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Extension of the suspension of the obligation to file for insolvency: Valerian for those affected?

As the coalition committee of the Federal Government decided on Monday, 25th August 2020, the regulation on the suspension of the obligation to file for insolvency is to be extended. Nevertheless: this autumn could be extremely unpleasant not only for ailing companies but also for their creditors. The pandemic-related special regulations in insolvency law, which initially apply until the end of September, are to be extended until the end of the year but with one not-insignificant restriction: the extension is to be limited exclusively to the suspension of the obligation to file for insolvency in the event of overindebtedness.

So far, the number of proceedings in which insolvency is due to over-indebtedness has been in the low single-digit percentage range at best. In contrast, the vast majority of insolvency applications by companies are based at least partly on the insolvency reason “inability to pay”. Contrary to initial impressions, the suspension of insolvency proceedings is therefore likely to be de facto terminated from October onwards, and with it, incidentally, the protection of creditors against an appeal.

Creditors should therefore prepare themselves for a drastic increase in corporate insolvencies in the last quarter of this year and, at any rate, should exercise the utmost caution from the beginning of October onwards, including in transactions with business partners who are in financial difficulties as a result of the pandemic.