Dispute over Corona insolvencies

During the Corona crisis, many things changed – including insolvencies. The German government temporarily suspended the obligation for insolvent companies to file for bankruptcy. Associations are now warning against a return to orderly conditions in insolvency law, with the German Retail Association (HDE), for example, warning against a “steep rise in insolvencies in the retail sector”. And the head of the German Hotel and Restaurant Association (Dehoga) is calling for an exemption until September 30, 2021 for those businesses that have not received any state aid so far.

Since the beginning of the year, it has again been the case that companies that are over-indebted or insolvent must also report this to the insolvency court. The only exception is for companies that have yet to receive payment of the state aid provided for since November 1, 2020. Until the end of April, they did not have to make their bankruptcy public, but could keep creditors, suppliers and customers in the dark about their economically disastrous situation. Formally, this rule has also expired since the beginning of May, but the SPD still fought for an extension. An end to the suspension is “incomprehensible, because now many companies that have bravely fought their way through the crisis so far will have to file for insolvency just because government aid has not yet been paid out,” explains Johannes Fechner, legal policy spokesman for the SPD parliamentary group. Thousands of jobs are at stake, according to Fechner. Anyone who calls these companies zombies is acting “cynically.” Fechner also recalled the warning voices of business associations such as Dehoga and HDE that many of their members had not yet received the state aid. and Corona money distributed too slowly. By two months should be extended the suspension of the insolvency application requirement, he said.

The CDU/CSU, on the other hand, argues that the obligation to file for insolvency in the event of imminent insolvency has been in force again for months for the vast majority of companies – and yet few insolvency applications are being filed. In any case, it is only suspended for those that have not yet benefited from state support.

Insolvency administrators such as Detlef Specovius criticize the chaos surrounding the obligation to file. In the meantime, says the specialist who, for example, oversaw the restructuring of the fashion chain Esprit, “hardly any managing director can see through whether he now has to file his impending bankruptcy or not.”

Insolvency administrator and restructuring expert Lucas Flöther considers the debate about a further suspension of the obligation to file for insolvency “a storm in a teacup. He says it is a widespread fairy tale that people have not had to file for insolvency until now. “The rules have long since been re-armed. Now it’s just a matter of a small number of companies,” Flöther explains. He believes it makes perfect sense that companies waiting for state bridging aid should still not have to file for insolvency. “The Ministry of Economics does not make it easy for such companies. Some companies have been waiting for months for payment because of sometimes massive delays,” adds Flöther. It is true that companies could initially file for insolvency and then withdraw it. But such an application is in some ways a ‘point of no return,’ he says. “Banks then often cancel loans, suppliers change their conditions to advance payment,” says Flöther.

Insolvency administrator Specovius does not anticipate the large wave of bankruptcies feared by the Social Democrats, but he does expect later distortions. These could occur if, in a few weeks’ time, managing directors discover that their companies are not performing as well as they did before the pandemic – and the insolvency administrator or restructuring expert called in finds that they should have reported their own impending bankruptcy months ago. Simply because the exemption rule did not apply. “In this case, the managing director has made himself liable to prosecution for delaying insolvency. Whether he understood the complicated regulation or not,” says Specovius. Tax consultants could also be partly responsible in such cases. Ignorance would therefore not protect against punishment in this case.