Where the law to mitigate the consequences of the COVID-19 pandemic in civil, insolvency and criminal proceedings (COVInsAG) is concerned, the German Parliament has introduced rules regarding the suspension of a managing director’s obligation to file for insolvency. It has also issued important statements regarding the liability of managing directors and the legal position of new loans, especially shareholder loans.

In the event that the obligation to file for insolvency is suspended:

The doctrine of substantive consolidation (generally- the power of a bankruptcy court to consolidate the assets and liabilities of affiliated entities in bankruptcy) is a recognized remedy exercised by bankruptcy courts – one that strikes fear into the hearts of many lenders. Justifiably so. The doctrine can be employed to order the substantive consolidation of related-debtor entities in bankruptcy and it can also be employed to substantively consolidate the assets of a debtor in bankruptcy with those of a related entity that is not a debtor in bankruptcy.