PwC's Automated Promissory Note

This article describes PwC Switzerland’s promissory note on PartnerVine. It helps you understand what a promissory note under Swiss law is, the differences between a promissory note and a loan agreement, and what you get when you purchase access to the software that creates the promissory note.

What is a Promissory Note?

A promissory note is a promise to pay cash to another party in the future. A party or parties (the “Issuer”) issues the promissory note to another party (the “Holder”). The agreement can be prepared quickly under Swiss law, because the default terms of a promissory note are defined under the Swiss Code of Obligations (CO). The standard terms of the CO are intended to be fair to both the issuer and the holder of the promissory note, but they are also for situations where there are minimal obligations on the Holder and the Issuer has agreed to pay cash with few conditions. If parties want to formalize a promise-to-pay quickly and rely on the standard terms of the CO, the promissory note is fast and easy to execute. In German, the promissory note is called an Eigenwechsel.

Here are some key terms from PwC’s promissory note:

  • The promissory note can be issued by an individual or a company.
  • The promissory note can be issued by two or more parties, in which case each party would be jointly and severally liable for the payment of the promissory note. “Jointly and severally” means that each party would be liable for the full amount of the promissory note, and the Holder of the promissory note can decide who it wants to collect the money from.
  • The promissory note must be paid (1) on demand (auf Sicht), which means that the promissory note has to be paid when the Holder asks for payment, (2) at a specific time after the promissory note has been presented for payment (nach Sicht), which means that the parties agree to a timeframe in accordance with the CO when the Holder can request repayment and when the Issuer has to pay, or (3) at a fixed date.
  • The amount, currency, date of issue (which is the date when interest begins to accrue), place of issue and terms of interest.

The guided interview in PwC’s promissory note takes account of the requirements of the CO.

What are the differences between a promissory note and a loan agreement?

The promissory note under Swiss law is issued by a party or parties, and has minimal obligations on the Holder of the note. The Issuer agrees to pay cash subject only to a few conditions, which is quite different than a loan agreement. A loan agreement usually has more extensive obligations on both the lender and the borrower, and is more heavily negotiated.

There are reasons why a borrower may prefer a loan agreement to a promissory note, including:

  • If the value or timing of what the lender provides is not clear, in which case the borrower would probably want to use a more detailed loan agreement.
  • If the lender would like to secure the payment against particular assets, in which case a loan agreement that covers security would be more suitable. The promissory note doesn’t speak to how the claim relates to other claims against the debtor’s assets, and a lender should generally assume that claims with a secured interest outrank the promissory note.
  • The borrower would like to subordinate the promissory note to claims of other creditors, in which case a subordinated loan agreement would be more suitable. 

How does PwC’s software work?

When you purchase a product from PwC Switzerland, you buy 90 days access to an automated document. An automated document is software that takes you through a guided interview. Your answers to the interview questions create a draft of an agreement. The questions serve as a checklist of issues to create the agreement, so you’ll be more likely to address issues you may not be considering. The checklist has been created by the law firm that prepared the product, so you’re getting access to the same resources a member of that law firm would use to create the agreement. What’s more, the questionnaire is built to insert repetitive items identically throughout the agreement, so there is less chance of error if you’re doing something like replacing the names of parties. After you’ve gone through the questionnaire, you’ll be shown what the draft of the agreement will look like, and then be able to make changes in the software, or after you’ve downloaded the agreement in Microsoft Word. For PwC Switzerland, you can use the questionnaire as many times as you’d like and download as many versions as you’d like during the 90 days you have access. It is quick and easy to repurchase access as well. 

User Experience

The promissory note follows a user-friendly interview format. The interview leads you through questions that involve ‘nested’ decision trees, so your answer opens up further questions and information based on your choices. The software saves you time by steering you through questions relevant to your responses, and mitigates the risk of errors by leading you through PwC’s checklist of issues.

Some fields are structured as multiple choices questions (e.g. “Yes” or “No”), an example of which is below.

Yes-No-Promissory-Note

Other questions are open, like the principal amount of the promissory note.

Open-field-Promissory-Note

For many questions, there are links to information from PwC, which provide you with the knowledge management resources of PwC delivered with software. An example of additional information when you click on the information button for the question “Define an end date for the period of presentation?” is below:

Info-Bubble-Promissory-Note

After answering the questions, PwC’s software leads you to a page showing the contract you have generated with links to each answer and a summary of your interview. That summary page lets you review what you’ve done and make changes easily.

Summary-page-Promissory-Note

If you move beyond the summary contract page, you will be able to download, review and print the agreement as many times as you’d like during the 90 days you have access to the software. The document can be downloaded as a Microsoft Word document or a pdf. 

Print-page-Promissory-Note

Savings

PwC has estimated the time and money you’ll save with the “Relative Advantage Calculator” listed on each product page. Assuming that you can draft a promissory note under Swiss law without PwC’s software, PwC estimates that you will save 1.5 hours by using its software, which would result in hundreds saved if the value of your time is CHF 350 per hour and you only use the software once. If the value of your time is more than CHF 350 or you use the software more than once, the savings increase dramatically because the expense of your software stays the same. The Relative Advantage Calculator for PwC's Promissory Note can be found on its product page.

You can find the Relative Advantage Calculators on each of PwC’s product pages. You can change the assumptions in the calculator to fit your situation. If you’d like more information on the Relative Advantage Calculator, you can read our article here. The article describes not just savings in time and money, but also benefits that the calculator does not quantify like risk mitigation and upskilling employees.

Further resources

There are links to the Promissory Note and a similar document to formalize an intra-group transfer of a promissory note under “Related Products” at the end of this article. If you’d like to try out an interview, PwC has automated its Inter-Company Loan Agreement, which can be accessed by clicking “Preview Document” in the “Preview a Document” box on each of PwC’s product pages. If you have further questions, you can contact PartnerVine by email, chat or our telephone hotline. The chat and telephone hotline are available 24/7.

Legal Information

Finally, a note on how you can use this article. This article is not to be considered legal advice and is not a substitute for advice from qualified legal counsel. If you are considering issuing a promissory note and don’t understand the default terms of the CO, you may want to consult qualified counsel. The CO specifically refers to Promissory Notes in Articles 1096-1099, but rights and obligations also depend on other sections of the CO. Although the standard terms under the CO are intended to be fair, understanding those rights and obligations will reduce the risk you take on when issuing a promissory note. Material aspects of the discussions in this article may change at any time and without further notice.

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