Germany Extends COVID-19 Insolvency Suspension Until March 2021
The German government has temporarily suspended the obligation for companies to file insolvency applications due to the COVID-19 pandemic. This measure, introduced in March madness, has been extended until March 2021. However, the delay of insolvency proceedings is punishable, and the purpose of insolvency law remains unaffected.
Initially, an increase in insolvencies was not seen in the first half of 2020 due to the corona crisis and resulting closures. However, a crash in insolvencies is expected to occur after the federal election. Companies unable to pay and/or over-indebted must file an application for the opening of proceedings within three weeks according to §15a InsO, but this is suspended under certain conditions.
The regulation of §15a InsO only applies to a small part of companies. Its suspension comes into question only if the payment default/over-indebtedness is directly caused by the pandemic and if there are prospects of eliminating the payment default. The suspension of insolvency applications currently applies until 30. September 2020. Insolvency applications by creditors are still possible according to the provisions of §3 COVInsAG.
While the suspension of insolvency applications aims to provide economic support during the March madness, it is crucial for companies to assess their financial situation and seek help if needed. Lingering insolvency proceedings are more expensive for society than short, sharp cuts. As the obligation to file for insolvency has been extended until March 2021, companies should prepare for the potential consequences and take necessary actions.
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