Beware of non-payment of social insurance contributions!

In a previous article of April 2022, the undersigned author warned individuals representing a company that is an employer against the company’s non-payment of employees’ social security contributions.

Indeed, according to the LAVS, in the event of non-payment of social security contributions, if the employer is a legal entity, its directors, as well as all persons involved in its management or liquidation, may be held liable, jointly or severally, to repair all or part of the damage and may be subject to civil proceedings for liability and compensation for damages. They may also be subject to criminal proceedings.

Since 1 January 2025, the law has been tightened for legal entities who are employers in the event of non-payment of employees’ social security contributions.

The principle, laid down by the federal law on debt collection and bankruptcy (LP), is that proceedings and claims against a company listed in the commercial register are pursued by means of bankruptcy and not by means of seizure.

However, “as soon as bankruptcy proceedings are opened, the management of the company loses the right to trade and to dispose of all available assets, i.e. all the company’s property such as bank accounts, real estate and production machinery” [1]. In other words, the operation of the company is no longer possible from the moment bankruptcy proceedings are opened, which is not the case in the event of seizure proceedings.

Before 1 January 2025, the LP provided for exceptions to bankruptcy proceedings for companies for public law claims. The former Article 43, paragraphs 1 and 2 LP provided that bankruptcy proceedings were excluded for the recovery of taxes, contributions, fees, duties, fines or other public law benefits due to a public fund or an official and for the recovery of compulsory accident insurance premiums. Social security contributions were included in these public law claims.

Since 1 January 2025, these exceptions have simply been abolished. This abolition is part of the fight against the misuse of bankruptcy.

According to the 2.14 Contributions leaflet published by the OASI/DI Information Centre in collaboration with the Federal Social Insurance Office [2], before 1 January 2025,” in order to recover social security contributions, the compensation funds had to systematically resort to seizure to recover the contributions due. In these cases, debtors had approximately one year to pay the contributions owed before a certificate of unpaid debts was issued. When the operators of a company were not in a position to honour their debts, they suffered virtually no consequences, as they could continue to operate their business, even after having issued several certificates of unpaid debts to their creditors”.

Since the beginning of this year and the removal of the exceptions of Article 43, paragraphs 1 and 2 LP and therefore since the introduction of bankruptcy proceedings also in the case of non-payment of social security contributions, the situation is very different!

Thus, “from now on, the time allowed for the debtor to pay the contributions due in the context of bankruptcy proceedings is considerably shortened. The court asks companies and self-employed individuals who can no longer honour their financial obligations to settle the amounts outstanding as part of the enforcement procedure (usually three months after the payment deadline). In the event of non-payment, the competent court declares bankruptcy and terminates the debtor’s activity”[3].

In other words, a legal entity, that is an employer and does not pay its employees’ social security contributions, no longer benefits from the “time” granted by the seizure proceedings and can very quickly lose the free disposal of the assets of the company and therefore no longer be able to operate the company and continue its business.

So even more than before, it is essential that every employer, whether a physical or legal person, ensures that the employees’ social security contributions are paid at all times.

[1] https://www.kmu.admin.ch/kmu/fr/home/savoir-pratique/succession-cessation-d-activite/fin-entreprise/faillite-entreprise-deposer-bilan/consequences-faillite.html

[2] Mémento 2.14-25/01- Lutte contre l’usage abusif de la faillite État au 1er janvier 2025

[3] Mémento op.cit.