Exten­si­on of the coro­na­vi­rus aid and Bridging Aid III Plus: grant to cover the cost of res­truc­tu­ring advice

Mana­ging direc­tors are caught bet­ween pre­ser­ving their com­pa­ny and avo­i­ding per­so­nal lia­bi­li­ty. Under the­se cir­cum­s­tances, it is important to avo­id key errors and do the right thing when your com­pa­ny finds its­elf in dire straits, taking advan­ta­ge of curr­ent­ly available govern­ment aid.

In a press release of 9 June 2021, the Fede­ral Minis­try of Eco­no­mic Affairs and Ener­gy announ­ced that coro­na­vi­rus aid will be exten­ded through 30 Sep­tem­ber 2021, as well as the new govern­ment aid to cover the cost of res­truc­tu­ring advice. The Covid-19 Insol­ven­cy Sus­pen­si­on Act, which was exten­ded on 1 Febru­ary 2021, expi­red on 30 April 2021.

Cur­rent legal situation

When the Covid-19 Insol­ven­cy Sus­pen­si­on Act expi­red on 30 April 2021, the for­mer legal situa­ti­on once again ente­red into effect. In other words, mana­ging direc­tors of limi­t­ed lia­bi­li­ty com­pa­nies are now once again requi­red to file for insol­ven­cy right away should they ascer­tain that their com­pa­ny is insol­vent and/or over-indebted.

Avo­i­ding mana­ging direc­tor’s liability

In prac­ti­ce, the first per­son that the mana­ging direc­tor cont­acts in such a case is typi­cal­ly the com­pany’s accoun­tant. As of 1 Janu­ary 2021, the­se pro­fes­sio­nals are requi­red to adhe­re to stric­ter due dili­gence requi­re­ments in accordance with the pro­vi­si­ons of the Cor­po­ra­te Sta­bi­liza­ti­on and Res­truc­tu­ring Act (cf. LLC law essay: “Impact of the Act on the Reform of Res­truc­tu­ring and Insol­ven­cy Law on the going con­cern pre­mi­se in accordance with § 252(1) No. 2 of the Com­mer­cial Code?”) (only in German).

Chal­lenges posed by shorta­ges of raw mate­ri­als and rising ener­gy costs

Com­pa­nies have addi­tio­nal chal­lenges to over­co­me right now asi­de from the lin­ge­ring impact of coro­na­vi­rus: they are facing shorta­ges of raw mate­ri­als and out­sour­ced items, and even some raw mate­ri­als which are (still) available have seen their pri­ces rise at an extre­me­ly fast pace sin­ce the start of 2021. The same is true for ener­gy pri­ces, which repre­sent a decisi­ve fac­tor, par­ti­cu­lar­ly for com­pa­nies with high ener­gy requi­re­ments. This increase in pro­cu­re­ment cos­ts needs to be taken into account in com­pa­ny plan­ning, regard­less of whe­ther it can be pas­sed on to cus­to­mers or not.

Reim­bur­se­ment of legal expenses

With exten­si­on of the “Bridging Aid III Plus” (only in Ger­man) packa­ge, com­pa­nies facing the thre­at of insol­ven­cy will be reim­bur­sed for up to € 20,000.00 a month in legal fees which they incur in order to under­go the res­truc­tu­ring neces­sa­ry to avert insol­ven­cy. The spe­ci­fic eli­gi­bi­li­ty requi­re­ments for this aid will be known only after the amen­ded FAQs (only in Ger­man) beco­me available, which is to be expec­ted by mid-July at the latest, based on past expe­ri­ence. But for the time being, it may be assu­med that only com­pa­nies which retain the ser­vices of a com­pe­tent att­or­ney will be eli­gi­ble for aid.

If you would like more infor­ma­ti­on on this sub­ject, plea­se cont­act our part­ner firm dphg and ask for Chris­ti­ne Frosch (an att­or­ney spe­cia­li­zing in insol­ven­cy law and a cer­ti­fied res­truc­tu­ring offi­cer), who is also a co-author of this artic­le. We are curr­ent­ly plan­ning an infor­ma­tio­nal event in con­junc­tion with dphg. See our news­let­ter and our event page for news about this event.

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