Short overview about “Corona Ad Hoc Measures” from EU member States: Germany

The obligation to file for insolvency, which applies for the management of corporations, is suspended until 30 September 2020, if illiquidity was caused by the pandemic.

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In force since last 27th of March, these measures below are aimed to mitigate the consequences of the COVID-19 Pandemic:

Suspension of the obligation to file for insolvency

Law to mitigate the consequences of the COVID-19 Pandemic (in force 27 March 2020): The obligation to file for insolvency, which applies for the management of corporations, is suspended until 30 September 2020, if illiquidity was caused by the pandemic. Accordingly the liability provisions for late filing and payment prohibitions for the management are softened and creditors’ applications for insolvency are suspended for 3 months.

Loans and credits

Loans and credits granted after the announcement of the law until the end of the suspension period regarding the filing obligation can be repaid until 30 September 2023 without the repayment being considered disadvantageous to creditors. This also applies to shareholder loans, as an exception to the otherwise applicable subordination and voidability of repayments in a subsequent insolvency proceeding.

Right of refuse of performance

Consumers and micro-enterprises can make use of a moratorium with regard to contractual obligations. This right applies until 30 June 2020 for claims arising from contracts concluded before 8 March 2020.

Delay of consumer loan agreements:  Lenders’ repayment and interest claims due between 1 April and 30 June 2020 are deemed to be delay for three months, if the borrower has lost income due to the pandemic.

Residential and commercial lease agreements / termination

Payment obligations are not lifted, but  the termination right in case of default is suspended, if the tenant cannot pay the rent due to the pandemic during the period from 1 April to 30 June 2020.

Company law

The management may allow simplified shareholder meetings and shareholders decision (virtual assembly / electronic communication).

Labour law

Short-time work benefit for all employees. Short-time work benefit is granted in a two-step procedure: (1) The company has to report the loss of work to the employment agency. (2) The employer submits a benefit application for the respective month. The short-time work benefit is calculated on the basis of the net loss of earnings and amounts to around 60% of the net wages lost.

Social security contributions: The German Employment Agency takes over the social security contributions for employees in short-time work. Social security contributions can be delayed under certain conditions.

Tax: On request due tax payments may be deferred without interest for a limited period of time, if payment is not possible due to the pandemic. This includes income tax and corporate income tax as well as VAT. More information here and here.

State loans and State aid

Since 23 March 2020 a detailed finance program has been launched from the German state-owned development bank (KFW).

You can find more information about the German legislation on COVID 19 following this link.

Ivo-Meinert Willrodt and Robert Hänel, Vice President Legal Framework Officer of the European Insolvency Practitioners Association

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