Federal Justice Minister Christine Lambrecht (SPD) is demanding a new law that would protect companies from having to file for bankruptcy. Instead, they should be given the opportunity to start restructuring at an early stage, according to the draft law on the further development of the restructuring and insolvency law, which is currently being voted on in the federal government.
“Companies suffering from the economic consequences of the corona pandemic will especially benefit from the new opportunities, even though they still have a compelling business model,” said Lambrecht Tagesspiegel. The proposal offers a “modern and effective framework for corporate restructuring”. “Companies that can show creditors a realistic reorganization perspective should also be able to implement their concept of reorganization outside insolvency proceedings,” the minister emphasized.
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Individual creditors should not be allowed to block restructuring
The new law stipulates that individual creditors can no longer block a restructuring project if this concept is supported by a majority of creditors. According to Lambrecht, the new legal framework gives the affected companies the opportunity to terminate or modify onerous contracts without the consent of the parties, if this is necessary to avert insolvency.
In terms of time, the regulation should follow as smoothly as possible the coronal simplifications in force in the area of insolvency law.
Christine Lambrecht, Federal Minister for Justice and Consumer Protection, wants to use insolvency law reform to allow … Photo: imago images / photothek
Companies that are over-indebted but not insolvent do not currently need to file for bankruptcy. The exemption from the application requirement is intended to help companies that are truly competitive but have run into economic difficulties due to the corona crisis. The regulation was originally intended to apply only until 30 September this year, but was extended until the end of the year.
Survival prognosis time is shortened
Following the expiry of this regulation, the new law should enter into force early next year. The intention is to extend the deadline for filing for bankruptcy for over-indebted companies from three to six weeks. In addition, the over-indebtedness test should be based on a relaxed standard that also takes into account the uncertainties of the current forecast.
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In the future, a one-year forecast period instead of a two-year period should be sufficient to predict whether a company is insolvent or over-indebted. During the corona crisis, the time to check whether a company can continue to be limited to four months.
This is to prevent companies that have suffered a significant drop in sales due to the corona from having to file for insolvency only because of forecast uncertainties caused by the crisis, a ministry spokesman stressed.