26.03.20

COVID-19/Corona: Basics for start-ups and founders on governmental measures

The measures of the national corona aid programme are currently primarily concentrating on extending short-time allowance (Kurzarbeitergeld), facilitating the granting of liquidity loans, tax deferrals and the partial suspension of the obligation to file for insolvency. In addition, further measures are being discussed specifically for start-ups, as it has already been recognised that start-ups will mostly not benefit from the liquidity loans.

An overview:

1/ Short-time allowance: The possibility to apply for short-time allowance will be extended. Short-time allowance means, that the Federal Employment Agency takes over part of the salary if the employer reduces the working hours of his employees and correspondingly reduces their salary. The employer is thus able to reduce costs by sending some of his employees on "unpaid compulsory leave". However, short-time working must usually be agreed on individually with the employee.

2/ Liquidity loans: Loans and guarantees can be obtained from the company’s main bank; these loans and guarantees will be secured by the KfW.

3/ Tax advances and deferrals: Usually, there are quarterly advance payments for corporation and trade taxes. However, upon request, the tax office can reduce these advance payments and also defer taxes that have already been assessed by tax assessment without interest or security.

4/ Obligation to file for insolvency: In case of over-indebtedness or illiquidity, the management is obliged to file for insolvency. The German government plans to suspend the obligation to file for insolvency until 30 September 2020. The precondition for suspension will be that the reason for insolvency is based on the effects of the Corona epidemic and that there are reasonable prospects of restructuring on the basis of an application for public assistance or serious financing or restructuring negotiations.

5/ Special measures for start-ups: The federal and state governments have recognised that assistance through liquidity loans is not an option for many start-ups, as they would only be able to obtain loans on poor terms from their main bank, regardless of the Corona crisis. Additional measures for start-ups are therefore being discussed. We are in exchange with other advisors and decision-makers. Most recently, the Berlin Senate has decided on an emergency aid programme for small and micro enterprises with a maximum of five employees, under which € 5,000 emergency aid can be applied for (possibly several times).

We also recommend to take a look at the insurance portfolio to check whether it possibly covers insurance claims in the event of epidemics.

Of course, we also advise on all corporate and insolvency law issues of the current situation, in particular on the obligations of the shareholders and managing directors in the crisis.

Any questions or need advice? Please do not hesitate to contact us at any time by email or phone:

Task Force BMH BRÄUTIGAM:

Dr. Julian Schroeder phone: +49 30 8 89 19-153 or email: julian.schroeder@bmh-partner.com
Till Wansleben phone: +49 30 8 89 19-176 or email till.wansleben@bmh-partner.com