The skilled trades welcome the new insolvency law

The federal government has initiated a comprehensive reform of insolvency law, which the skilled trades sector largely views positively.

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

On October 14, the German Federal Cabinet approved the draft law for the new insolvency law. Among other things, it includes provisions for restructuring measures that can prevent insolvency.

Companies that have run into financial difficulties as a result of the coronavirus pandemic are also set to benefit. Further relief measures will be introduced for these companies after the law comes into effect on January 1, 2021 : While they will again be subject to the obligation to file for insolvency due to over-indebtedness – which had been temporarily suspended – the over -indebtedness assessment will be based on a more lenient standard that takes into account the current uncertainties in forecasting.

Furthermore, the reform is intended to ensure that insolvency in self-administration , i.e. without an insolvency administrator, remains possible only for sound projects.

Renovation possible under your own responsibility

The centerpiece of the reform is the newly introduced restructuring framework . This is a restructuring procedure that precedes insolvency. It is only available to companies that are facing imminent insolvency. Management remains in office during the restructuring and manages it independently.

You might also be interested in:

Operations management

This is what a tradesman can do if the customer doesn't pay.

Craft policy

"Craftsmen need reliable framework conditions"

Operations management

Leasing return: What damages do you have to pay for?

The central tool of the restructuring framework is the so-called restructuring plan . This is intended to enable companies to avert insolvency and restructure with the approval of a majority of creditors. The debtor is required to present a valid restructuring plan to their creditors. The plan gives the companies concerned flexibility; for example, they can involve only specific creditors in the process.

Small businesses can apply special procedures

Good news for smaller companies : They will now have access to so-called restructuring mediation between debtors and creditors as a preliminary step. Another positive change: Under the old law, an insolvency petition had to be filed for protective shield proceedings. This can now be avoided with the restructuring framework.

With this draft, the German government is implementing a corresponding EU directive. It still has to be passed by the Bundestag and Bundesrat.

Chambers of Crafts advise, but not comprehensively

Holger Schwannecke , Secretary General of the German Confederation of Skilled Crafts (ZDH) , stated regarding the draft legislation : "With its successful draft, the Federal Government is presenting a balanced and practical restructuring procedure that requires only minor adjustments . The law is being introduced at the right time. Given the ongoing economic uncertainties caused by the pandemic, businesses need effective restructuring tools before insolvency occurs and liquidation threatens."

The only flaw was the assignment of insolvency counselling duties to the Chambers of Skilled Crafts . Contrary to the intended purpose, this is not simply a clarification of existing counselling services. "Chambers of Skilled Crafts offer initial consultations to member businesses in financial distress . That's important," emphasizes Schwannecke. " However, legal insolvency counselling goes far beyond this and is simply not feasible in terms of costs, personnel expenses, and liability risks . This obvious legal oversight must be corrected in the upcoming parliamentary process," demands the ZDH president.

Guide for tradespeople > Here you will find the current guide from the German Confederation of Skilled Crafts (ZDH) on the new insolvency law with restructuring proceedings: Saving against impending bankruptcy. Businesses with financial problems should seek advice early on. The Chambers of Skilled Crafts can help companies at risk. > Read more here!