Overview of the „Act to mitigate the COVID 19 pandemic in civil, insolvency and criminal procedure law“ for companies passed by the German Bundestag

In a unique fast-track procedure, the Bundestag passed a bill on 25 March 2020 to combat the economic consequences of corona sites in Germany.

This article is intended to provide a brief overview of the short-term changes for companies. A number of changes in civil law, insolvency law and company law have been passed, which are particularly relevant for companies. The aim is to make the economic consequences of the Covid 19 pandemic as little noticeable as possible.

Changes in civil law
For a limited period of time, Article 240 of the EC Treaty introduces provisions which are intended to give debtors the possibility of refusing or discontinuing the performance owed without fear of legal consequences.

Micro-enterprises are given the right to refuse performance in the case of continuous obligations if the contract was already concluded before 8 March 2020. The right of refusal is valid until 30 June 2020. Micro-enterprises are companies with up to 9 employees and an annual turnover of up to € 2 million. Again, the prerequisite is that the circumstances leading to the refusal of the service must be attributable to the Covid 19 pandemic. This is to be assumed if the company cannot provide the service or if the company would not be able to provide the service without endangering the economic basis of its operations. However, the right to refuse performance is excluded if it is unreasonable for the creditor. This should be the case if the economic basis of the creditor would cease to exist. In such cases, however, the law provides for a right of termination for the microentrepreneur.

Moreover, the above-mentioned regulations for continuing obligations do not apply to rental and lease relationships, loan agreements and claims under labour law.

However, other changes have been decided for tenancies. For example, a landlord may not terminate a lease in the period from 1 April 2020 to 30 June 2020 in the event of non-payment of rent if the rent cannot be paid due to the Covid 19 pandemic. A connection with the Covid 19 pandemic must be substantiated. This may mean that in the event of a substantively false credibility, criminal prosecution may also be threatened. The rent is therefore only deferred and must be paid in any case after the end of the above-mentioned period. The changes made to the lease concern both private and commercial rents.

If necessary, the above-mentioned regulations can be extended by the Federal Government until 30 September 2020.

Changes in insolvency law

The obligation to file for insolvency pursuant to section 15a InsO and section 42 BGB is suspended until 30 September 2020. The obligation to file for insolvency is only suspended if the insolvency maturity is due to the Covid 19 pandemic or if there are prospects of insolvency. It is assumed that if there was no inability to pay on the cut-off date of 31 December 2019, there was no insolvency due to the Covid 19 pandemic.

The consequence is that if the obligation to file for insolvency is suspended

– payments which are made in the ordinary course of business are deemed to be compatible with the due care of a prudent and conscientious manager
– the repayment of a loan granted until 30 September 2023 of a new loan granted during the suspension period and the provision of collateral is not considered to be detrimental to the creditor
– granting of credit and collateral are not considered to be an immoral delay in filing for insolvency
– a challenge is not possible if legal acts have been carried out which have led to security or satisfaction
The main purpose of these measures is to keep the farms going and, for example, to provide an incentive for the granting of loans. The limitation of the rescission is intended to allow existing business relationships to continue.

The Federal Ministry of Justice is granted the authorization to extend the above-mentioned amendments until March 31, 2021 in the event of continued deterioration.

Changes in company law
From now on, stock corporations will have the possibility to hold virtual general meetings without existing regulations in their articles of association. To this end, various parts of the German Stock Corporation Act concerning the Annual General Meeting have been amended. Thus, the Annual General Meeting can be convened with a notice period of 21 days. The notice period is usually 30 days. In deviation from the old version, the Annual General Meeting can also be convened after one year to accept the adopted annual financial statements. In this case a period of 8 months applied. The changes affecting public limited companies are applicable to the partnership limited by shares and to the European Company (SE).
For the GmbH, it applies that shareholder resolutions may be passed in text form or by written submission of votes even without the consent of all shareholders. § Section 48 Paragraph 2 GmbHG actually provides for a mutually agreed resolution here.
Here too, the Federal Ministry of Justice is authorised to extend these provisions until 31 December 2021 at the latest if necessary.

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