NEWS

What You Now Need to Know About COVID-19 – Part I: The Most Important Legislative Changes for Your Business

The Corona crisis has us all firmly in its grip, both personally and professionally. And community and solidarity are the best way forward, the German Federal Government has also recognised this. New laws and regulations are passed almost daily in order to mitigate the economic downturn as much as possible.

Businesses must keep up-to-date regularly with new obligations and new relief options. We have collected answers to the most important questions.

 

Questions Concerning Economic Considerations

Applying for Liquidity Assistance

In addition to simplified requirements for applying for short-time work allowance (see our article on changes in labour law), the German Federal Government has put together further aid packages for the economy in its bail-out package totalling 600 billion euros. These include fast direct aid for small businesses and the self-employed, tax deferrals or reductions of tax advances and the provision of short-term business loans.

In order to secure their liquidity, which is threatened or already limited by the COVID-19 pandemic, businesses can apply for deferral of trade, income and corporate income tax and solidarity surcharge, as well as for a reduction in tax advances. These tax reductions should particularly benefit those sectors that have been severely affected by the pandemic, such as catering and tourism. Applications for deferrals and reductions should be submitted via the tax advisor.

Under the KfW Special Programme 2020, businesses can apply for short-term loans with low interest rates and simplified risk assessment through their main bank. The German Federal Development Bank takes up to 90% of the risk from the banks.

 

Suspension of the Obligation to File for Insolvency

In order to protect businesses from a possible bankruptcy, the German Federal Government has suspended the obligation to file for insolvency until September 30, 2020. The prerequisite for this is that the effects of the COVID-19 pandemic are the reason for the insolvency to be registered. The new COVID-19 Insolvency Suspension Act is intended to give businesses more time.

The German Ministry of Justice is to be allowed to extend these measures by decree at the most until March 31, 2021.

 

Provisions on Rental Payments

In the coming weeks and months, businesses and consumers alike will have to accept a drop in turnover and income, which may make it more difficult to pay rents and leases. The German Ministry of Justice has introduced a regulation according to which tenants of residential and commercial properties may not be evicted for rent debts in the period April 1 to June 30, 2020. Here, too, the condition is that the rent debts are based on the effects of the COVID-19 pandemic.

It goes without saying that rent and lease payments must not be suspended without comment. It is advisable to find an amicable solution with the landlord.

 

Questions Concerning Company Law

It is the season of general meetings and shareholders' meetings. In order to stay operational, businesses must now approve their financial statements and make further decisions. However, far-reaching contact bans and curfews make large and small gatherings impossible.

Businesses with the legal forms AG, KGaA and SE now have the option of allowing online participation in their annual general meetings. In addition, the current eight-month period for holding the annual general meeting will be extended.

The situation is different for GmbHs: The existing law on limited liability companies (GmbH) already provides that all decisions can also be made by written circular procedure if all shareholders agree. This way, this year's shareholders' meetings can easily be avoided.

 

Conclusion

All these legislative changes are becoming more and more detailed. Legislators are showing themselves to be flexible and eager to act – which is a good thing in light of the unpredictable situation. But this is why the regulations are still subject to frequent changes and are not uniform in all German states.

Contact us to find out how you and your business can best master this challenge. Just send us an email to clarius@clarius.legal or call us at +49 40 257 660 900.