The COVID-19 pandemic is also keeping legislators on their toes, who are continuing to try to mitigate the impact of the pandemic on the economy. The focus was initially on the temporary suspension of the obligation to file for insolvency by the COVID-19 Insolvency Suspension Act (COVInsAG). Following on from this, with the Act on the Further Development of Restructuring and Insolvency Law (SanInsFoG), which came into force on 1 January 2021, the legislator has further modified obligations of conduct and, correspondingly, the liability of managing directors in the crisis of the company. In the following we provide an overview of the substantial insolvency-specific changes, with particular regard to the obligation to reimburse payments after a company has become insolvent, which were previously governed in particular in Section 64 sentence 2 Limited Liability Companies Act (GmbHG) and Sections 92 para. 2 sentence 2, 93 para. 3 no. 6 Stock Corporation Act (AktG) and have now found a new – and modified – "home" in Section 15b Insolvency Statute (InsO).
Pursuant to the COVInsAG, the obligation to file for insolvency is suspended. In accordance with Section 1 para. 1 COVInsAG, this suspension was initially limited until 30 September 2020 and was then extended by the German government until 31 December 2020, albeit with one change: According to Section 1 para. 2 COVInsAG, only companies that are over-indebted are exempted from the obligation to file for insolvency. This is because the German government wants to give over-indebted companies additional time to implement reorganization and restructuring measures. For insolvent companies, on the other hand, the old rules will apply again from 1 October 2020, so that managers and directors must file for insolvency within three weeks of becoming aware of the insolvency. Most recently, the German Government included a further suspension of the insolvency filing obligation in the month of January 2021 in Section 1 para. 3 COVInsAG: The insolvency filing obligation for managers and directors of companies entitled to receive financial assistance under government aid programs to mitigate the consequences of the COVID 19 pandemic (so-called November and December aid) is thereafter suspended, provided that a corresponding application for aid has been filed in the period from 1 November 2020 to 31 December 2020. If it was not possible to file an application within the period for legal or factual reasons, the obligation to file an insolvency petition shall also be suspended. However, the obligation to file an insolvency petition shall not be suspended if there is obviously no prospect of obtaining the assistance or if the assistance that can be obtained is insufficient to eliminate the insolvency. Furthermore, the suspension of the obligation to file for insolvency does not apply or did not apply in general if the insolvency is not due to the consequences of the spread of the Corona virus or if there is no prospect of eliminating an existing insolvency. If the debtor was not insolvent on 31 December 2019, it is presumed that the insolvency is based on the effects of the COVID 19 pandemic and that there are prospects of eliminating an existing insolvency. Accordingly, there is a model of principle (suspension of the obligation to file for insolvency), exception (insolvency is not based on the pandemic or no prospects of eliminating the insolvency) and presumption (exception applies if the company was not insolvent as at 31 December 2019).
The aforementioned extension until 31 January 2021 is now to be extended until 30 April 2021 following a decision of the Federal Government. Under the previous scheme, this further extension will only benefit debtors who are entitled to financial assistance under government aid programs to mitigate the consequences of the COVID 19 pandemic and whose payment is still outstanding. The basic prerequisite is that the aid is applied for by 28 February 2021 and the aid that can be obtained is suitable for eliminating the insolvency. However, the filing of an application is exceptionally not relevant if it is not possible to apply for the assistance by 28 February 2021 for legal or factual reasons.
With regard to the obligation to reimburse payments after insolvency, Section 2 para. 1 no. 1 COVInsAG provides that payments made in the ordinary course of business, in particular payments which serve to maintain or resume business operations or to implement a restructuring concept, shall be deemed “to comply with the diligence of a ordinary and conscientious manager within the meaning of Section 64 sentence 2 GmbHG, Section 92 para 2 sentence 2 AktG [and comparable legal norms]". Section 2 para. 1 no. 1 COVInsAG thus establishes a non-rebuttable fiction and enables the defence of the director or manager that payments after insolvency were compatible with the diligence of a regular and conscientious manager or director if such payments were made (i) in the proper course of business and (ii) during the suspension of the insolvency application obligation. The burden of proof in a lawsuit is thus distributed as follows: The claimant must prove that the obligation to file for insolvency in accordance with Section 1 para. 1 sentence 2 COVInsAG remains. The manager or director, on the other hand, must prove the presumption of Section 1 para. 1 sentence 3 COVInsAG, namely that the insolvency is based on the effects of the COVID-19 pandemic and that there is a prospect of eliminating an existing insolvency if the company was not insolvent on 31 December 2019. In addition, the managers and directors bear the burden of proof that the payments were made "in the proper course of business" within the meaning of Section 2 para. 1 no. 1 COVInsAG.
What is remarkable about the COVInsAG is that, despite this very young law, the reference in Section 2 para. 1 no. 1 COVInsAG, in particular to Section 64 sentence 2 GmbHG and Section 92 para. 2 sentence 2 AktG, already leads nowhere. This is because these legal provisions were repealed by the SanInsFoG as of 1 January 2021 (hereinafter).
The SanInsFoG is already in effect since 1 January 2021 in most parts. Exceptions to this are, in particular, the rules on public restructuring cases. The core of the SanInsFoG is the Law on the Stabilisation and Restructuring Framework for Companies (StaRUG). The SanInsFoG is also intended to ensure that companies affected by the COVID-19 pandemic, which are over-indebted but not insolvent, can benefit from the facilities provided for in the law and can make use of the possibility of restructuring outside of insolvency proceedings.
Pursuant to Section 1 para. 1 StaRUG, managers and directors are obliged to implement a system consisting of early crisis detection and crisis management with reporting obligations to the bodies appointed to supervise the managers and directors. The aim is to initiate restructuring measures as early as possible in the run-up to insolvency. Pursuant to Section 43 para. 1 StaRUG, the managers and directors must work towards ensuring that the debtor conducts the restructuring with the care of an ordinary and conscientious manager and director and safeguards the interests of all creditors. In the event of a breach of this duty, they are liable to the debtor for the amount of the damage suffered by the creditors, unless they are not responsible for the breach of duty. Thus, liability for the violation of the interests of the creditors is added to the original liability under company law from Section 43 para. 2 GmbHG or Section 93 para. 2 AktG from the time of the impending insolvency. This restructuring delay liability is structured as an internal liability: The claimant is the company, so in subsequent insolvency proceedings the claim would be drawn to the assets by the insolvency administrator and thus benefit the injured creditors. In practice, such claims are likely to fail because of the hurdle of proving the damage, since the claimant must prove that the breach of duty caused the damage, i.e. that a certain restructuring measure was practically feasible and to what extent its implementation would have avoided losses.
The SanInsFoG itself also influences the duties of conduct and, correspondingly, the liability of managers and directors. As before, the managers and directors continue to be obliged to file for insolvency under Section 15a InsO. However, this has been partly modified, since on the one hand, the concept of over-indebtedness was changed (the forecast period in the context of the continuation forecast is now only 12 (instead of 24) months, cf. Section 19 para. 2 sentence 1 InsO) and on the other hand, the managers and directors now have a maximum of 6 (instead of 3) weeks to file an application in the event of over-indebtedness. Furthermore, all bases for claims relating to the so-called payment prohibitions, which were previously regulated in Sections 64 GmbHG, Sections 92 para. 2, 93 para. 3 no. 6 AktG and Sections 130a, 177a of the German Commercial Code (HGB), are now uniformly regulated in Section 15b InsO. But there are also changes in this respect: Section 15b para. 3 InsO now contains a presumption that payments are generally not compatible with the diligence of a ordinary and conscientious manager or director if the grace periods of 3 weeks after the occurrence of insolvency and 6 weeks after the occurrence of over-indebtedness, as stipulated in Section 15a para. 1 InsO, have elapsed and no application has been made. Thus, if the payment is made within the aforementioned grace periods, it is in principle compatible with the diligence of an ordinary and conscientious manager or director, provided that it was made in order to maintain the business and that the managers or directors have taken measures to ensure the sustainable elimination of insolvency or to prepare for an insolvency application, see Section 15b para. 2 sentence 2 InsO. In any event, with regard to payments to social security institutions and the tax authorities, the explanatory memorandum of the legislator at least makes it clear that, after the filing of an application the obligation to pay contributions and taxes takes second place to the obligation to secure the assets (according to the legislative will, cf. RegE to SanInsFoG, BT-Drucks. 19/24181, p. 190). For payments made prior to the application, neither the law nor the explanatory memorandum of the legislator contains a statement, so it is likely to remain in line with the previous legal situation.
Section 15b InsO also contains an advantageous provision, especially in comparison with the so-called payment prohibitions, in particular from Section 64 sentence 2 GmbHG and Sections 92 para. 2, 93 para. 3 no. 6 AktG. Whereas under the aforementioned old statutory provisions, any payments without reference to damage in the legal sense were simply added up, in accordance with Section 15b para. 4 sentence 2 InsO, liability for payments after insolvency is now limited to the damage incurred by the creditors. The managers and directors must explain and prove that and to what extent the damage suffered by creditors falls short of the total amount of the payments.
COVInsAG creates an advantageous regime for managers and directors, but only for a limited period of time. If the regulations are not extended further due to the pandemic that will certainly continue well into the current year, a wave of insolvency could therefore be threatened by May 2021 at the latest. Tourism, gastronomy and the event industry are likely to be particularly affected.
In addition to a large number of rather technical new provisions, the SanInsFoG replaces the earlier so-called payment prohibitions in Section 64 GmbHG, Sections 92 para. 2, 93 para. 3 no. 6 AktG and Sections 130a, 177a HGB with a significant qualitative difference due to a uniform new provision in Section 15b para. 4 InsO: Liability for payments after insolvency is limited to the amount of loss incurred by the creditors. This is the first time that the legislator introduces a concept of loss, thereby putting an end to the simple addition of payments and the almost excessive sharpness of liability associated with it. Whether and to what extent the managers and directors will be able to prove this counter-evidence, especially if they have already left the company, will have to be clarified in individual cases, taking into account secondary burdens of proof or disclosure obligations of the insolvency administrator.
In addition, the legal innovation described above may indicate that – even taking into account current case law of the German Federal Court on the existing D&O insurance cover for claims pursuant to Section 64 sentence 1 GmbHG (judgment dated 18 November 2020 – IV ZR 217/19) – there is insurance cover for claims pursuant to Section 15b para. 4 InsO even without an express provision in the D&O policy. This goes hand in hand with the reduced liability for managers and directors, which, however, still must be proven in practice.