What is a deficit?

An underbalance exists if a balance sheet loss means that the company's assets no longer fully cover the share capital and the required reserves. Capital loss and excessive indebtedness are types of underbalances, which have legal consequences.

Types of Underbalances

An underbalance without legal consequences exists when the assets cover all the external capital and at least half of the share capital and the statutory reserves. In the case of an underbalance with legal consequences, a distinction is made between capital loss and excessive indebtedness. If the assets cover all the external capital but less than half of the share capital and the statutory reserves, it is a capital loss (OR 725 I). Excessive indebtedness occurs if the external capital is no longer fully covered by the assets (OR 725 II).

Legal Consequences

In the event of a capital loss, the board of directors must immediately convene a general meeting and request restructuring measures (OR 725 I). If there is a justified concern of excessive indebtedness, an interim balance sheet must be drawn up and submitted to an approved auditor for examination (OR 725 II). If the interim balance sheet shows that the company's creditors' claims are not covered neither at ongoing nor liquidation values and creditors do not subordinate themselves to the extent of the undercoverage behind all other creditors, the board of directors must notify the judge according to OR 725 II (see Bankruptcy Notification in Corporation). The judge will declare bankruptcy based on the notification or may postpone it at the request of the board of directors or a creditor if there is a prospect of restructuring (OR 725a I).

As an approved auditing agency, we are happy to conduct the review of your interim balance sheet. Calculate an offer online or arrange a consultation.