In Germany, as in many other countries, a number of laws have been passed in order to respond to the economic challenges in connection with the Covid-19 crisis. This memorandum provides a brief summary and overview focusing on the most relevant changes to the legal landscape.

I. Financial Support

Credit agreements by their terms commonly bar the borrower from seeking punitive, indirect, special or consequential damages for a breach of the agreement by lenders and their affiliates. The clauses, as enforced, prevent a borrower from obtaining damages for harm that may be suffered by the borrower's business if the lender wrongfully declines to fund. The clauses prevent lenders from exposure to open-ended damages claims if the lenders refuse to lend to a borrower, including damages that are the direct and indirect result of the failure to lend.

Cancellation of commercial agreements under German insolvency law

Commercial agreements usually provide for extraordinary termination rights or even automatic cancellation in the case of insolvency of one of the parties. Such a cancellation right may, however, contradict the general principles of German insolvency law.

Preliminary Remarks

On March 1, 2012, the Act for the Further Facilitation of the Restructuring of Companies (ESUG) came into effect. The main aim of the ESUG is to improve the prospects of an early and successful restructuring of distressed companies, to involve creditors in the selection process of the (preliminary) insolvency administrator and to improve the reliability and predictability of particular insolvency plan proceedings. The main changes of the ESUG to the current German insolvency law (InsO) comprise: