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Covid-19 coronavirus: Amendment to COVInsAG

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Herding Franz Bernhard
Dr Franz Bernhard Herding

Partner

Frankfurt am Main

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Pruefer Sven
Dr Sven Prüfer

Partner

Frankfurt am Main

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Uebelhoer Walter
Dr Walter Uebelhoer

Partner

Munich

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Peter Hoegen
Peter Hoegen

Senior Counsel

Frankfurt am Main

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Kranz Christopher
Dr Christopher Kranz

Counsel

Frankfurt am Main

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04 September 2020

Suspension of obligation to file for insolvency on the grounds of over-indebtedness until 31 December 2020 and consequences of suspension

From 1 October 2020 onwards, illiquid companies must once again file for insolvency without undue delay, and no later than within three weeks. In case of doubt, a liquidity status report should be prepared now and, for companies undergoing financial crisis, a rolling 13-week liquidity forecast should be prepared in the interests of legal certainty.

For non-illiquid companies, i.e. companies that are over-indebted but also companies that are neither over-indebted nor illiquid (!), the legislature continues to offer temporary stability during the period of suspension of the obligation to file for insolvency on the grounds of over-indebtedness until the end of 2020:

  • Directors are not obliged to issue a positive going-concern prognosis in order to avoid having to file for insolvency on the grounds of over-indebtedness, and payment prohibitions under insolvency law will not apply to them even in a potential situation of over-indebtedness.
  • Lenders may grant new loans to companies and may have collateral provided without having to fear liability or avoidance risks. In particular, the requirement to obtain a restructuring opinion generally remains suspended.
  • Shareholders may grant shareholder loans without having to fear avoidance or liability risks.

But beware: In addition to the familiar challenges related to mixed financing structures (“new/old money”) owing to the limitation of the various exemptions, it is advisable to prepare not only a rolling liquidity forecast but, where possible, also a restructuring concept serving at least as a “roadmap” through the crisis, because some uncertainties remain as to the exact scope of application of the various exemptions in the run-up to a potential illiquidity situation (= crisis).

From 1 January 2021 – under the current rules – a positive going-concern prognosis will again be important in order to avoid over-indebtedness, and the requirements for restructuring loans will again apply in full. Companies should thus use the time in order to develop at least the basic structures for a conclusive restructuring or refinancing concept.

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