CEOs Beware: Insolvency Filing Obligation Suspended, Liability Remains

On January 28, 2021, the German Bundestag passed an amendment to the COVID-19 Insolvency Regulation Suspension Act (COVInsAG). This amendment extends the suspension of the obligation for companies to file for insolvency until the end of April 2021, provided certain conditions are met. The change applies retroactively from February 1, 2021.

The extension of the suspended filing obligation is, however, subject to strict requirements. According to the federal government, the extension is intended to benefit companies that are entitled to financial aid from established Corona support programs which have not yet been disbursed. To qualify, applications for such aid must have been submitted by February 28, 2021, and the aid received must be sufficient to resolve the company's insolvency.

Companies' eligibility for Corona aid depends on further conditions that must be met on a case-by-case basis. The duty to file for insolvency resumes if a support application is rejected or if the funds received are insufficient to eliminate the insolvency. Company management must carefully assess whether the extended regulations apply to their situation, with necessary legal, economic, and subsidy law advice.

It is crucial to note that the suspension of the filing obligation does not remove personal liability for executives. Particularly when a company is in an insolvency situation, CEOs and board members can become personally liable with their private assets. This can include liability for payments from company vốn, late insolvency filings, or for incurring debts while aware of the company's insolvency.