The Federal Ministry of Justice and Consumer Protection (BMJV) is preparing, according to apress release dated 16.03.2020is preparing a new statutory regulation to suspend the obligation to file for insolvency in order to protect companies that find themselves in financial difficulties as a result of the coronavirus pandemic.
Building on previous regulations
Older regulations that were passed in response to the flood disasters in 2002, 2013 and 2016 should serve as a model for this.
For example, the wording of the 2016 regulation (Act on the Temporary Suspension of the Obligation to File for Insolvency in the Event of Insolvency Caused by Floods and Heavy Rainfall as Art. 3a of the Ninth Act Amending Book 2 of the German Social Code of 26.07.2016,BGBl. I 2016, 1824 (1838)) is reproduced:
"Section 1 [Suspension of the obligation to file for insolvency]
If the occurrence of insolvency or over-indebtedness is due to the effects of the heavy rainfall and flooding in May and June 2016, the obligation to file for insolvency pursuant to Section 15a of the Insolvency Code shall be suspended for as long as the parties obliged to file are conducting serious financing or restructuring negotiations and there are reasonable prospects of restructuring as a result, but no longer than until the end of December 31, 2016."
§ Section 2 of this law also contained a ministerial authorization for a temporary extension of this suspension.
The predecessor regulation (Art. 3 of the Reconstruction Assistance Act of 15.07.2013(BGBl. I 2013, 2401 (2402)) on the occasion of the 2013 flood disaster was identical in content.
Current legal situation
According to the current legal situation§ Section 15a para. 1 of the Insolvency Code(InsO) applies:
"If a legal entity becomes insolvent or over-indebted, the members of the representative body (...) shall file an application to open insolvency proceedings without undue delay, but no later than three weeks after the occurrence of the insolvency or over-indebtedness.(...)"
Failure to file an application in good time can result in very considerable civil, tax and, above all, criminal liability risks for all members of the management or board of directors personally.
Announced amendment and recommended action
There is as yet no current draft legislation on the announced suspension of the obligation to file for insolvency. It is not yet possible to assess whether the voices calling for significantly more far-reaching legislative measures will be heard (e.g. Prof. Dr. Georg Bitter; Prof. Dr. Stephan Madaus). This also applies to alternative proposals, such as the temporary extension of the insolvency filing period from 3 to 6 weeks ("Acute program against the corona economic crisis",BT-Drs. 19/17747 from 10.03.2020).
Insofar as - according to thepress release of the BMJVthe wording of the new regulation is based on the predecessor regulations of 2016 and 2013 and adopts them in essence, all managing directors and board members of companies that are in principle subject to the statutory obligation to file for insolvency pursuant to§ Section 15a InsOare recommended to provide comprehensible and auditable documentation.
As a precautionary measure and as a matter of urgency, it will be necessary to ensure that
- the causality of the coronavirus pandemic for the occurrence of over-indebtedness and/or insolvency,
- the financing or restructuring negotiations conducted and
- the resulting restructuring prospects for the company
verifiably documented in order to be able to provide the proof required in accordance with the previous considerations that the obligation to file an application is or was actually suspended in the specific case. The question of the causality of the coronavirus pandemic for the economic threat to the company will presumably also be one of the decisive prerequisites for the approval of the financial aid promised by the German government.
Whether further legal adjustments are intended and what these will be, for example in the area of the requirements for emergency management(Sections 64 GmbHG, 92 para. 2 AktG) and the existing distribution of the burden of proof for payments initiated by the management or the management board during the crisis, is not yet foreseeable. In any case, such adjustments were not made in connection with the previous regulations.
Please contact us if you are unsure and would like us to check whether the (announced) temporary suspension of the otherwise mandatory obligation to file for insolvency and the associated liability risks will apply in your case.
We will keep you informed of further developments here.