The German legislator’s frenzy went into overdrive on 17 December 2020:
Not only did he adopt the long-awaited reduction in the period for the discharge of residual debt from regularly six years to three years (cf. already here (in German)). This Bill will be put into force retrocatively from 1 October 2020. Thousands of debtors are awaiting this shift in governmental policy and will file their personal insolvency early in January – which will certainly guarantee a blockage of the insolvency courts and flood the insolvency administrators with new cases.
Also, the German legislator did not only again prolong the suspension of the “early filing requirement” for over-indebtedness until 31 January 2021, but he also again (!) extended this suspension to the insolvency ground of illiquidity – which had been re-instated as an obligatory ground for filing on 1 October 2020 only (cf. for the “first” COVInsAG here and its “overtime” here). This extension and prolongation has become necessary because the various financial packages created to soften the impact of the second lock-down imposed in Germany could not be paid out in due course – due to IT-problems and work-overload. Hence, in order to saveguard businesses eligible for such compensation, the early filing requirement has been suspended alltogether again, albeit expressly only for the aforementioned debtors. Since the media, though, did not really stress this detail worth noting, it is doubtful that managing directors will really make that distinction. And, well, let’s see if this suspension really ends in January 2021 (my fair guess is that it will only end two to three months after the lockdown, hence in early summer, if at all).
Last, but not least, the German legislator enacted the StaRUG (the Geman implementation of the EU-Regulation on the “preventive restructuring framework”) within the “Sanierungs- und Insolvenzrechtsfortentwicklungsgesetz – SanInsFoG“, albeit with some crucial modifications compared to previous Draft Bills (cf. for earlier discussions here and here). The most important change, without doubt, being the striking off the possibility to cancel certain contracts within the “Restrukturierungsverfahren“, as foreseen in previous drafts. The cancellation of this part of the StaRUG was forced through by the second chamber of the German Parliament, the Bundesrat, the chamber of the Länder. With this feature missing, the new law will most probably not attain much more than being an apt tool for the restructuring of financial obligations, according to leading experts’ first opinion. But it will not really help to (operationally) turn around companies.
I will comment more in depth on these landslide changes of German insolvency law and its consequences with the start of the new year. Suffice is to say that it remains to be seen whether the now enacted changes will indeed prepare for the anticipated wave of distressed companies in the aftermath of the corona pandemic.
Gesetz zur weiteren Verkürzung des Restschuldbefreiungsverfahrens, et. al., BRat-Drs.: 761/20 (in German)
Sanierungs- und Insolvenzrechtsfortentwicklungsgesetz – SanInsFoG, BRat-Drs.: 762/20 (in German)