Suspension of the obligation to file for insolvency for companies affected by the Corona pandemic

 

The Federal Republic of Germany has adopted comprehensive measures to stabilise the economy. To prevent companies from going bankrupt because they do not receive the funds early enough, the obligation to file for insolvency in Germany is suspended until September 30, 2020.

  • Management bodies of legal entities (above all GmbH, GmbH & Co. KG, AG) are obliged to file for insolvency within three weeks as of inability to pay or over-indebtedness. In case of an infringement the body will be liable for prosecution due to a delay in filing for insolvency.  
  • In order to avoid that companies are forced to file for insolvency because the above mentioned measures (especially loans) cannot be made available quickly enough the obligation to file for insolvency shall be suspended until 30 September, 2020.    
  • The precondition is that the reason for the insolvency is based on the Corona epidemic and that there are reasonable prospects of restructuring due to an application for public assistance or serious financing or restructuring negotiations by the applicant. If necessary, this will have to be certified by an expert.   
  • The respective press release of 16 March, 2020 can be found on the website of the Federal Ministry of Justice and Consumer Protection 
  • On 23 March, 2020 the federal cabinet has concluded the draft of the “Act for temporary suspension of the obligation to file for insolvency and limitation of the directors´ and officers´ liability in an insolvency caused by COVID 19 pandemic (COVInsAG)“

 

  • The key elements of the draft are as follows
    • Suspension of the obligation to file for insolvency until 30 September, 2020 (suspension period) in case of an insolvency caused by Coronavirus
    • Limitation of the directors´ and officers´ liability for payments in vicinity of insolvency during the suspension period
    • Limitation of liability and the risk of objection for credit grantors and creditors
    • Suspension of the subordination for shareholder loans granted during suspension period

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