COMMERCIAL LAW NEWS

COVID and corporate law conversions

During the COVID crisis, we assisted in numerous merger and transformation processes. In the face of the crisis and numerous conversion projects, the legislator had extended to twelve months the eight-month deadline, according to which the business register court may only register the transaction if the balance sheet has been drawn up on a reference date no more than eight months prior to the filing. This extension now applies unchanged for the year 2021. Nevertheless, we advice to start conversion procedures early enough in order not to get caught in the pressure of the end of the year.

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.

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.

FAMILY LAW

Right of access and corona

Even in Corona times, the regulations made between the parents or decided by the court regarding the child's transition continue to apply as before.

Recent decisions by the Higher Regional Court of Brandenburg do not indicate the need to impose conditions concerning certain masks as a protective measure against corona towards the parents.
As a rule, there is no claim to compliance with the Corona rules during the contact. It should go without saying that the parents comply with the respective applicable official measures in the context of the arrangement of contact in order to protect themselves, the children and third parties from infection.

Separation

A separation raises various legal issues for the spouses. This also applies to the further procedure concerning the marital home.

If the flat is owned by the spouses, the spouse who remains in the flat must have a residential value added to his or her income for the rent-free use of the flat as a non-cash benefit.

In the year of separation, the so-called appropriate residential value is taken as a basis, which corresponds to the costs of a smaller rented flat corresponding to the marital standard of living. From this residential value, he can deduct any instalments for a property loan up to the limit of the negative residential value.

If the family home is a rented dwelling and both spouses are tenants, it depends on whether the spouse's remaining in the dwelling represents a housing situation chosen by him or her.

This is usually the case if the spouses agreed on the departure of one of them and the whereabouts of the other. In this case, it is justified that the remaining spouse is responsible for the rent alone in the internal relationship - at least after expiry of the period of notice. This means that he or she cannot claim half of the rent as a reduction in income.

The legal situation is different if the housing situation is imposed. In this case, at least for the duration of the notice period, the spouses' proportionate liability for the rent obligations remains.

If the spouse remaining in the flat owes the spouse who has moved out separation support, he or she can usually deduct half of the rent payments for the former married flat from his or her income. The maintenance claim of the other spouse is reduced accordingly. Only if the spouse remains in the flat even after the end of the notice period can it be assumed that he or she has chosen a chosen housing situation and is therefore solely liable.

LABOUR LAW

When do vacation days expire?

This major controversial question was supposed to be decided by the German Federal Labor Court (Bundesarbeitsgericht, BAG); however, we still have to wait for a decision: On 29.9.2020, the BAG suspended an appeal procedure on the existence of vacation compensation claims and submitted it to the European Court of Justice (ECJ) for a preliminary ruling. The decision of the ECJ will have a decisive impact on the question of whether employees can accumulate vacation entitlements for an unlimited period of time and still take vacation that was not taken several years ago or have it compensated when their employment relationship ends.

The fact that vacation entitlements do not expire if the employer did not comply with its obligation to cooperate was already decided in a landmark decision by the BAG in 2019.
The question was now whether in these cases the old vacation claims do not prescribe at all, thus accumulating until the employer starts the prescription by his obligation to cooperate (so the LAG Düsseldorf) or whether the regular prescription of 3 years applies here.

Employers can incur considerable additional costs if an unlimited accumulation of past vacation claims would be possible. The outcome at the European Court of Justice can therefore only be expected with excitement, but until then the employer should play it safe and inform the employees in time about their existing vacation and further request them to take the vacation in the calendar year (if necessary until March 31st of the following year).

LAW OF SUCCESSION NEWS

A gift made ten years ago is in principle no longer to be taken into account in the compulsory portion of an heir's estate.

However, with the 10-year period according to § 2325 III BGB, details are again important:

Does this also apply if a testator continues to live, for example, in the donated property? The answer to this question can be found in a recent ruling of the BGH (Supreme Court of Germany).

Decisive for the final execution of the gift is whether the testator formally relinquishes his legal status and does not remain in the "enjoyment" of the given object in economic terms either.

The testator must actually separate the given object from his or her assets. With the gift, he must have created a condition which means a real loss for him.

However, there must be a period of ten years between the gift and the death of the testator, so that a so-called right to a supplementary compulsory portion does not intervene after this death.

This right means that a person entitled to the compulsory portion can calculate his or her right to the compulsory portion as if the gift had not been made. If, for example, the estate consists of several houses, and one house was given away by way of a gift during the testator's lifetime, but less than 10 years before his or her death, the property is added to the estate in terms of value, even though it did not belong to the testator at all in the end.

In any case, when it comes to the 10-year period, it is always necessary to look closely at how far the testator really gave away the given-away property.

Even after the 10-year period has expired, those entitled to a compulsory portion can often still hope that a given item will be added to the estate and thus significantly increase their compulsory portion.