Sunday, May 09, 2021
Insolvency obligation applies again
“Have to get back to normal”
The suspension of the obligation to file for insolvency has ended. Many companies are facing a dramatic situation, says CDU legal expert Heribert Hirte. Nevertheless, it is right not to extend the regulation. Help will still be available.
The suspension of the obligation to file for bankruptcy expires for all companies. Are companies facing problems now?
Heribert Hirte: I have been closely following the discussion about the suspension of the obligation to file for insolvency since March last year and helped shape it on the parliamentary side. It was one of the first measures ever that the Bundestag had decided to counteract the economic hardship of many companies due to the Corona crisis. We have repeatedly emphasized that as legislators we cannot put the interests of the creditors aside. And that we have to see that we can get back to the normality of creditor protection as quickly as possible. That is why we have turned back the “insolvency protection” step by step. Until the situation that expired on April 30th. In the end, only those companies that were waiting for grant payments were protected. They did not have to file for bankruptcy because it was politically promised that liquidity would be generated from other sources.
If that expires now, won’t that also put companies in trouble that could still recover in the coming months, we are all hoping for the summer?
We are facing a dramatic situation. And we should think about protecting companies that have got into trouble by the crisis and only have to leave the market because they are now – because of the crisis – not liquid or indebted in the short term. It is precisely for this purpose that we improved the reorganization and restructuring options for companies a few months ago.
So should there be another regulation?
This is a correct consideration if there is a predictable probability that companies will be able to return to the market afterwards. The opposite question is, however, whether the renewed suspension of the obligation to file for bankruptcy is the correct answer. Let me remind you that the last extension of this rule was expressly not a general extension of the suspension. It only referred to cases in which companies were entitled to a variant of the corona aid and the state aid had not yet been paid out. So it only applied to companies that were particularly hard hit, no longer to everyone.
Which companies are they now?
Gastronomy, tourism and retail. In these cases in particular, state aid was granted, which can be included in the company’s balance sheet as an asset. And my impression is that the payments can also be made relatively promptly if they are not already.
What does that mean in concrete terms?
This means that the situation we had around December and the beginning of the year will not repeat itself. At least not in the same way. At least that is my current assessment. And that means that the suspension is no longer an option for the time being. The state payments compensate for the liabilities, so it is not necessary to suspend the obligation to file for bankruptcy any further.
And if they do exist – do you advocate an examination on a case-by-case basis?
As a matter of fact. Because it depends on the industries. In the industries we are talking about, the situation is dramatic. But it is worth taking a differentiated look here, because there are differences within the industries, and business is sometimes going well. I see that in the restaurant business. Some innkeepers in good locations and with a good to-go or delivery concept say that they can no longer accept orders. However, many had to lay off their employees, which then no longer affects the company we are talking about here. There is light and shadow alike. Of course we hope that the summer will be nice, or that at least the outdoor catering will generate a lot of sales, as last year. Many have thus compensated for their losses or at least large parts of them. If that doesn’t work, we would have to decide on a case-by-case basis. But it is by no means the case that we would give the correct answer with a generalized solution.
The suspension of the obligation to file for bankruptcy has been criticized again and again, as many fear that we could face a wave of bankruptcies once the regulation expires. Do you see that?
An extension alone does not lead to bankruptcy and if it does, it would only postpone a possible wave. The prognosis of an impending wave of bankruptcies has been given time and again, but it has so far not come true. We compared the numbers of insolvent companies and those about to bankrupt before the crisis and now – the difference is of course there. But it’s not as big as is often claimed. As I said, an extension would not be the right answer, but it would also not result in us putting off a huge wave of bankruptcies in front of us. I also say this out of great conviction. We have very badly affected branches of the economy. But we also have other branches of the economy that are doing very well at the moment. And that was exactly the balance we made when we made the, as one sometimes reads negatively formulated, twilight lockdown. That was of course so that the economy could continue. And it can and does it in many places.
The way you present it is a big topic, but maybe not as big as we often discuss it?
As a matter of fact. I would like to report here on a conversation between Members and the President of the Bundesbank, Jens Weidmann. He said that the savings rate has increased significantly, and I was very impressed by the number. And of course the Bundesbank asks itself where the money will go when the lockdown ends. He gave two answers: We have a situation of threats and existential fears. But we also see that spending is being postponed. And one can hope that they will come back to a much larger extent at a later point in time. In any case, we have to take that into account in all of the considerations.
Bastian Hosan spoke to Heribert Hirte. The interview first appeared on “Capital”.
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