In a recent decision, the Swiss Federal Supreme Court has clarified equitable subordination risks in connection with shareholder loans. The key takeaways are as follows:

Introduction

What happens when monies are loaned for a specific purpose but that purpose fails? Should those monies fall within the general assets of the recipient upon bankruptcy or insolvency?

Overview

Despite calls upon the government to intervene and, later, attempts to sell the business, the South West construction firm Midas has collapsed into administration this week.

The collapse of the business has led to over 300 redundancies, though it is understood that a section of the business (Mi-Space) has been sold, saving over 50 jobs. Concerns have also been raised about the knock-on effort on sub-contractors and connected businesses, many of whom have been left out of pocket through unfulfilled contracts and unpaid invoices.