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A new approach for BVI liquidators to deal with un-cooperative Swiss banks

As we’ve reported before - How we deal with un-cooperative Swiss banks at Grant Thornton – we often find in our role as Liquidators of BVI companies that BVI companies hold/held accounts with banks in Switzerland.

These banks often, citing banking secrecy and potential criminal liability for breaching same, refuse to co-operate with the liquidators.

A recent change in the law in Switzerland has enabled Grant Thornton, in conjunction with Fraudnet Swiss member firm Baldi & Caratsch, to adopt a new approach to this.

The common solutions and the problems with them

As discussed in our prior article, the two routes we’ve historically used to resolve this issue are:

  1. A ‘Swiss mini-bankruptcy’ proceeding, which results in an ancillary procedure whereby a Swiss bankruptcy trustee is being appointed to oversee the proceeding; or
  2. An exequatur in Switzerland, which is akin to a disclosure order, and can be granted even if accounts with a certain bank have already been closed or if such account no longer hold any assets.

There are a number of drawbacks to these approaches including, for the bankruptcy the cost of the bankruptcy (application fees and the Trustee’s costs) and the time it can take to obtain a decision on the application. 

As it relates to the drawbacks of the exequatur, the order only covers the banks named in the application, and if assets are discovered at those banks, a separate bankruptcy order would need to be obtained to permit the banks to remit the funds to the liquidator.

The new approach

In certain circumstances, the Courts in Switzerland will allow the overseas Liquidator to apply to recognise the order of appointment of the foreign liquidator without the need to conduct a Swiss ancillary proceeding and to appoint a Swiss bankruptcy trustee (“Recognition”), namely by contemporaneously applying with the Court for a waiver of the ‘Swiss mini-bankruptcy’ following the Recognition.

Crucially, this approach is only possible if there are no creditors identified in Switzerland, but the application still needs to show the existence of Swiss assets as a pre-requisite for Recognition. After having recognised the order of appointment, the Court orders the publication of a call to Swiss creditors. If such call does not reveal any Swiss creditors, the Court then automatically issues the waiver granting to the foreign liquidator the right to approach the Swiss banks to obtain information and direct access to the funds.

The material advantages of Recognition include:

  1. There is no need to further apply for separate bankruptcy proceeding if assets are identified in the bank(s);
  2. There is no need to seek separate relief if additional assets deposited with banks in Switzerland are identified at a later stage;
  3. The Recognition order is valid in all Cantons, the exequatur route has not been tested in all Cantons, so this approach avoids this uncertainty;
  4. The costs of the Recognition are lower than a ‘traditional’ bankruptcy; and
  5. The foreign liquidator has the possibility to directly obtain access to information and to the funds deposited with the banks.

Grant Thornton have used this approach successfully on a number of their cases recently.  It is a powerful tool in the asset recovery arsenal which has helped us identify and pursue assets in as cost and time efficient manner as possible.

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