· Insight

M&A COVID-19 Wire XV

1. State Aids

a) P+P SÄULE II-Helpdesk

The Säule II state aid program as part of the Corona aid package of the German Federal Government supports start-ups without venture capital investments. Companies affected by the COVID-19 pandemic can receive funding of up to EUR 800,000. However, the conditions and procedures are implemented very differently by the Federal States. For many start-ups, the application for funding becomes a bureaucratic challenge. P+P has therefore developed the SÄULE II-Helpdesk (in German). The for free Online Tool enables start-ups to find the relevant program, check the application requirements and prepare the application for funding directly online in three steps.

b) Interim Financial Aid Program extended

On 18 September 2020, the German Federal Ministry of Finance announced that the previous interim financial aid program provided by the German Federal Government to support small and medium-sized enterprises from all sectors in the COVID-19 pandemic, will be extended, expanded and simplified. The aim of the interim aid is to reduce declining turnover of affected companies during the COVID-19 crisis. Further information on the interim financial aid program - in particular regarding the application - can be found in this guideline (in German) of the Federal Ministry of Economics and Energy.

  • The "first phase" of the program, which covers the funding months June to August 2020, expired at the end of August. Retrospective applications for these funding months can only be submitted until 9 October 2020. 
  • The program has now been extended for the months September to December 2020. Applications for this "second phase" are expected to be available from mid-October 2020. It should be noted that modifications have been made to the previous program: 
    • In future, all companies that have recorded a decline in revenue of at least 50% in two consecutive months in the period April to August 2020 compared to the respective months of the previous year will be eligible to apply. Likewise, all companies that have recorded a decline in revenue of at least 30% on average in the months April to August 2020 compared to the same period of the previous year.
    • The previous SME cover amounts of EUR 9,000 and EUR 15,000 respectively will, without replacement, no longer apply. In future, 90% of fixed costs will be reimbursed if revenue declines more than 70%, 60% of fixed costs revenue declines between 50% and 70% and 40% of fixed costs if revenue declines more than 30% compared to the same period of the previous year. Furthermore, the lump sum for personnel costs of eligible costs will be increased from 10% to 20%.
    • In future, it should be possible to make additional payments and recoveries in the final accounts.
  • Please note that an application for the interim financial aid program can still only be submitted by tax consultant, auditor, sworn auditor or lawyer.
  • Furthermore, first court decisions have been issued stating that the interim financial aid program is not transferable as an earmarked claim and is therefore subject to the prohibition of attachment under section 851 par. 1 German Civil Procedure Law.


2. Obligation to file for Insolvency

  • With the law on mitigating the consequences of the COVID-19 pandemic in Civil, Insolvency and Criminal Proceedings (COVID-19 Law) of 27 March 2020, the obligation to file for insolvency was suspended with effect from 1 March 2020 to 30 September 2020 for both the insolvent reason of over-indebtedness and inability to pay. For further information please refer to our M&A COVID-19 Wire dated 25 March 2020 and 9 July 2020.
  • On 30 September 2020 an announcement was made in the Federal Law Gazette that the suspension of the obligation to file for insolvency in the case of over-indebtedness as the reason for insolvency will be extended until 31 December 2020. 
  • Companies and associations that were not required to file for an application by 30 September 2020 because their insolvency maturity was based on the consequences of the COVID-19 pandemic and had the prospect of eliminating their insolvency are no longer exempted from filing for an application.
  • As a result, from 1 October 2020 onwards, insolvent companies and associations are obliged to file for insolvency in accordance with section 15a of the German Insolvency Code with potential consequences under criminal law according to section 15a par. 4 German Insolvency Code in case the filing is not submitted accordingly.


3. Corporate Law

a) Federal Minister of Justice intends to extend the COVID-19 Law

  • The German Federal Minister of Justice has announced to extend the Law concerning Corporate, Associations, Foundations and Commonhold Property measures to combat the Effects of the COVID-19 pandemic (Article 2 of the aforementioned COVID-19 Law) until 31 December 2021. The draft bill of this regulation was already sent to the federal states and associations for statement.

b) Limited Liability Companies: Facilitated Execution of Circular Resolutions

  • The COVID-19 Law facilitates the holding of shareholder meetings of limited liability companies. A resolution by written circulation procedure without holding a physical shareholders' meeting currently requires a majority decision more than 50% of the shareholders (in deviation from section 48 par. 2 German Limited Liability Companies Law). The consent of all shareholders is currently not required.
  • Considering the information duties of the company and the participation right of the shareholders, it is advisable to inform all shareholders in advance that a decision regarding the circulation procedure (deviating from the usual legal situation) can be passed with a majority more than 50% (i.e. a vote with "no" or abstention in the decision regarding the circulation procedure does not automatically prevent a resolution on the subject matter). Furthermore, an explicit resolution on the circulation procedure is recommended.
  • However, the majority prescribed by law or the articles of association is still required for the resolution of the subject matter. For example, despite the simplifications made by the COVID-19 Law, a statutory 75% majority is required for an amendment to the articles of association.
  • Resolutions which require notarisation, such as an amendment to the articles of association, can also be resolved by circulation procedure. Each shareholder votes on the minutes of a meeting in front of a (not necessarily the same) notary public (notarisation, no certification!). Furthermore, it is recommended that a (additional) notary public collects the votes and records the voting result and the resolution in a notarised protocol.
  • However, it is controversial whether or under which conditions the simplified circulation procedure is permitted in constellations in which the law or the articles of association stipulate the holding of a presence meeting, e.g. in the case of section 49 par. 3 German Limited Liability Company Law as well as in case of merger, demerger or a change of legal form.
  • Aforementioned facilitations apply to any limited liability company (also companies in formation) as well as an entrepreneurial company with limited liability.

c) Stock Corporation: Admissibility of the virtual General Meeting (Local Court of Munich I)

  • In a decision dated 26 May 2020, the Regional Court of Munich I has decided that a virtual general meeting can only be prohibited in an interim relief if the resolutions to be adopted are null and void.
  • A misuse of discretion with regard to the decision as to whether an annual general meeting should be attended in person or a virtual general meeting should take place shall not result in nullity of the resolution. According to the court, this does not affect the proper convening of the general meeting (section 241 no. 1 of the German Stock Corporation Law). Furthermore, the holding of a virtual general meeting in accordance with the COVID-19 Law does not constitute a violation of the essence of a stock corporation (section 241 no. 3 of the German Stock Corporation Law).
  • Nevertheless, a misuse of discretion in connection with the decision of holding a virtual general meeting could lead to a contestability of the resolutions adopted at the general meeting.


4. German Tax Law

  • On 28 September 2020, the finance committee of the German Federal Council has published various comments on the draft of the annual tax act 2020 (German) of the German Federal Government. Amongst others, the comments provide for the implementation of the ATAD directives of 12 July 2016 and 29 May 2017 (EU Directives 2016/1164/EU and 2017/952/EU - "Anti-Tax Avoidance Directives") with regard to controlled foreign companies (CFC rules) and hybrid mismatch arrangements.

  • In addition, the following supplementary measures to deal with the COVID-19 pandemic are proposed, among others, and shall be taken into account in the course of the ongoing legislative process:

    • Extension of the carryback period for corporate tax losses suffered in 2020 and 2021 from one to two financial years. 

    • Improved write-down of innovation assets relevant for digitalisation and of low value assets.

    • Tax incentives for retained profits of partnerships and implementation of an option for partnerships (transparent entity) to opt for a taxation as corporation (opaque).

    • Reduction of the legal interest rate from currently 6% per year to 3% per year.

    • Reduction of the electricity tax.

  • The German Bundesrat is expected to consider the recommendations on 9 October 2020.


5. Labour Law

  • The Federal Ministry of Labour and Social Affairs has presented an uniform SARS-CoV-2 occupational safety standard in April 2020, but without stating if and to what extent the standard is binding for companies (please refer to our M&A COVID-19 Wire dated 23 April 2020). Recently, a new SARS-CoV-2 Rule (in German) has been introduced, which is intended to specify occupational health and safety during the COVID-19 pandemic and provide legal clarity in the implementation of respective measures (see also the announcement (in German) of the German Federal Government).

  • The German Federal Ministry of Labour and Social Affairs has launched a legislative initiative for a legal regulation on mobile work. The draft of the law is currently in the early coordination stage. The ministry provides information about the current status on its website (in German). However, the rules of occupational safety and other provisions of occupational safety law still apply in case of mobile work at home.


6. COVID-19 Pandemic and Business Closure Insurances

  • In our M&A COVID-19 Wire dated 28 May 2020 we already discussed a decision of the Regional Court of Mannheim concerning the business closure insurance in connection with the COVID-19 pandemic. Now the Regional Court of Munich I decided on 1 October 2020 (case no. 12 O 5895/20) on insurance coverage in the event of an administrative shutdown due to the COVID-19 pandemic

  • The Regional Court of Munich I adjudged a gastronome a compensation of EUR 1,014,000. The insurance coverage was solely based on the notifiable diseases, but contained limitations regarding the German Infection Protection Act and referred to the version of the law dated 20 July 2000. The court declared this clause in the insurance conditions as non-transparent and invalid, since the insurance coverage cannot be determined by the policyholder without review of a legal regulation.

  • The court stated, that neither short-time work compensation nor state liquidity aid have a claim-reducing effect.

  • The Regional Court of Ellwangen negated with its decision on 17 September 2020 (case no. 3 O 187/20) an insurance coverage of a business closure insurance, where the general insurance conditions stated all covered diseases and pathogens without mentioning the SARS-CoV-2 pathogen.

  • The Regional Court of Munich I published a further decision dated 17 September 2020 (case no. 12 O 7208/20). Accordingly, there is no insurance coverage under a business closure insurance policy if the business is partially continued.


If you have further questions, please contact us:

Nico Fischer –
Tobias Jäger –
Eva Nase –
Nemanja Burgić –
Stefan Weinberger –

Authors: Dr. Ralf Bergjan, Dr. Nico Fischer, Tobias Jäger, Dr. Eva Nase, Dr. Marco Ottenwälder, Benjamin Maciejewski, Dr. Laura Greimel, Eva-Juliane Stark, Dr. Matthias Augsburger, Nemanja Burgić, Dr. Stefan Weinberger