Germany’s Federal Ministry of Justice has made plans to suspend the obligation to file for insolvency due to the coronavirus. The measure is designed to protect businesses that have gotten into difficulties as a result of the pandemic.

A company that becomes insolvent or overindebted must file for insolvency without undue delay. We at the commercial law firm MTR Rechtsanwälte note that if there is good reason to believe that the grounds for insolvency can be redressed, filing for insolvency can be put on hold for a maximum of three weeks.

It is to be expected that the coronavirus pandemic will threaten the survival of many companies and workplaces, as well as the economic livelihood of many self-employed individuals. These businesses will also be receiving financial support from the federal government. However, it may be while before the measures are implemented and the funds are actually at the disposal of those concerned. That is why Germany’s Federal Ministry of Justice and Consumer Protection is making arrangements for the suspension of the obligation to file for insolvency. The aim is to protect businesses that are experiencing financial difficulties as a result of the coronavirus.

The federal justice minister, Christine Lambrecht, explained in a press release that the measure is meant to prevent businesses from having to file for insolvency simply because the assistance legislated by the federal government does not arrive in time. She went on to state, citing information made available by the Federal Ministry of Justice, that because the regular three-week filing period is too short in view of the circumstances, it is now being suspended until September 30, 2020.

It should be noted, however, that the suspension of the obligation to file for insolvency is conditional on the grounds for insolvency being attributable to the coronavirus pandemic. In addition, there must be a reasonable prospect of the business recovering by applying for state aid, or after emerging from serious financing or restructuring negotiations. Plans for the measure to be extended envisage a revised deadline of no later than March 31, 2021.

Failing to file for insolvency in due time is a criminal offense. Suspending the obligation to file for insolvency would lower the risk and buy time. Since the grounds for insolvency need to be attributable to the crisis surrounding the coronavirus, managing directors and board members would be well advised to clearly document all transactions and events.

Lawyers with experience in the field of insolvency law can advise businesses, freelancers, and the self-employed to ensure proper compliance with the legal requirements.

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