Private Credit 2026 Comparisons

Over the past 12 months, the private credit market in Switzerland has remained stable, with moderate expansion compared with the previous year. Increasing capital costs for banks, tighter bank lending standards as well as the recent takeover of Credit Suisse by UBS have continued to support demand for non-bank financing, particularly among mid-market companies. In addition, the current upheaval in the US private credit market, with apparently increasing default rates, has led investors and asset managers to increase their geographical diversification, leading to an increased appetite for European and Swiss private debt investments by Swiss and international private debt investors.

In the firm’s experience, private credit activity in Switzerland has focused primarily on the following sectors:

• technology;
• software;
• services;
• healthcare; and
• life sciences.

Typically, private credits are facilitated through domestic and international private debt funds, cross-border direct lenders and platform-mediated SME financing, as well as other non-bank originators and arrangers.

Typically, private credits allow for an illiquidity premium and more flexible terms relative to bond offerings. Since private credit has been a growing asset class in the past ten years, it has become true competition to public markets as well as to bank lending. However, certain significant refinancings of private credit with public debt financial instruments are still seen in cases where the borrower does not prefer to keep its financials confidential.

Acquisition financings are a major driver of private credit in Switzerland, especially for private equity-sponsored deals. That said, the credit market in Switzerland is still dominated by banks. This also applies to acquisition financing. However, private credit has gained momentum over the past few years, especially for mid-market acquisitions and more risky or exotic loan transactions. Swiss banks are extremely conservative with respect to their requirements for borrowers and credit conditions, and focus on established industry companies with steady cash flows. To stay competitive with banks, private credit providers focus on flexibility, speed and certainty and aim to offer more tailored solutions to borrowers, being more engaged in higher-yield transactions and specialty finance.

The expansion of the private credit market in Switzerland has faced several challenges.

• First, the relatively conservative financing culture of Swiss corporates and their historically strong relationships with domestic banks (which are also rather conservative lenders) continue to limit the scale of disintermediation toward private lenders.
• Second, the traditionally cautious investment approach of Swiss institutional investors has moderated the pace at which capital is allocated to private debt strategies.
• Third, competition among international private credit funds as well as competitive pressure from banks and public markets has intensified, putting pressure on pricing and lender protections in certain transactions.

Despite these constraints, the market continues to develop gradually, supported by demand from sponsor-backed mid-market companies seeking flexible and tailored financing solutions that may not be readily available through traditional bank lending channels.

In Switzerland, private credit providers are not exclusively focused on private equity sponsors and their portfolio companies, although sponsor-backed transactions remain a significant portion of the market. However, lenders also provide capital to founder-owned and family-owned businesses, which are prevalent in the Swiss mid-market. In such cases, private credit is commonly used for growth financing, succession planning, acquisitions or balance-sheet optimisation. Further, an increased demand for private real estate credit is observable. Financing for publicly listed companies occurs less frequently, as larger corporates generally retain access to bank lending or public debt markets.

Moreover, Switzerland is home to many national and international asset managers in the area of private debt that either invest in this asset class for the funds that they manage or merely distribute their foreign private debt funds to Swiss investors.

Switzerland has a lively private markets investment ecosystem that operates across three key layers:

• private equity and venture capital;
• private credit; and
• private infrastructure (see Fig. 1).

The distinctive characteristic of Switzerland’s private markets framework is the role of its aggregators and wealth managers, who integrate private debt into their portfolio and advisory solutions. The country’s extensive network of asset managers, private banks and wealth advisors connects investors to private markets opportunities that otherwise would be difficult to access.

This approach enhances capital flow to corporations and broadens the reach of private credit to a wider range of investors. Switzerland is also the home of some of the world’s biggest institutional investors and asset owners. These can successfully invest in private credit.

Private markets are therefore developing rapidly and are becoming increasingly important as a source of capital in Switzerland. In Switzerland, asset managers already manage around CHF360 billion in private market investments. The study titled “Private Markets in Switzerland: Scaling Innovation & Growth”, by the Asset Management Association Switzerland (AMAS), the Swiss Private Equity & Corporate Finance Association (SECA) and the Boston Consulting Group (BCG), illustrates the potential of this booming asset class.

According to this study, over the past two decades, private markets have expanded rapidly, with private equity assets under management (AUM) growing 15-fold between 2003 and 2023, while public equity markets have shown a threefold expansion. While public equity markets are still substantially larger, with a market capitalisation of USD112 trillion, AUM in private equity has reached USD11 trillion.

Private credit has emerged as one of the fastest-growing areas within private markets, valued at USD2.4 trillion in 2023 (see Fig. 2). Regulatory changes, such as Basel III/IV, have compelled traditional banks to deleverage significantly, and this has created a gap in traditional credit availability. This has opened opportunities for non-bank financial institutions (NBFIs), particularly private credit funds, to play a central role in providing flexible and customisable debt structures.

In Switzerland, private credit transactions are commonly observed in the lower and mid-market segments in practice – ie, in the range of CHF50–250 million. Larger financings (CHF250 million or more) are primarily provided by international private debt funds in the form of syndicated loans. Occasionally, private debt funds also participate in syndicated loans arranged by banks. Smaller financings are frequently provided by other professional investors or family offices, or through crowd-lending platforms.

In Switzerland, regulators have so far adopted a risk-based and relatively liberal approach towards the regulation of private credit lenders. Apart from the Banking Act (BA), the Swiss regulatory framework focuses primarily on:

• Anti-Money-Laundering Law (AMLA) compliance;
• compliance with investor protection and asset management regulations under the Financial Institutions Act (FinIA); and
• compliance with the collective investment schemes regulations pursuant to the Collective Investment Schemes Act (CISA).

At present, there are no major pending legislative proposals specifically aimed at regulating private credit funds more strictly.

Lending per se does not trigger any licensing requirements in Switzerland, including for foreign lenders. However, a banking licence may be required to accept deposits from the public, or for the lender to refinance itself with loans from banks that do not own any significant holdings in it (in order to provide financing on its own account, in any manner, to any number of persons or companies with which it does not form an economic unit) (Articles 1a and 3 of the BA).

Furthermore, (relatively “light”) permits issued by the relevant cantonal or federal authorities (but not actual banking licences) are required if:

• the loan qualifies as a consumer loan or pursuant to Article 39, paragraph 1 of the Federal Act on Consumer Credit (FLCC);
• the loan is used to finance, or is secured by, residential real estate in Switzerland according to Article 2 et seqq of the Federal Act on the Acquisition of Immovable Property in Switzerland by Foreign Non-Residents (ANRA);
• transactions with sanctioned or restricted persons or goods according to the Federal Embargo Act (EmbA) and its implementing ordinances are intended, in which case an authorisation by the state Secretariat for Economic Affairs (SECO) is required; or
• the loan would directly or indirectly finance war material prohibited under the Federal Act on War Material (WMA).

In addition, if the lender is based in Switzerland, lending activities are subject to AML regulations, especially AMLA. This requires the lender to join a so-called self-regulation organisation (SRO) and to comply with applicable KYC regulations.

Furthermore, if a private credit transaction structure involves the pooling of assets, it should be evaluated if it triggers licencing requirements as a collective investment scheme under CISA. Moreover, if the lender manages collective investment schemes to fund lending, it may be subject to a licensing requirement as asset manager or manager of collective assets under FinIA. These licensing requirements are generally related to collective investment schemes or asset management activities, not the act of extending credit per se.

Finally, both Swiss and foreign lenders can take security over Swiss assets without being subject to licensing or permit requirements (other than as set out in the foregoing).

As set out in 2.1 Licensing and Regulatory Approval, lending as such does not trigger any licensing requirements; thus, there is no regulator exercising prudential supervision if no banking licence or approval as a collective investment scheme is required.

However, lenders based in Switzerland are required to join an SRO to ensure compliance with AML regulations. An SRO issues regulations, supervises its members with respect to compliance with such regulations and takes any necessary enforcement measures such as issuing penalties or excluding a member. Investigations commenced against a member of an SRO must be notified to the Swiss Financial Market Supervisory Authority (FINMA), which exercises the ultimate supervision.

FINMA is also responsible for supervising collective investment schemes such as private credit funds – other than the limited qualified investor fund (L-QIF) – under CISA and managers of collective assets such as credit funds under FinIA.

As of today, there is no law in force that applies to foreign investments in general. There are, however, sectoral laws regulating foreign investments, particularly in the banking, asset management, real estate, telecommunications, nuclear energy, radio and television, defence and aviation sectors. Going forward, the Federal Act on the Control of Foreign Investments (ISA) will likely be applicable as of January 2027.

The purpose of this new Act is to prevent foreign takeovers that could endanger Swiss public order or security. As the scope of application is limited to takeovers, it will mostly not be applicable with respect to lending transactions. However, if covenants are drafted such that the lender can de facto exercise control over the borrower, it could be considered a takeover and subject to notification and approval requirements by SECO.

In Switzerland, compliance and reporting requirements for private credit providers depend on how the lender or fund is structured and whether it markets to Swiss investors. Swiss private credit funds that qualify as collective investment schemes must comply with CISA, which means that a FINMA approval is required, unless the collective investment scheme is structured as an L-QIF. Swiss regulated and FINMA-supervised funds and financial institutions must maintain robust internal compliance and risk management frameworks and submit regular reports to FINMA – and, in the case of funds, also to investors.

Non-Swiss private credit funds are typically not retail products and must generally be offered exclusively to qualified investors in Switzerland and, in the case of HNWI investors, appoint a Swiss representative and paying agent. However, there is a recognisable market trend towards the democratisation of alternative investments. Against this background, various attempts have been made to obtain approvals from FINMA for the offering of European long-term investment funds (ELTIFs) to non-qualified investors in Switzerland. It appears that no ELTIFs have been approved by FINMA so far. It will be interesting to see whether and how FINMA practice further develops in this regard in the near future.

Reporting requirements for non-supervised lenders are generally limited to any contractual disclosures as well as audit (including AML-related audits by an auditor approved by the SRO) and taxation reporting. Depending on the size of the private credit provider, ESG reporting obligations may apply. However, these obligations apply to any Swiss entity that exceeds certain thresholds and is not specific to lenders.

In Switzerland, club lending by private credit providers has not been a major regulatory concern, although it is monitored under general competition and antitrust principles. Club deals – where a small group of lenders jointly provide financing to a single borrower – are common in mid-market private credit transactions, particularly for sponsor-backed acquisitions. These arrangements are generally accepted as long as they are regulatory compliant and do not involve anti-competitive practices, collusion on pricing, or market allocation. However, there have been certain regulatory uncertainties in the past with respect to so called co-investment syndicates (which are increasingly used in the market for venture capital loans by private lenders). In a recent case decided by of the Swiss federal administrative court against FINMA (Decision of 25 March 2025, B5992/2022) a co-investment syndicate in the form of a simple partnership was not deemed to qualify as a collective investment scheme or to require a licence as an asset manager. However, syndicates need to be evaluated on a case-by-case basis from a Swiss regulatory perspective and must ensure that they either do not fall under the general Swiss financial markets regulation licensing obligations or comply with it if needed. Furthermore, it is noteworthy that the Federal Communications Commission (ComCo) has recently ensured lower interchange fees for credit cards.

There is no one-size-fits-all approach when it comes to structuring private credit transactions. The following types of credit facilities are commonly seen.

• Term and revolving loans: Term loans provide borrowers with a single, upfront disbursement that is typically repaid through fixed instalments or, in some cases, a final bullet repayment. They are well suited for uses such as capital expenditures, acquisitions or refinancing existing debt. Revolving loans, by contrast, allow borrowers to draw and repay funds repeatedly over the life of the facility, making them a more appropriate solution for financing working capital needs or managing day-to-day liquidity.
• Senior and junior loans: Senior loans are generally secured and benefit from first‑ranking rights to a borrower’s assets in case of default. They are usually provided to companies with stable cash flows and strong collateral, and can take the form of both term loans and revolving loans. Junior debt, by contrast, is subordinated either contractually or structurally (or both) to senior debt and therefore carries a higher default risk. To compensate, it often features elevated interest rates.
• Secured and unsecured loans: A secured loan is a loan that benefits from collateral – ie, a right in rem that grants the secured lender the right to foreclose on an asset and to have the proceeds of such foreclosure applied as the first priority towards satisfaction of any unpaid sum owed to that secured lender. See 5.1 Assets and Forms of Security regarding the types of security typically available under Swiss law. Unsecured loans expose the lender to a higher recovery risk and, depending on the credit profile of the borrower, usually come with a higher interest rate.

External factors have influenced transaction structures. Macroeconomic uncertainty has encouraged lenders to adopt more conservative leverage levels, stronger covenant protections and enhanced collateral packages. At the same time, competitive pressure among private debt funds has supported the continued use of flexible capital structures tailored to borrower-specific needs.

The key documents for a private credit transaction under Swiss law include:

• the term sheet;
• a facilities agreement/loan agreement;
• an intercreditor agreement (if required);
• security documents (see 5.1 Assets and Forms of Security regarding the typical set of security documents); and
• conditions precedent (CP) documents.

In addition, certain ancillary documents such as fee letters are typically entered into. Agreements are typically negotiated for each transaction. The facilities agreement is usually based on the recommended form of the Loan Market Association (LMA), adapted to comply with Swiss law (Swiss-style LMA). In sponsor-backed transactions, documentation is often also based on precedents.

Unitranche facilities, dividing a facility into “first-out” and “last-out” tranches of debt, are seen in Switzerland, but they are not very common in the firm’s experience.

External factors having an impact on private credit documentation have included events such as the replacement of the LIBOR with the Swiss Average Rate Overnight (SARON), COVID-19 and potential lender defaults (eg, Credit Suisse) in the market leading to lender-default clauses.

In Switzerland, foreign lenders (including direct lenders) are generally not restricted from providing private credit or taking security over Swiss assets. They can lend directly to Swiss borrowers and perfect security interests in assets located in Switzerland. Furthermore, it is not necessary that a foreign lender be registered, licensed, qualified or entitled to carry on business in Switzerland in order to be granted full access as plaintiff to the courts of competent jurisdiction in Switzerland. However, a permit by the competent cantonal authority may be required if the loan is used to finance or is secured by residential real estate in Switzerland (see 2.3 Restrictions on Foreign Investments). Further, the general restrictions regarding sanctioned persons or restricted goods may apply to foreign direct lenders if the prerequisites are fulfilled (see 2.3 Restrictions on Foreign Investments).

Other than for non-compliance with applicable sanctions or other public laws, there are no statutory restrictions on how borrowers may use proceeds from private credit transactions, but credit agreements typically include contractual covenants limiting use to specified purposes, such as acquisitions, refinancing, capital expenditures or working capital. Furthermore, the financial assistance/capital maintenance requirements described in 5.3 Downstream, Upstream and Cross-Stream Guarantees and 5.4 Restrictions on the Target apply. Use of proceeds restrictions may arise from a Swiss tax perspective; see 4.1 Withholding Tax.

Under Swiss law, debt buybacks by the borrower or sponsor are generally permitted, subject to the terms of the credit agreement. The terms of the debt buyback usually include a disenfranchisement of the borrower or sponsor to clarify that the borrower is excluded from certain of the lenders’ rights such as participating in the decision-making process of the lenders.

There are no major legal developments that are expected to have a substantial impact on the Swiss private credit market. In light of the current geopolitical situation, increased attention is given to sanctions provisions. Recently, credit agreements have tended to include more detailed representations and covenants in this respect to ensure compliance with applicable laws and funds’ internal policies.

Junior/hybrid debt is subordinated either contractually or structurally (or both) to senior debt. It often includes an equity component such as warrants or conversion rights to compensate for increased risk, in addition to the higher yield typically associated with junior/hybrid debt. Junior/hybrid debt is typically unsecured or secured by a second ranking lien on assets otherwise encumbered by the senior creditors.

The contractual structuring and subordination among the senior and junior creditors are typically set out in an intercreditor agreement. Typical provisions include the subordination itself and the corresponding restrictions on receiving payments by the junior creditors, the obligation to turn over non-permitted receipts as well as the distribution of proceeds in case of an enforcement event. Further features include anti-layering provisions, ensuring that no further class of debt that ranks between the senior and junior debt is incurred and, in case of a HoldCo financing, provisions ensuring that equity contributions made and distributions received are always routed through the HoldCo.

HoldCo financings are typical in Switzerland in the context of acquisition financing but are often combined with a security package reaching down to the operating entities. A typical security package includes a share pledge over the major operating companies, an assignment of trade and intercompany receivables and a bank accounts pledge. Where relevant and available, the security can extend to relevant intellectual property (IP) rights.

Payment in kind (PIK) allows the borrower to defer interest payments by capitalising them to the principal amount. This can be attractive to borrowers wishing to preserve their cash flow. In Switzerland, PIK interest is increasingly seen, but is usually limited to high-yield, distressed or leveraged financing in sponsor-backed transactions. Typically, the borrower is only granted the option to opt for PIK for a certain portion of the interest. If the borrower opts for the PIK feature, the lender is usually compensated by a higher margin on the PIK interest. Under Swiss law, there is a risk that a court would consider PIK interest to be in violation of the prohibition of anatocism (ie, capitalising interest and adding it to the principal), as set out in Article 314 of the Swiss Code of Obligations. The workaround typically used in case of a Swiss borrower is to have the PIK feature drafted such that it is at the discretion of the borrower to opt for it.

Amortisation schedules are typically flexible and tailored to the borrower’s cash flow profile. A typical structure would be to grant an amortisation-free initial period, followed by annual amortisations and a bullet repayment at the end of the term of a loan.

Private lenders typically extend loans based on an expected return over a defined maturity period. Early repayment, refinancing or acceleration triggered by an event of default can undermine that expected return and expose the lender to a reinvestment risk. To address this, lenders commonly include prepayment protection provisions.

Typical provisions include break-up fees, calculated as the difference between the interest rate agreed in the credit agreement and the interest achievable by lenders in the lending market for the remaining term of the credit agreement at the time of termination. A flat prepayment fee is often included as well.

In more complex financing structures, in particular in distressed situations, lenders often negotiate for a make-whole provision, which requires the borrower to pay the full value of the interest payments that the lenders would have received during the remaining term of the loan, regardless of whether or not the lenders can place the funds elsewhere.

Under Swiss tax law, interest payments made by a Swiss borrower under a private credit arrangement to a lender are, as a general rule, not subject to Swiss withholding tax of 35%. This principle does not apply, however, if the criteria of the so-called Swiss non-bank rules are met. In such circumstances, the underlying loan relationship is recharacterised as a bond for Swiss tax purposes, with the consequence that, inter alia, the interest payments fall within the scope of Swiss withholding tax. The repayment of the principal amount is not subject to Swiss withholding tax.

The debtor of the Swiss withholding tax is the Swiss borrower, who is required to withhold the amount and remit it to the Swiss Federal Tax Administration (FTA). The tax is economically borne by the lender, as the Swiss borrower deducts the Swiss withholding tax from the interest payment such that only 65% of the relevant interest is paid out to the lender, while the remaining 35% is retained and remitted by the borrower to the FTA. Any entitlement to a withholding refund by the lender is determined in accordance with the applicable double taxation treaty.

The Swiss non-bank rules may be summarised as follows:

• 10 non-bank rule – a breach of the 10 non-bank rule results in the recharacterisation of the financing as a bond (Anleihensobligation) where a Swiss borrower raises funds from more than ten creditors on identical terms against the issuance of debt acknowledgments, provided that the aggregate borrowing amounts to at least CHF500,000;
• 20 non-bank rule – a breach of the 20 non-bank rule results in the recharacterisation of the financing as a bond (Kassenobligation) where a Swiss borrower raises funds on a continuous basis from more than 20 creditors against the issuance of debt acknowledgments on non-identical terms, provided that the aggregate borrowing amounts to at least CHF500,000; and
• 100 non-bank rule – a breach of the 100 non-bank rule results in the qualification of the relevant liabilities as customer deposits (Kundenguthaben) where a Swiss borrower accepts interest-bearing funds on a continuous basis from more than 100 creditors, provided that the aggregate amount of such liabilities is at least CHF5,000,000.

As implied by the term “10/20/100 non-bank rule”, creditors that are domestic or foreign banks within the meaning of the banking legislation applicable at their place of establishment are disregarded for the purposes of determining the relevant creditor thresholds. Where a bank lends through a foreign branch, the relevant banking law requirements must be met in the branch’s jurisdiction, and the branch must conduct genuine banking activities there. Investment funds (eg, debt funds) generally do not qualify as banks. Domestic and foreign group companies of the Swiss borrower are likewise not taken into account for the purposes of determining the relevant creditor thresholds.

Where a creditor is a fund (eg, a limited partnership), it is, for the purposes of the creditor count, generally treated as a single creditor, provided that said vehicle is not established specifically for the relevant financing. In the case of pre-existing funds, this requirement can generally be demonstrated more easily. By contrast, in the case of newly established funds, it is advisable to ensure that subsequent investments are made through the same vehicle. In practice, the treatment of such lender as a single creditor (including, for example, where multiple limited partnerships share the same general partner) can be confirmed by way of a tax ruling. In particular, where there is uncertainty as to whether a “look-through” to the underlying investors may apply, obtaining such a tax ruling is generally advisable.

If, at any point during the term of the financing, the relevant thresholds (including, in particular, the creditor or amount thresholds) are met, such that the financing qualifies, for example, as a bond, this qualification is retained even if the relevant thresholds are subsequently no longer exceeded. By contrast, a mere credit facility exceeding CHF500,000 does generally not suffice; the relevant amount threshold must be exceeded based on the actually drawn and outstanding amount.

In practice, particular attention is paid to compliance with the 10/20 non-bank rule in order to avoid a recharacterisation of the financing as a bond. Credit agreements typically include a number of contractual safeguards. These generally comprise:

• restrictions on the syndication and transfer of the facility to no more than ten non-bank lenders (typically by requiring the borrower’s consent for any transfer to a non-bank);
• representations and covenants by the borrower such that, throughout the term of the financing, it will not have more than 20 non-bank creditors within the meaning of the 20 non-bank rule;
• limitations on sub-participations, ensuring that any sub-participant does not acquire a direct claim against the borrower (particularly in the event of the lender’s insolvency), typically implemented through so-called exposure transfer clauses; and
• representations by each lender as to its lender status under the Swiss 10/20 non-bank rules.

In addition, lenders typically require gross-up or interest adjustment clauses to address the risk that a breach of the Swiss 10/20 non-bank rules – whether by the borrower or as a result of transfers or sub-participations by other lenders – may lead to a recharacterisation of the financing as a bond.

For the sake of completeness, it should be noted that interest paid by non-Swiss borrowers is generally not subject to Swiss withholding tax. However, under certain circumstances, foreign-issued bonds or similar instruments may be treated as Swiss bonds for Swiss withholding tax purposes – typically where the financing is guaranteed by a Swiss group entity and the proceeds are on-lent to Swiss affiliates beyond certain thresholds. In such cases, compliance with the Swiss non-bank rules is required to avoid the imposition of Swiss withholding tax.

Loan arrangements that are recharacterised as bonds under the Swiss 10/20 non-bank rules may also have securities transfer tax consequences. If the loan arrangement or participations in such loan arrangements are transferred with the involvement of a Swiss securities dealer (ie, banks or companies holding securities/bonds with a minimum of CHF10 million book value in its balance sheets), the securities transfer tax amounts to up to 0.15% of the transfer price for domestic bonds.

Payments (in particular interest) secured by Swiss real estate and made to non-Swiss lenders are, as a rule, subject to tax at source at both the federal and cantonal/communal levels, unless relief is available under an applicable double taxation treaty. This rule may become particularly relevant in the context of internationally syndicated financings secured by Swiss real estate, including mortgage-backed securities structures.

Notary fees and registration duties may be payable in connection with security over real estate.

As outlined in 4.1 Withholding Tax, in the event that Swiss withholding tax is levied, any entitlement to a refund is governed by the applicable double taxation treaty. The refund process requires compliance with formal requirements and supporting documentation and may involve a certain administrative burden as well as processing time. These considerations may be taken into account in the negotiation and structuring of loan arrangements with foreign lenders.

A Swiss security package typically includes:

• a share pledge agreement over major group companies or other assets;
• security assignment of trade and intra-group receivables;
• a bank accounts pledge agreement;
• an IP pledge agreement (if available); and
• a mortgage on real estate (if available).

To take security over such assets, the parties are required to enter into separate security agreements and specifically designate the assets which are subject to security. There is no all-asset lien or similar concept under Swiss law. Perfection of security requires the wet ink execution of the security agreements by the parties. Additionally, depending on the asset, further perfection steps need to be taken.

• In case of a share pledge agreement, the share certificates representing the pledged shares have to be physically transferred to the creditor or its representative, duly endorsed in blank.
• In case of a security assignment and bank accounts pledge agreement, the underlying debtor – eg, the trade debtor or the bank, has to be notified of the security assignment or right of pledge. While this is strictly speaking not a perfection requirement, failure to deliver the notification will have the effect that the underlying debtor can validly discharge its obligation by paying to the pledgor/assignor instead of the pledgee/assignee, which jeopardises the value of the security.
• In case of an IP pledge agreement regarding registerable IP rights, registration of the right of pledge with the national or supra-national IP authorities is often required by the lenders. While this is strictly speaking not a perfection requirement, it does prevent third parties from asserting rights to the IP asset on the basis of having acquired such rights in good faith and with no knowledge of the encumbrance (eg, in case the underlying asset is sold by the pledgor in breach of the IP pledge agreement).
• In case of a mortgage on real estate, the security is perfected by registration of the mortgage in the land registry and the transfer of the mortgage certificate to the pledgee by way of a security transfer. Alternatively, the pledgee can be registered in the land registry as the pledgee of the mortgage without the need to issue and transfer a certificate.

Perfection of security is usually required as a condition precedent to funding. Under certain circumstances, security can be perfected as a condition subsequent – eg, the pledging of shares over the target group can only occur after funding for the acquisition financing.

Other than in case of the mortgage certificate, the granting of security over any of the assets described in the foregoing does not require notarisation under Swiss law. Furthermore, there is no general registration requirement for security agreements. Registration is only required where the asset itself is registered – eg, in case of certain IP or in case of real estate. In particular, there are no registration requirements for share pledges under Swiss law.

Swiss law does not recognise floating charges or universal security interests over all present and future assets in the way common law jurisdictions do. Security must be granted over specific, identifiable assets, and perfection requires compliance with the steps described previously. The main implication of this is that there is no meaningful way of granting security over inventory under Swiss law.

It is possible for Swiss entities to grant downstream, upstream and cross-stream guarantees, provided that the articles of association of the Swiss entity granting the guarantee contains a so-called group clause. This is a clause stating that the guarantor may act not only in its own interest, but also in the interest of other group companies, thereby extending its corporate purpose.

Downstream guarantees to wholly owned subsidiaries of a Swiss entity may be granted without any limitations regarding its enforceability. It is the prevailing view under Swiss law that upstream/cross-stream guarantees are subject to the same formal and substantive requirements applicable to the distribution of dividends by the guarantor to its shareholders. The main implication of this is that the guarantee is limited to the freely distributable equity of the guarantor at the time the guarantee is enforced. Furthermore, the execution of the guarantee requires a shareholder resolution (in addition to the board resolution, which is customarily obtained for financing transactions), approving the terms and execution of the guarantee as well the distribution of assets in case of a realisation of the guarantee.

Finally, it is worth noting that enforcement of an upstream/cross-stream guarantee may trigger Swiss withholding taxes on the enforcement proceeds, currently at a rate of 35%. The limitations described in the foregoing, as well as the tax consequences resulting from the enforcement of upstream/cross-stream guarantees, are typically set out in a provision referred to as “limitation language” in the guarantee agreement. The same limitations apply with respect to upstream/cross-stream security.

It is common in Switzerland for a target (group) to be required to accede to the credit agreement as an obligor and security provider, as a condition subsequent to funding. As the loan is usually granted to the acquisition company, this will automatically result in an upstream constellation. The limitations and requirements described under 5.3 Downstream, Upstream and Cross-Stream Guarantees apply.

In most cases, the board approvals customarily required for these kinds of transactions and shareholder approval are sufficient in case of upstream/cross-stream security, as described under 5.3 Downstream, Upstream and Cross-Stream Guarantees. Approval by other company bodies, such as work councils, is not required.

A permit by the competent cantonal authority is required if the loan is used to finance or is secured by residential real estate in Switzerland. Furthermore, the consent of the counterparty – ie, the debtor – is required if the contractual basis for the receivables to be assigned contains an anti-assignment provision. An assignment made in breach of an anti-assignment provision is null and void.

The typical forms of security described in 5.1 Assets and Forms of Security are usually released by way of a release agreement. A release agreement typically provides for the release itself, as well as the re-delivery of documents by the secured party to the security provider (eg, share certificates) and, if applicable, the de-registration of the right of pledge from registries (eg, in case of registerable IP rights).

In case of security granted by way of an assignment (eg, receivables) or full title transfer (eg, mortgage certificates), it is crucial that the release agreement contains the appropriate language to re-transfer such rights to the assignor/transferor. By contrast, a right of pledge is accessory in nature and discharged automatically with the repayment in full of all outstanding amounts under the relevant credit agreement. In this case, the release agreement is merely declaratory in nature, but is nevertheless entered into for the sake of clarity.

Multiple liens are recognised under Swiss law and are typically structured through a combination of contractual priority rights as well as junior/senior ranking liens with effect in rem. In cases where security is granted by way of a full title transfer – eg, in case of a security assignment of receivables – a second ranking security right with effect in rem cannot be established. However, it is possible to agree that the enforcement proceeds of such security are allocated to different groups of creditors in a specific order by appointing a security agent to hold the security and setting out the application waterfall contractually. This is typically done in an intercreditor agreement.

Contractual subordination clauses survive the insolvency of a borrower incorporated in Switzerland. It is the prevailing opinion under Swiss law that the bankruptcy administrator is bound by such contractual arrangements, meaning that they not only remain valid as between the senior and junior ranking lenders, but also need to be observed by the bankruptcy administrator when making distributions out of the insolvency estate.

Swiss banks’ general terms and conditions typically include a first ranking lien and a right of set-off with respect to all assets booked to bank accounts opened with them. As this lien is typically established before the perfection of the bank accounts pledge, it ranks senior. Bank account pledge agreements typically include the requirement to notify the account bank of the right of pledge and to use commercially reasonable efforts to have the account bank waive its first ranking lien. As the bank’s lien typically only covers bank fees and charges, it is usually acceptable to the private credit lender if the bank does not waive its right to the first-ranking lien.

Furthermore, taxes in connection with real estate such as real estate transfer taxes or real estate capital gains taxes are typically secured by a lien of the cantonal tax authorities that ranks senior to all mortgages.

Cash pooling is a common way for Swiss companies to manage liquidity within the group. The cash pooling bank is typically not party to the intercreditor agreement and is thus not secured by the security package provided in the context of the private credit agreements. Its only security in this case is the lien established under the general terms and conditions of the cash pooling bank. By contrast, hedge counterparties are typically party to the intercreditor agreement and beneficiaries of the security provided under the private credit agreements.

In the context of syndicated loans, it is typical that the security is held and administered by a security agent. In case of security interests that are accessory in nature (meaning that they cannot be separated from the secured obligation), such as a right of pledge, the security agent acts as the direct representative of the secured parties while the secured parties themselves formally remain the pledgees. The right to act as representative of the secured parties is typically conferred upon the security agent in an intercreditor agreement or a separate security agent agreement. This structure is typically combined with a parallel debt structure to ensure that the security agent itself is also a creditor of the secured obligations, thus making it eligible to be a pledgee. In cases where the security granted is not of accessory nature, such as a security assignment of receivables or a security transfer of a mortgage certificate, the security agent holds the security in its own name but for the benefit of the secured parties.

Non-bank lenders can enforce security in the same way that bank lenders can. It is a prerequisite for enforcement that the outstanding amount under a credit agreement has become due and payable. A loan typically becomes due either on the agreed maturity date or by acceleration as a consequence of an event of default.

Enforcement can occur either by way of private realisation (Privatverwertung) or by way of initiating proceedings pursuant to the Swiss Debt Enforcement and Bankruptcy Act (DEBA). Private realisation is only permissible if explicitly stated in the security agreement and is only possible for as long as bankruptcy proceedings have not been commenced against the borrower. An exception only applies with respect to book-entry securities (ie, intermediated securities booked to a securities account) for which private realisation is permissible at any time. One thing to consider when opting for private realisation is that Swiss law provides for a liability of the pledgee in case the pledged assets are sold below value. A diligent pledgee will thus first have the pledged assets valued by an appraiser.

Depending on the type of asset, enforcement of security is effected as follows:

• a share pledge is typically enforced by way of an auction and subsequent sale of the shares to the bidder;
• a bank accounts pledge is enforced by directing the bank to pay the account balance to the pledgee;
• a receivables assignment is enforced by collecting the receivables from the underlying debtor; and
• a mortgage is enforced by a public auction.

Which security is actually enforced depends on the circumstances. One thing to consider is that share pledges are structurally subordinated, such that it is often faster to foreclose on individual assets of the pledgor (eg, collecting receivables) if these are sufficient to cover the outstanding amounts.

Once the security is enforced and the proceeds are allocated, the pledgee (or security agent) is required to prepare an account of the proceeds, enforcement costs and allocation of proceeds. Any excess has to be returned to the pledgor. It is not permissible under Swiss law for a pledgee to appropriate the pledged assets without any further accountability towards the pledgor (so-called pactum commissorium).

As a general rule, a Swiss court would uphold a choice of foreign law and would recognise the submission of a Swiss borrower to a foreign jurisdiction. With respect to credit agreements (other than with consumers), there are no specific limitations as to the jurisdiction and law the parties may choose. However, general limitations such as the principle of good faith (Grundsatz von Treu und Glauben) and public policy (ordre public) apply. By applying such principles, a Swiss court can disregard the applicability of the law chosen by the parties and instead apply Swiss law.

From a Swiss law perspective, a foreign state may waive its immunity from jurisdiction and enforcement. A waiver of immunity from jurisdiction or enforcement is valid only if the state concerned expressly states that, in the case in question, the Swiss courts may exercise jurisdiction or may order the seizure of property and assets intended for sovereign purposes.

Assets of Swiss governmental authorities that are directly used to fulfil public duties constitute administrative assets and may not be seized or realised, even with the authority’s consent, for as long as they serve public purposes.

A Swiss court will generally recognise as valid, and will enforce, any final and non-appealable civil judgment obtained from a competent foreign court against a Swiss borrower. In case of a judgment rendered by a member state of the Convention of 30 October 2007 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (the “Lugano Convention”), Swiss courts are prohibited from any kind of re-examination, whereas judgments rendered by the courts of other jurisdictions may also be recognised without retrial, but are subject to a public policy (ordre public) examination as well as an examination of whether the foreign court had jurisdiction from a Swiss perspective. Specific rules set out in further bilateral and multilateral agreements remain reserved.

A final award of an arbitral tribunal against a Swiss borrower would be recognised and enforced by Swiss courts pursuant to and to the extent provided by the New York Convention on the Enforcement of Foreign Arbitral Awards.

A foreign lender can generally enforce its rights in the same way as a domestic lender. The only noteworthy difference is that a Swiss court can order a foreign plaintiff to provide security to cover the defendant’s legal fees, which the plaintiff may be required to bear depending on the outcome of the proceedings.

The time it takes to enforce security granted under Swiss law greatly depends on two factors:

• the type of asset; and
• whether enforcement takes place by way of private realisation or by proceedings pursuant to DEBA.

The most straightforward form is a private realisation of liquid assets – eg, the collection of assigned receivables or the private sale of publicly traded book-entry securities. This can be done in a matter of days, assuming, in the case of receivables, that they are due and collectible.

The second-best option is the realisation of less liquid assets through private realisation. To avoid liability of the pledgee for realisation below value, this process usually involves a valuation by an appraiser and a sales process, typically in form of an auction. This process can take a few weeks to a few months.

The longest and most costly form of enforcement is enforcement pursuant to DEBA. In case insolvency proceedings have commenced against the borrower, this is the only enforcement option (other than in case of book-entry securities). In this process, the enforcement of securities is handled by the bankruptcy administrator. This can take anywhere from six months to multiple years, depending on the complexity of the case.

A few factors may limit a creditor’s (foreign or Swiss) ability to enforce its rights under a loan or security agreement:

• the creditors of a Swiss borrower will be satisfied pursuant to a certain ranking order provided for by DEBA (see 7.2 Waterfall of Payments);
• private realisation of pledged assets is no longer permitted once insolvency proceedings have commenced, other than in case of book-entry securities;
• the commencement of bankruptcy proceedings has the effect that (except for secured claims) interest stops accruing;
• any powers of attorney, instructions and similar arrangements given or made by the insolvent party prior to its insolvency authorising or directing a third party to legally represent the insolvent party or to dispose of the insolvent party’s assets would expire;
• the assignment of future rights (in particular, receivables) is not valid with respect to rights that only come into existence after the commencement of bankruptcy proceedings – ie, a true sale with respect to future periodic payments is not possible;
• certain transactions occurring before bankruptcy may be voidable (see 7.6 Transactions Voidable Upon Insolvency); and
• enforcement limitations apply with respect to upstream and cross-stream security and guarantees (see 5.3 Downstream, Upstream and Cross-Stream Guarantees).

Swiss law offers several insolvency and restructuring processes, including ordinary bankruptcy proceedings and composition proceedings, which can lead to an ordinary composition agreement or a composition agreement with assignment of assets.

The commencement of composition proceedings triggers a statutory stay on enforcement. In bankruptcy proceedings, there is no automatic stay; however, individual enforcement by creditors is replaced by collective proceedings, and creditors may no longer enforce claims against the debtor or its assets outside the bankruptcy process. Secured lenders retain the privilege on the collateral if properly perfected, but the realisation of collateral is carried out within the bankruptcy proceedings by the bankruptcy administrator rather than through individual creditor enforcement, subject to limited statutory exceptions (such as book entry securities).

In ordinary bankruptcy, a bankruptcy administrator is appointed by the court to manage the debtor’s estate. In composition proceedings, the debtor often remains in possession under supervision of a court-appointed administrator. The administrator and the court oversee the process, including creditor claims, enforcement rights and restructuring plans, ensuring orderly treatment of secured and unsecured creditors.

In Switzerland, the insolvency payment waterfall consists of three classes for unsecured creditors. The insolvency costs and receiver fees are outside of these classes and are paid upfront. The first class includes statutorily preferred claims, such as employee wages for the last six months before bankruptcy, and certain social security contributions. The second class contains mostly other social security contributions that are not allocated to the first class. The third class contains all other claims.

Secured creditors receive payment from the proceeds of their collateral outside of the waterfall with priority over unsecured creditors.

In practice, certain statutory privileged claims, like employee wages and pension contributions, are almost always paid in full or largely satisfied. Vendor claims may also be prioritised if they relate to retention of title arrangements or are backed by secured rights. Private credit lenders should account for these statutory and practical priorities when structuring collateral and intercreditor agreements.

Typical bankruptcy proceedings in Switzerland take 12 to 48 months, depending on the complexity of the debtor’s business, the number of creditors and the type of assets involved. Straightforward bankruptcies with liquid assets can be completed faster, while larger corporates with multiple subsidiaries or cross-border operations may require several years.

Recovery rates for creditors vary significantly. Secured creditors with properly perfected liens, such as mortgages, share pledges or assigned receivables, generally recover amounts close to the realisable value of their collateral. Unsecured third-class creditors often receive only a fraction of their claims, as statutory preferential claims, insolvency costs and administrative fees are paid first. Overall, Swiss bankruptcy procedures are predictable and orderly, but recoveries are highly dependent on collateral quality, the debtor’s financial position and the effectiveness of enforcement within the bankruptcy process. Composition proceedings are normally slightly faster, also depending on the complexity.

In Switzerland, company rescue or reorganisation outside formal insolvency proceedings is available through out-of-court restructurings. These often involve negotiated agreements with creditors, amendments to loan terms, covenant waivers or debt-for-equity swaps. Such processes allow companies to restructure liabilities while remaining solvent and avoid formal bankruptcy or court-supervised restructuring.

Private credit lenders typically participate by agreeing to consensual modifications, including extensions of maturity, adjusted interest rates or partial covenant waivers. Intercreditor agreements and security agent structures are often used to co-ordinate multiple lenders.

These arrangements are flexible and faster than formal insolvency proceedings, with minimal court involvement, and are widely used in Switzerland for mid-market companies seeking to stabilise operations, preserve value and maintain creditor relationships while avoiding the public and procedural costs of formal insolvency proceedings.

Key risk areas for lenders in Switzerland if a borrower, security provider or guarantor becomes insolvent include limitations on private enforcement of security, priority of claims and potential claw-backs. Statutory claims, such as employee wages and social security contributions, will be satisfied in priority to the lenders’ claims. Bankruptcy proceedings replace individual enforcement by collective proceedings on enforcement, limiting the lender’s ability to act independently and thus to privately enforce collateral (this is exclusively done by the bankruptcy administrator). Intercreditor disputes and co-ordination with other secured or junior creditors can also delay recoveries.

Claw-back actions may be initiated by the bankruptcy administrator if transactions of the borrower are deemed to have directly or indirectly disadvantaged its creditors, including recent disposals of assets or the granting of security or guarantees prior to the formal opening of insolvency proceedings. The lookback periods depend on the basis for the claw-back action and range up to five years before the opening of the insolvency proceedings.

For claw-back of certain transactions prior to the commencement of insolvency proceedings, please see 7.5 Risk Areas for Lenders.

In addition, certain general considerations apply to creditors in insolvency proceedings. All rights relating to the bankruptcy estate and the debtor’s business affairs are transferred to the bankruptcy administrator, who becomes the sole representative of the estate and has exclusive authority to dispose of its assets. Any dispositions made without the administrator’s consent are null and void. Ongoing litigation is stayed, and creditors may enforce their rights and seek payment only within the bankruptcy proceedings. In composition proceedings, the debtor may only enter into material transactions with the consent of the court‑appointed administrator.

Set-off in insolvency is generally recognised under Swiss law. However, certain restrictions apply. Creditors may offset mutual and due claims against the insolvent debtor, provided that the claims existed at the time of bankruptcy and that the creditor of the insolvent debtor did not only become a creditor after bankruptcy is declared.

Offsetting may be contested by the bankruptcy administrator if a debtor of the insolvent party has acquired a claim against the insolvent party prior to bankruptcy being declared but with knowledge of the imminent bankruptcy in order to obtain an advantage for himself or herself, or another person, by means of offsetting to the detriment of other creditors.

A typical private credit out-of-court restructuring in Switzerland involves consensual amendments to loan terms, such as maturity extensions, interest adjustments, covenant waivers or partial debt-for-equity swaps. It can further include haircuts and warrants for the lenders. Secured lenders often negotiate more enhanced collateral arrangements or guarantees to maintain protection while stabilising the borrower’s operations.

Out-of-court restructurings typically require the consent of various stakeholders, such as the borrower, the various lender groups, further creditors as well as the borrower’s shareholders. A lender is typically only willing to accept certain terms – eg, a haircut – if other creditors are willing to do the same. Shareholder consent is usually required in the context of debt-equity swaps or for the issuance of warrants.

Out-of-court restructurings are typically preferred because court proceedings tend to be more time consuming and costly, and they often lead to a loss of control for equity holders.

Out-of-court restructurings typically require consent from affected lenders, so dissenting lenders can refuse amendments, although majority provisions in agreements may allow certain changes without unanimous consent.

In court-supervised proceedings, DEBA provides for mechanisms for dissenting lenders and non-consensual restructurings. By law, a composition agreement is accepted if it has been approved:

• by the majority of the creditors who also represent at least two-thirds of the total amount of the claims; or
• by one-quarter of the creditors representing at least three-quarters of the total amount of the claims.

The debtor’s privileged creditors are not included in the majority calculation. Secured creditors’ claims only count towards the majority calculation with the amount that is uncovered according to the commissioner’s valuation.

Even though Swiss law has no explicit rules for expedited restructurings through so‑called pre‑arranged or “pre‑pack” transactions, the Swiss Federal Supreme Court confirmed in its leading decision of 18 March 2021 (5A_827/2019) the previous legal practice of privately pre-negotiated, confidential pre-pack restructurings in Switzerland and thus provided legal certainty under Swiss law.

In such cases, key elements of the restructuring, typically the sale of part or all of the business by way of an asset deal, are privately negotiated before the opening of formal composition proceedings and are then implemented swiftly during a court‑approved moratorium. The court may approve the transaction without a prior hearing of creditors. Where a restructuring primarily targets the balance sheet rather than operational changes, it is commonly achieved through a pre‑negotiated transfer of assets or business units combined with a composition proceeding. The decision confirms that Swiss courts will generally uphold restructuring support or similar agreements embedded in a pre‑pack, provided that statutory requirements are met and the transaction is approved by the competent court.