and the proposal for a composition agreement
The court may, based on the commissioner's report and request provided at the end of the provisional moratorium, decide to grant a moratorium for up to 24 months (including extensions). During this period, the commissioner may work out a composition agreement which is subject to approval both by the meeting of creditors and by the court.
The approval of the composition agreement
The composition agreement becomes valid and binding on all the creditors if: (i) the majority of the creditors and creditors representing two-thirds of the debtor's outstanding obligations; and (ii) the court approves it.
If the composition agreement is not approved within the period of the moratorium, any creditor may demand that the debtor be declared bankrupt.
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