Under the Insolvency Suspension Act COVID-19 (COVInsAG), the obligation to file for insolvency is suspended under certain conditions due to the coronavirus. The regulations apply retroactively to 01.03.2020.

The coronavirus is spreading fast. Measures to slow its spread are already hitting companies hard and will cause many companies considerable financial difficulties in the foreseeable future.

Obligation to file for insolvency

The Covid-19 crisis is impacting on all businesses across Germany including the dynamic German start-up scene. In this article we outline some of the more important measures taken by the German government to support start-ups through the crisis. These measures include providing immediate financial support, loan finance, subsidies for short-time work schemes, relaxation of management obligations to file for insolvency, tax relief schemes and the suspension of social security payment obligations.

The German government has moved quickly and decisively to protect businesses from the short-term impact of the Covid-19 pandemic. A new law was passed by parliament using remote voting procedures and comes into today, 27 March 2020. The Covid-19 Suspension of Insolvency Law (COVInsAG) provides a protective shield for businesses against the economic fallout caused by the extraordinary measures taken to limit the spread of the SARS- CoV 2 virus which causes the illness we now know as Covid-19.

The law addresses three main areas:

Cash pooling during the COVID-19 pandemic provides particular challenges for management. What the most important issues on which to focus?

Many businesses, particularly those operating internationally, have set up group cash pooling systems to optimise payment processes and maximise liquidity. A well-structured cash pooling system offers a treasury department transparency over the group's liquidity and by centralising financing requirements can reduce costs.

On Saturday 28 March, Secretary of State for the Business, Energy and Industrial Strategy, Alok Sharma, announced a proposal for the urgent reforms to UK insolvency law, designed to protect companies and their directors during the COVID-19 outbreak.

Wrongful Trading (section 214 Insolvency Act 1986)

It was announced that there would be a temporary suspension of section 214 Insolvency Act 1986 in relation to wrongful trading.

Sky News reports today that the Insolvency Service is considering reforms to insolvency laws which may include a moratorium on winding up petitions against companies and the suspension of rules on wrongful trading.

Construction litigation is no stranger to insolvency, including insolvent claimants. This is also the case for adjudication, a fast and commercially driven form of dispute resolution for the construction industry. However, there has been considerable uncertainty as to the enforceability of adjudicators’ awards where a claimant is insolvent and receives a favourable decision. Recent cases have shed some light on this issue and have started to untangle the statutory difficulties when insolvency meets adjudication.

Re System Building Services Group Limited [2020] EWHC 54 (Ch)

Summary

A recent High Court ruling has considered the character and extent of directors’ duties in the context of insolvency.

In System Building Services, Insolvency and Companies Court Judge Barber (“ICCJ Barber”) considered, amongst other things, the nature of a director’s duties to a company and whether those duties survive the company’s entry into an insolvency process.

Introduction

Why are bankruptcy laws needed?

Over the past couple of years, there have been a wave of new insolvency and bankruptcy laws introduced in the GCC. With the exception of Qatar and Kuwait, all other GCC countries have now introduced new bankruptcy laws. As for Oman, its new bankruptcy law is due to come into effect on 1 July 2020.