Companies that were brought to a standstill by the coronavirus crisis did not have to file for insolvency immediately in recent months. With this measure, the German government – in addition to short-time work and state bridging aid – wanted to Wave of bankruptcies prevent or at least mitigate them.
This temporary regulation will now be replaced by the newly adopted reform of insolvency law. The draft law stipulates that struggling companies will be able to restructured even without insolvency proceedings can be – as long as they are not yet insolvent.
“Restructuring concept in the future also without insolvency proceedings”
“Companies that convince a majority of their creditors of their restructuring prospects with a solid plan will be able to implement their restructuring concept without insolvency proceedings in the future,”
said Federal Minister of Justice Christine Lambrecht. She further emphasizes:
“Especially companies that have stumbled through no fault of their own due to the COVID-19 pandemic but have a convincing business model will be able to benefit from the innovations.”
Consideration of forecast uncertainties
Once the law comes into force, further relief will be provided for companies affected by the pandemic: From January 1, 2021, they will again be subject to the obligation to file for insolvency, which had been suspended since March of this year due to the coronavirus pandemic and has been in force again since October, at least for insolvent companies. However, according to the Ministry of Justice, the over-indebtedness assessment will be based on a more relaxed standard in the future, taking into account the current forecast uncertainties.
In addition, the restructuring options under existing law will be further developed. The aim is to ensure that the waiver of the appointment of an insolvency administrator in so-called self-administration proceedings is generally reserved only for well-prepared and soundly prepared projects. At the same time, these companies should be provided with a legally secure path to self-administration-based restructuring options.
