Please find here our M&A update on the legislative and further government COVID-19 measures that have now come into force:

1. State Aid

  • The Bavarian State Ministry of Economic Affairs, Regional Development and Energy has published guidelines for supporting companies and members of the liberal professions affected by the COVID-19 pandemic. These guidelines make clear that the prerequisite for the granting of emergency aid is a liquidity shortage that threatens the existence of the company as a result of the pandemic triggered by the corona virus, which cannot be compensated for by compensation payments, tax deferrals, other equity or borrowed funds or other liquidity measures. If the company is an affiliated company, the liquidity shortage must be assessed for the company as a whole. At the moment, there is uncertainty as to when there is a liquidity shortage that entitles can claim.
  • Applications for the emergency aid programs of the Federal Government and the State of Bavaria can only be made using an online form. Once the number of employees has been entered, the program automatically recognizes whether the Bavarian or German emergency aid program is applicable and provides the relevant application form.
  • We summarized further funding opportunities for companies under the following link: COVID-19: State Aid for affected companies

2. Labor Law

  • The government decree simplifying the short-time work based on the respective law dated 13 March 2020 has been issued in the Federal Law Gazette on 27 March 2020 and, thus, the simplification to the short-time compensation (in particular the reduction of the required percentage of employees affected by shortfall from 30% to 10% and the full reimbursement of the social security contributions) came into force retroactively as of 1 March 2020. In March, around 470,000 notices of short-time work were already received by the authorities. Cf. https://www.reuters.com/article/health-coronavirus-germany-labour/around-470000-firms-in-germany-applied-for-short-time-work-labour-office-idUSS8N2BH00U
  • When applying for the short-time compensation, the requirements of Sections 95 et seq. of the German Social Code III must be fulfilled, in particular a significant shortfall in work. For the (provisional) granting of the short-time compensation, it is only required to substantiate the requirements. However, an official review is carried out and the employer is obliged to prove the fulfilment of the requirements upon request. In the event of wilful or negligent false or incomplete information, there is a risk of repayment of the funds granted and claims for damages. Furthermore, an administrative offence may be committed leading to the imposition of fines. The misuse of short-time work benefits may also have consequences under criminal law.
  • As further measures to stabilize the labour market and support the employees, the so-called social protection package entered into force on 28 March 2020. The newly implemented right to compensation for loss of earnings of parents due to child care during the shutdown of schools and childcare centres is part of the law regulating the protection against infection. The new regulation came into force on 30 March 2020.

3. Law to mitigate the Consequences of the COVID-19 Pandemic

The law to mitigate the consequences of the COVID-19 pandemic has been issued in the Federal Law Gazette on 27 March 2020. The regulations on insolvency law, in particular the suspension of the obligation to file for insolvency, came into force retroactively as of 1 March 2020. The simplified requirements in company law, in particular for the holding of general meetings and passing shareholders' resolutions, came into force on 28 March 2020. The contract law regulations, in particular the right to refuse performance, the exclusion of termination in tenancy law as well as the regulations on consumer loan law, came into force on 1 April 2020.

There were no material changes to the cabinet draft dated 22 March 2020 which was discussed in detail in our last COVID-19 Wire.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.