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Most corporate bankruptcies are caused by bad decisions and very rarely by bad luck. But in some cases even bankruptcy is desirable and is part of the business model. These bankruptcy riders are driving the current wave of bankruptcies roaring through the Swiss corporate landscape.
“Suspicious cases are on the rise and we are seeing a clear increase in fraudulent bankruptcies,” says Raoul Egeli, 54, President of Creditreform, the creditors’ association. The number of suspected cases is now well above the pre-pandemic level. There were over 70 cases in March alone – experts also assume a large number of unreported cases.
The hospitality and construction industries are particularly popular with bankrupt riders – often also referred to as corporate contractors. According to a study by business information service Dun & Bradstreet, bankruptcies increased by 46 percent in the first three months of the year in the hospitality industry and by 76 percent in the construction industry.
Covid loans could lead to bankruptcy
How exactly does a bankruptcy cavalry work? An entrepreneur is in financial difficulties but stays in the market thanks to dumping prices. He avoids paying social security contributions, sells some of the inventory, raises a mountain of debt, and jumps out as soon as the situation gets too dangerous. From there, the corporate contractor takes over at the company’s expense, who buys it for as long as possible and sells the last company property before everything collapses.
As Egeli expected, Covid loans can now increase cases of abuse even more: 137,000 companies in Switzerland received Covid loans totaling CHF 16.9 billion from the federal government. Currently, over 9.3 billion Swiss francs are open at 92,000 companies. “I assume most companies fail to repay these loans,” says Egeli.
In the canton of Zurich alone, bankrupt riders cause high economic losses in the triple-digit million range each year, according to the cantonal police. However, many dubious cases are not even pursued because there is nothing to gain creditors. “As there are only debts, the authorities are finally stopping bankruptcy proceedings for lack of assets. The injured party will have to give an advance of CHF 4,000 in order for the process to continue, »says Roland Berli (63).
“The new law turns into a bit of a toothless tiger”
Berli worked as an inspector in the cantonal police for 18 years and has been running a board of trustees in Hinwil ZH for over twenty years. He is currently writing a thesis on the subject, as his clients are also victims of bankruptcy riders.
The federal government wants to make bankruptcy harder with a package of measures next year. Berli reviewed the package in an expert survey. “During the consultation for targeted criminal prosecution, the new law was shortened too much. Thus, it becomes a bit like a toothless tiger,” he summarizes the result.
However, minor improvements can still be expected: In the future, by associating the database with the person database for legal entities, it will be easier to recognize straw people and networks with brains. Bankruptcy officials also now have a duty to report in case of doubt. But controls are also a resource issue. And bankrupt drivers often destroy all their accounting records, making prosecution much more difficult.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
