On 25 March 2020, the German Bundestag launched a comprehensive COVID-19 aid package to cushion the drastic consequences of the corona pandemic, particularly for the economy. In the following, the experts of the law firm P+P Pöllath + Partners provide an overview of the individual measures and also explain the consequences for M&A practice.
The KfW Special Program 2020 was launched on 23 March 2020. It is aimed at all companies (irrespective of turnover thresholds), self-employed and freelancers who have run into financial difficulties as a result of the corona crisis. Under the KfW Special Program 2020 the conditions of existing promotional programs will be modified and extended. The Federal Government has launched a large-volume Economic Stabilization Fund (WSF). The WSF is intended to implement temporary measures to stabilize the German economy.
Draft law to mitigate the consequences of the COVID-19 Pandemic
The draft law in connection with COVID-19 provides for a suspension of the obligation to file for insolvency until 30 September 2020. Furthermore, it will temporarily simplify and reduce the circumstances for insolvency appeals considerably and also loosen up payment prohibitions for management
In the area of civil law, a moratorium on the use of consumers and micro-companies for the fulfilment of contractual claims will be introduced. Consumers and micro-companies affected by COVID-19 should be granted a moratorium if they are unable to provide their contractual services due to the COVID-19 pandemic. This right of refuse of performance shall apply until 30 June 2020 for claims arising from contracts concluded before 8 March 2020. Only material continuing obligations are covered, i.e. those which are necessary to cover the obligations with services of adequate general interest or which are necessary to cover the obligations with services for the adequate continuation of the business.
For consumer loan agreements concluded before 15 March 2020, the lender’s claims for repayment as well as interest and redemption payments due between 1 April and 30 June 2020 shall be deemed to be deferred for three months from the due date if the borrower has lost income due to the COVID-19 pandemic, which makes it unreasonable to expect him to make the repayment owed as well as interest and redemption payments. Termination of consumer loan agreements due to default of payment or due to a significant deterioration in the financial circumstances of the consumer or the value of collateral provided for the loan in the event of such deferral is excluded until the end of the deferral. In addition, the possibility of an amicable settlement between the parties is provided for.
A right to refuse payments/other performance for tenancy and lease agreements has not been implemented in the proposed law. Therefore and despite the Corona crisis, each tenant is not exempt from the obligation to pay the (monthly) rent. However, a temporary exclusion of termination right is set out in the proposed law. If any tenant does not pay the due rent in the period from 1 April to 30 June 2020 and the non-payment is caused by the effects of the COVID-19 pandemic, the landlord’s legal termination options are excluded. This provision applies to both residential and commercial leases. The tenant has to substantiate the correlation between the non-payment and the COVID-19 pandemic.
The proposed law provides for various forms of simplification for holding shareholders’ meetings and passing shareholders’ resolutions without physical presence. In addition, it contains an amendment of the German Transition Law: The eight-month time limit for using the balance sheet is extended to twelve months. For companies with a fiscal year equal to the calendar year, this opens up the possibility of reverting to the 2019 balance sheet in the event of a merger/division in the current calendar year. In times of economic crisis, a merger, especially within a group, can be used for corporate restructuring and a turnaround.
The German government is planning further measures to ease the burden on the labour market and in particular to promote access to social benefits (so-called social protection package). Some measures are intended to support the employers, e.g. the continued wage payments in the event of employees being unable to work because of childcare shall become funded by state programs. However, the most important labour law instrument in the current crisis remains the implementation of short-time work and other labour law measures by the employer.
European competition authorities signal that they will tolerate certain forms of cooperation also among competitors during the Corona crisis but warn against excessive pricing of essential products.
The COVID 19 aid package in detail
Read more about the individual measures of the aid package here: