The German Federal Government has resolved upon a draft bill for the mitigation of the consequences of the SARS-CoV2-Virus (COVID-19) pandemic (the “Proposed Legislation”). One of the goals of the Proposed Legislation is to prevent insolvencies of companies which encounter financial difficulties as a result of the ongoing COVID-19 pandemic.
The Proposed Legislation goes well beyond the earlier announcement made by the German Federal Department of Justice which suggested that the envisaged amendments to be made to the German Insolvency Code would generally follow the previous reliefs granted, in particular the reliefs granted to mitigate the effects of the floods in Germany in 2016. In stark contrast thereto, the Proposed Legislation would comprehensively modify the German insolvency regime and address nearly all insolvency-related obligations and restrictions which insolvent debtors typically encounter and which would frustrate the affected companies’ going concern status and their ability to continue trading.
It is planned that the Proposed Legislation will be enacted very soon given the urgency caused by the severe impact of the COVID-19 pandemic on businesses. For that reason, the German legislator will make use of a fast-track process in deviation from the usual procedure for the enactment of draft bills. In addition, the Proposed Legislation provides for an enactment with retroactive effect on and from 1 March 2020.
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