Corona: These are the current rules on insolvency

Overindebted or insolvent because of the coronavirus? An expert explains who doesn't currently have to file for bankruptcy despite pandemic-related financial problems.

This article is part of the special topic: Restructuring, protective shield or insolvency?

Ecovis business consultant Alexander Waschinger explains the current changes to the Covid-19 Insolvency Suspension Act (COVInsAG) .

Which companies do not have to file for insolvency despite being over-indebted?

The current regulations apply until April 30 , 2021. Accordingly, over-indebted companies do not have to file for insolvency if they applied for coronavirus aid between November 1, 2020 and February 28 , 2021 , or could have applied for such aid but were legally or practically prevented from doing so.

Updated January 20, 2021The Federal Ministry of Justice announced today that the obligation to file for insolvency will be extended beyond 31 January until April 30, 2021 The extension is intended to benefit debtors who are entitled to financial assistance from the Corona aid programs. The prerequisite is that the assistance applied for by 28 February 2021 is or could have been applied for, but the company was legally or actually prevented from doing so. 

Federal Justice Minister Lambrecht explained: "The review of applications takes time, which is why the assistance is often not yet available for payment We must not deprive these companies of the opportunity to get back on their feet financially with government aid."

What do “legal” and “actual” mean in this context?

The explanatory memorandum to the law does not specify when an application was not possible for legal or factual reasons. The crucial point is that it also refers to someone who could have submitted the application but chose not to.

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What happens if there is no prospect of receiving assistance?

If it is clear that there is no entitlement to coronavirus aid, an insolvency petition must be filed. The COVInsAG (COVID-19 Insolvency Suspension Act) did not suspend the grounds for insolvency per se. It is intended only to support those who are threatened with insolvency due to the pandemic.

How can a company prove that its financial difficulties were caused by the pandemic?

Three points are necessary for this:

• The company may on 31 December 2019 not may have been insolvent or over-indebted.
• The financial year ended before 1 January 2020 must be a positive EBIT identify.
• In addition, the Revenue in the calendar year 2020 by more than 30 percent have fallen compared to the previous year.

The COVInsAG (COVID-4 Insolvency Suspension Act) was amended at the end of 2020 along with a comprehensive package of reforms governing restructuring and insolvency law. The forecast period for the over-indebtedness assessment is limited to four months for cases where the COVInsAG applies – a further simplification. However, this measure is only valid until December 31, 2021.

Are there any further reliefs in the COVInsAG?

The updated COVInsAG now includes easier access to the protective shield procedure . It is advisable to seek advice from a lawyer experienced in insolvency law.

What applies to companies that are insolvent?

Since October 1, 2020, these companies have been required to file for insolvency , even if they meet the aforementioned criteria. Only companies that are over-indebted due to the pandemic are protected.

Source: Ecovis / BMJV

Restructuring: The skilled trades welcome the new insolvency law . Read more > here!