Business headlines have warned of a potential “chilling effect on buyouts” as a result of the decision recently issued by the U.S. District Court for the Southern District of New York in In re: Nine West LBO Securities Litigation (Dec. 4, 2020). Contrary to the views of some other commentators on the decision, we do not believe that the decision is likely to chill leveraged buyout activity, to upend how LBOs have been conducted, or to significantly increase the potential of liability for target company directors selling the company in an LBO.

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

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: