Dispute Insights #11: Opening the Books – How Foreign Creditors Can Assess a Swiss Debtor

A creditor pursuing a Swiss company faces an important question before investing further resources in litigation or enforcement: can the debtor actually pay?

Swiss law provides a useful, yet often overlooked, instrument for answering that question. Under Art. 958e(2) of the Swiss Code of Obligations ("CO"), a creditor may inspect a Swiss debtor's annual financial statements and audit reports if it can demonstrate a legitimate interest. This tool may prove particularly valuable, since Swiss private companies are generally not required to publish their financial statements, leaving creditors litigating abroad, or holding foreign judgments or arbitral awards, with little visibility into the debtor's financial position.

In a 2023 decision, the Swiss Federal Supreme Court confirmed that the right to inspect a Swiss debtor's financial statements may be exercised even while the underlying claim remains disputed in foreign proceedings. Recent decisions of cantonal (i.e. state-level) courts have adopted a similarly receptive approach and further illustrate how the mechanism operates in cross-border cases.

This opens the way for foreign litigants to bring an action under Art. 958e(2) CO before the courts at the company's registered seat in Switzerland, while litigating the underlying claim in parallel in a foreign court or before an arbitral tribunal. A claimant can thus prepare for enforcement while the litigation or arbitration is still ongoing.

Jurisdiction, Arbitration and Choice-of-Law Clauses Do Not Necessarily Prevent the Inspection Right

The request must be brought before the court at the debtor's registered seat. Swiss courts have accepted jurisdiction even where the underlying dispute is being litigated abroad. They have generally treated the statutory inspection right as distinct from the contractual dispute on the merits.

As the Swiss Federal Supreme Court held in its 2023 judgment, a foreign jurisdiction clause does not necessarily extend to an application under Art. 958e(2) CO. Swiss courts have taken a similar approach with respect to arbitration agreements: in a Zurich case, an LCIA arbitration clause did not prevent a creditor holding a recognised arbitral award from enforcing its right to inspect the debtor's annual report.

The inspection right is governed by Swiss corporate law because it concerns the organisation of a company incorporated in Switzerland. A foreign choice-of-law clause governing the underlying claim does not displace that statutory right.

The Two Requirements under Article 958e(2) CO

An application under Art. 958e(2) CO is determined in so-called summary proceedings. These are expedited proceedings, generally decided on the basis of documents, and considerably faster than ordinary court proceedings. The creditor must establish:

• its status as creditor (i.e. that it has a claim against the Swiss company in question); and

• a legitimate interest in inspecting the annual report.

Creditor status need only be established with high or overwhelming probability. A debtor cannot defeat the inspection right merely by disputing the underlying claim.

According to the Swiss Federal Supreme Court, creditors whose claims remain the subject of pending foreign litigation may nonetheless qualify as creditors within the meaning of Art. 958e(2) CO. In determining creditor status, a court may consider contracts, correspondence, acknowledgments, judgments and other evidence of the underlying claim. The debtor may, in turn, raise substantive defences.

Creditor status alone is, however, not enough. The applicant must explain why it requires access to the financial statements.

A legitimate interest will typically exist where the creditor needs to assess the debtor's financial situation before deciding whether to commence proceedings, continue pending litigation or arbitration, seek recognition or enforcement in Switzerland, or initiate attachment or bankruptcy proceedings. In practice, the existence of pending litigation, or concrete steps toward commencing proceedings, will generally be sufficient.

A balancing of interests nevertheless remains necessary. Courts may refuse access where the request is abusive, aimed at obtaining business secrets, or otherwise amounts to a fishing expedition.

Scope of the Inspection Right

The right of inspection extends to the approved annual financial statements, including the balance sheet, income statement and notes, as well as any applicable audit reports and, where relevant, consolidated financial statements. It does not, however, extend to underlying accounting records, management accounts, or unapproved financial statements.

Inspection generally takes place at the company’s registered seat during business hours. Zurich case law has also permitted creditors to make copies at their own expense.

Conclusion

Art. 958e(2) CO can provide foreign creditors with valuable insight into a Swiss debtor's financial position before further resources are committed to litigation or enforcement. Creditors pursuing claims against Swiss companies should thus consider an Art. 958e(2) CO request as part of their broader litigation and enforcement strategy. It can answer an important question at an early stage of a cross-border recovery effort: is the debtor worth pursuing?