- Obligation to file for insolvency is suspended for a longer period

An amendment to the COVID-19 Insolvency Suspension Act (COVInsAG) extends the suspension of the obligation to file for insolvency in cases of overindebtedness for the period from 1 October 2020 to 31 December 2020.

The Federal Ministry of Justice justifies this as follows: The COVID 19 pandemic has not yet been overcome and many companies are at risk of insolvency due to the pandemic. In order to continue to give companies the opportunity to restructure and finance themselves by making use of state aid offers and through out-of-court negotiations, the obligation to file for insolvency should continue to be suspended. The further suspension would only apply to companies that are over-indebted but not insolvent due to the pandemic.

As the Insolvency Code also offers opportunities to take advantage of a legal protection shield and to restructure the company, we are sceptical whether this is the right way forward.

 

- “Bridging assistance”

The Federal Ministry of Economics (BMWi) intends to admit lawyers as applicants for companies in addition to tax consultants, auditors and sworn accountants. The BMWi is working on the technical implementation. In the near future, lawyers will also be able to apply for bridging assistance for their clients via the BMWi's nationwide online platform. Applications for bridging assistance for small and medium enterprises can be submitted until 31 August 2020.

This is of course long overdue, as we want and have to support our entrepreneurial clients in all matters and proceedings!

 

- The new “Law on the further shortening of the residual debt
discharge procedure”

Covid-19 seems to be manageable and the economy is on the upswing again. Together with
you we want to look confidently into the future and master the challenges. The legislator also
remains active with the new “Law on the further shortening of the residual debt
discharge procedure”, as does Ministry of Justice with the plan to extend the suspension of
the obligation to file for insolvency until March 2021.

The government draft of a law to further shorten the residual debt discharge procedure
provides for a reduction of the procedure from currently six to three years in the future. The
fulfilment of special conditions such as the coverage of the costs of the proceedings or the
fulfilment of minimum satisfaction requirements is to be waived in future.

The three-year residual debt discharge procedure is to apply to all insolvency proceedings
applied for from October 1, 2020, in order to support those debtors who have become
insolvent as a result of the COVID 19 pandemic in making a fresh start. The residual debt
discharge proceedings applied for between 17 December 2019 and 1 October 2020 are to be
gradually shortened.

The shortened procedure should in principle be open to all debtors, i.e. in particular, as
before, also to entrepreneurs.

In the event of renewed insolvency, the government draft proposes to extend the blocking
period for the renewed attainment of residual debt discharge from currently ten to eleven
years and the residual debt discharge procedure from currently three to five years.
Furthermore, debtors are to be more strongly encouraged to hand over acquired assets in
the so-called "good conduct phase". In addition, it should be possible in future to refuse
discharge of residual debt if inappropriate liabilities are created during the "good conduct
phase".

Finally, the government draft provides that bans on activities which have been issued solely
as a result of the debtor's insolvency will automatically cease to apply after granting residual
debt discharge.