Final Act: § 3a EStG (“Sanierungserlass”) becomes law

After all the drama about the tax exemption for so-called “turnaround profits” (“Sanierungsgewinne“,  (see more details here), the legislator – after a positive statement of the EU Commission last summer (cf. here) – is currently implementing the “reorganisation decree in legal form” (“Sanierungserlass in Gesetzesform“) within the framework of the so-called “Annual Tax Act 2018” (now referred to … more

The German economy in October 2018 – southbound

Yep, as predicted in my last monthly report, “(economic) autumn” (cf. here) has finally arrived in Germany. Amid political tensions after Chancellor Merkel announced here demise as leader of Germany’s conservative party, there is mounting evidence that the German economy has peaked somewhere in the previous months. But let’s have a closer look at the details: 

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ESUG evaluation – and now?

Five years after its entry into force in March 2012, the practical relevance of the “Act for the Further Facilitation of the Restructuring of Enterprises” (“Gesetz zur weiteren Erleichterung der Sanierung von Unternehmen“, “ESUG“) has recently been evaluated, as required by the prior enactment. The more than 350-page final report of the team of experts consulted by the Federal Government comes to the conclusion that the insolvency practice has largely positively accepted the changes introduced by the ESUG and that a return to the earlier provisions does not seem to be indicated. However, the report proposes changes on individual issues. So far, so good – and not surprising. But what does this mean for the further development of the desired “turnaround culture” in Germany?

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The German economy in September 2018 – the start of (economic) autumn?

Well, the German economy is currently doing well, when you look at the figures for exports, unemployment or industrial orders. However, from the perspective of inflation or industrial production it does not look to great. The outlook for the foreseeable future, however, seems to be rather measly, if you agree with our government. Hence, after a not-so-clear August (here), the September might prove to be the start of an economic autumn, as the following figures show:

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Crisis management – when the going gets tough

Recently, the German automotive supplier SAM filed for insolvency (here). In addition to the usual suspects, a “classic” reason for a corporate crisis showed up: a fire in the production (here). Without production there is no turnover and without turnover there is no profit. A company hit by a fire can thus run through the crisis curve at a rapid pace. However, what can an entrepreneur do in such cases of WTSHT?

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BGH on director’s payments reducing the insolvent estate

Today, the popular wisdom “they (only) go after the little guy” seems to apply to a limited extent only, at least in insolvency: Arcandor’s insolvency administrator, for example, holds the ex-management liable (here), as does Neckermann’s (here) and Air Berlin’s (here). However, even if “they” now go after the “big ones”, the perceived “little guys” do not get off scot-free, as the subsequently explained tightening in German jurisprudence on liability risks for managing directors in insolvency makes clear:

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Taxes in turnaround – EU-Commission “supports” § 3a EStG (“Sanierungserlass”)

According to yet unconfirmed press releases, the EU Commission has no objection to the new legislation of the so-called “Sanierungserlass“, now contained in § 3a German Income Tax Code (“Einkommenssteuergesetz” “EStG“), which was declared unconstitutional by the German Federal Tax Court (“Bundesfinanzhof“, “BFH“) last year (see here). Since the ECJ recently also surprisingly declared the so-called “Sanierungsklausel” of § 8c 1a KStG as being legitimate (see here), taxation in business turnarounds will most likely be more relaxed – just in time for the beginning of the next economic crisis (see here).

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Internal Investigations: Jones Day or “the ride on the razor’s edge”

In the legal realm, this summer’s silly season is filled with a heavily discussed decision of the German Constitutional Court (“Bundesverfassungsgericht“, “BVerfG“) regarding the protection of internal corporate documents from seizure by the public prosecutor. In the case underlying the decisions, the Munich public prosecutor had seized various documents relating to Audi’s involvement in the “Diesel-scandal” held in the German offices of the US-based law firm Jones Day.

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