Update on the Legislative Proposal for the Temporary Suspension of the Obligation to File for Insolvency due to the Corona Epidemic
The legislative draft announced last week by the Federal Ministry of Justice (BMJV) to ease the obligation to file for insolvency is expected to be passed by the Bundestag and Bundesrat (federal parliament and council) next week.
A draft bill has not yet been published. The BMJV, however, has already announced that the easing of the obligation to file for insolvency will be tied to the following conditions:
- Insolvency / over-indebtedness is due to the effects of the Corona pandemic; this is presumed to be the case if factual insolvency has occurred from a cut-off date yet to be determined;
- serious financing or restructuring efforts with reasonable prospects of recovery through the use of public funds/emergency aid packages.
Payments made during the suspension period, which serve to maintain business operations, should be compatible with the requirements of emergency management (section 64 sentence 2 German Limited Liability Company Act (GmbHG) / 92 (2) sentence 2 German Stock Corporation Act (AktG)).
In order to be able to benefit from a suspension of the obligation to submit an application and the fiction regarding emergency management, at least the following evidence should be required:
- no factual insolvency maturity before the cut-off date;
- serious financing or restructuring efforts with reasonable prospects of success;
- payments made after factual insolvency served to maintain business operations.
Dr Florian Weichselgärtner