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Audit in case of over-indebtedness

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If there is justified concern that a company’s liabilities are no longer covered by its assets, the board of directors shall immediately prepare an interim account at going concern values and sale values in accordance with Art. 725b of the Swiss Code of Obligations. If the going concern assumption is given and the interim accounts at going concern values do not show an over-indebtedness, the interim financial statements at disposal values can be dispensed with. If the going concern assumption is not given, interim financial statements at disposal values are sufficient. Both sets of financial statements are subject to an audit (Art. 725b para. 2 CO). If the company does not have a statutory auditor, the provisions in Art. 725a para. 2 CO apply mutatis mutandis, because an over-indebted company always fulfills the conditions a of a capital loss according to Art. 725a CO. Accordingly, the annual financial statements must be subjected to a limited statutory examination by a licensed auditor appointed by the board of directors until the capital loss has been elimnated.

Good to know

If auditors accept the task of examining in case of over-indebtedness, they are subject to significant risk: Pursuant to Art. 725b para. 5 CO, the auditors are subject to the same reporting requirements as if they were statutory auditors of the company. If, for instance, the board of directors neglect to inform the courts in case of over-indebtedness, the appointed auditor has to do this in its place. Experience has shown that company’s finances are in a critical condition when over-indebted – so the newly appointed auditor has to anticipate difficulties settling the receivables for the auditing services carried out.

Project Lead
Project Lead
  • Daniel Carotta

    Daniel Carotta

    +41 44 533 76 00


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