COVID-19 update

So far the Swiss economy has come through the pandemic in relatively good shape, not least thanks to the massive package of support from the federal government. Through September, the federal government had provided around CHF 40 billion in hardship assistance and issued some CHF 17 billion of guarantees on bridging loans. Ultimately, however, the medium and long-term consequences of this crisis may lead to a different conclusion.

In future, companies will need to keep an eye on the following issues:

Short-time working compensation (KAE)

Short-time working compensation arising because of COVID has now been extended through the end of 2021 and may be reported through 31 March 2022.

Since the end of August, internal and external auditors from SECO have been inspecting some 40-60 companies per month. So far, about 1,000 reports of abuse have been received by SECO. Roughly 10% of inspections have found abuses and resulted in criminal prosecution. At 70% of companies audited the KAE calculations had to be corrected, and SECO found the calculations were correct in only just under 20% of cases. Excess KAE awarded can be reclaimed up to five years after payment.

Hardship assistance

Payment of hardship assistance is regulated at cantonal level. Many cantons have adopted provisions of the federal COVID-19 Hardship Assistance Ordinance in cantonal law. It is important to note that the money received has to be repaid from profits generated in the year following payment and the three fiscal years after that (HAO article 6). There is also an obligation to repay where a loan was made to the company owner.

COVID-19 loans

The term of loans has now been extended to a maximum of ten years. When calculating a loss of capital or excess debt, loans now count as quasi-equity until the end of the term. Since early 2021 it has also been possible to apply loans to investments in expansion. Distributing profits, financing related companies and granting shareholder loans remains forbidden during the term of the loan. If an auditor finds that a loan has been granted improperly, it must insist the Board of Directors remedy the situation and monitor it. If the Board of Directors takes no action, it must inform the Annual General Meeting. If the unlawful situation is still not remedied after the Annual General Meeting has been informed, the auditor must notify the Guarantee Cooperative.

This indicates that we will still be dealing with the economic consequences of the pandemic for a long time to come, and both entrepreneurs and auditors may in some circumstances have to keep an eye on the relevant provisions for a long while yet. Prudence is appropriate, and repaying loans received can make the room for business maneuver considerably easier. It is not always easy to determine in an individual case if a loan has been used improperly. It is important to follow the emerging case law and benefit from this.