#CovCivilLaw

Civil law implications due to the pandemic

Civil law implications due to the pandemic

Civil law implications include facilitations under company law, e.g. regarding the holding of general meetings and general assemblies. For the first time, such meetings can be held without physical presence. At the same time, the right of termination is excluded for rent and lease arrears in the period from April 1, 2020 to June 30, 2020 if the non-performance is due to the effects of the COVID-19 crisis. Please find below an overview of the effects under civil law.

General and shareholder meetings

Measures:

Art. 2 - Law on measures relating to company law, cooperative society law, association law, foundation law and residential property law to counter the effects of the COVID-19 pandemic* provides in particular for the following measures:

  • Enables companies to hold general meetings as well as shareholders' meetings by means of electronic communication
  • Significant limitation on the judicial review of violations of the shareholders' right to information
  • Limitation of the contestability of resolutions taken at a general meeting
  • Temporary deviations from the German Stock Corporation Act and the German Limited Liability Companies Act permitted
  • Only valid for general meetings and shareholders' meetings held in 2020

* Law to mitigate the consequences of the COVID-19 pandemic in civil, insolvency and criminal proceedings, of March 27, 2020, Federal Law Gazette I 2020, No. 14, p. 569 et seq. – Art. 2

Employee participation in the company (implementation planned)

Measures:

By amending the Works Constitution Act and the Federal Personnel Representation Act, the Federal government aims to expand the possibilities for works council decisions, ensure the capacity of the personnel representatives to act as well as to guarantee the conclusion of personnel council elections also in times of the COVID-19 pandemic.

  • Use of audio and video conferences for the adoption of decisions by staff committees
    • For works councils until December 31, 2020
    • For staff councils until March 31, 2021
    • Valid retroactively as of March 01, 2020
  • Continuation of business by existing staff representatives
    • Existing staff representatives are to remain in office until the end of the elections and will represent the interests of the employees during said period
    • Valid retroactively as of March 01, 2020 until March 31, 2021
  • Amendment of the electoral regulations
    • Enables the electoral committees to order a postal vote instead of or in addition to the presence vote
    • Supplemented by organizational simplifications in the event that the election date has to be postponed
    • Valid until March 31, 2021

Article 240 Introductory Statute to the Civil Code*: § 1 Moratorium - Temporary right to refuse performance in the context of continuing obligations

Moratorium:

  • Temporary right to refuse performance in the case of continuing obligations for consumers and micro-entrepreneurs (entrepreneurs ≤10 employees and turnover or balance sheet total ≤ 2 million Euro)
  • The right to refuse performance in respect of all material continuing obligations of the consumer or micro-entrepreneur, with the exception of rental, lease, loan and employment contracts
  • Essential are continuing obligations to be covered by services of general interest, including compulsory insurance, electricity and gas contracts, telecommunications services or contracts for water supply and disposal (where regulated by civil law)
  • For micro-enterprises, also with regard to receivables that are not claims for payment (in particular micro-enterprises that provide services or offer rental services, for example for motor vehicles)
  • The right to refuse performance must be asserted by way of defense: Explicit appeal by the debtor to the right to refuse performance with evidence of the COVID-19 pandemic as the cause of the inability to perform
  • Only in respect of continuing obligations entered into before March 8, 2020
  • End date of the moratorium by June 30, 2020
  • Possibility of prolongation until 30 September 2020 by legal decree of the Federal Ministry of Justice

* Law to mitigate the consequences of the COVID-19 pandemic in civil, insolvency and criminal proceedings, of March 27, 2020, Federal Law Gazette I 2020, No. 14, p. 569 et seq. – Art. 5

Art. 240 Introductory Statute to the Civil Code*: § 2 Restriction on the termination of rental and lease agreements

Rental and lease agreements:

Under the current legal situation, the obligation to pay rent during the COVID-19 pandemic does not in principle cease to apply.

However, termination by the landlord for rent arrears is excluded for the period from April 1, 2020 to June 30, 2020, if the non-payment is due to the effects of the COVID-19 pandemic.

To establish the credibility of the COVID-19 pandemic as a cause:

  • Relevant evidence provided by the tenant: affidavit in lieu of oath or any other appropriate means (in particular, proof of the application or the certificate on the granting of state benefits, certificates from the employer or other evidence of income or loss of earnings).
  • For tenants of commercial properties: in addition, for example, by reference to a legal regulation or official order that prohibits or significantly restricts operations in connection with combating the SARS-CoV-2 virus (currently affects restaurants, hotels, DIY stores, hairdressers, etc.)

This does not include other reasons for termination, including termination during the period of validity of the Law due to rent arrears that have accumulated in an earlier period (before April 1, 2020) or that will result from a later period

* Law to mitigate the consequences of the COVID-19 pandemic in civil, insolvency and criminal proceedings, of March 27, 2020, Federal Law Gazette I 2020, No. 14, p. 569 et seq. – Art. 5

Art. 240 Introductory Statute to the Civil Code*: § 1 Regulations on the right to loans

Loans:

  • Deferral of repayments, interest or principal payments on consumer loan agreements due between April 1, 2020 and June 30, 2020, with a three-month maturity date
  • Deferral until June 30, 2020
  • Possibility of prolongation until September 30, 2020, by legal regulation of the Federal Ministry of Justice
  • Conclusion of the loan agreement before March 15, 2020
  • Loss of income for the consumer due to the exceptional circumstances caused by the spread of the COVID-19 pandemic as a reason why the provision of the service due is not deemed reasonable
  • Exclusion of dismissals for this reason for the duration of the deferment
  • Deferral of claims for (partial) repayment of a (partially) maturing loan due within the deferral period
  • Deferral of regularly occurring interest and redemption payments, usually to be made monthly
  • Deferring of the payment due date of claims to be paid between April 1 and June 30, 2020, by three months
  • In the event that an amicable arrangement cannot be reached for the period after June 30, 2020, the contract period shall be extended by three months. The respective due date of the contractual services shall be postponed by this period

We will be pleased to answer all your questions regarding the civil law implications of the COVID-19 crisis and advise you on the best approach for your company.

* Law to mitigate the consequences of the COVID-19 pandemic in civil, insolvency and criminal proceedings, of March 27, 2020, Federal Law Gazette I 2020, No. 14, p. 569 et seq. – Art. 5

further measures to mitigate COVID-19-related economic damages

#ShortTimeWork

  • Application possible retroactively to March 1st.
  • Allowed in case of absence from work by >10% (previously 30%) of the workforce with more than 10% of the salary
  • Full refund of social security contributions
  • Also applies to temporary employment agencies
  • Abstention from building up negative working time accounts
  • Term up to 12 months

#TaxDeferral

  • Application for interest-free deferral of mature and maturing taxes until end of 2020
  • Applications for adjustment of advance payments (income tax / corporate tax / VAT)
  • Refund of advance payments is possible
  • Suspension of late payment penalties / enforcement measures until the end of 2020

#COVInsAG*

  • Conditional suspension of the obligation to file for insolvency until September 30, 2020, if the insolvency maturity is based on the consequences of the COVID 19 pandemic and there are prospects of eliminating the insolvency
    • Insolvency maturity is due to the spread of the COVID-19 virus and
    • prospect of eliminating an existing insolvency if no insolvency had occurred by December 31, 2019
  • Extensive suspension of liability and rescission rules as well as criminal law treatment

#KfWLoans

  • Risk assumption by KfW of up to 90% of the loan volume
  • Application for and granting of loans via intermediary financing partners ("house banks")
  • Up to 800 TEUR with 100% assumption of the credit default risk

#LiquidityAid

  • Liquidity assistance from the Bundesländer for companies and the self-employed (including emergency aid, guarantees, bridging loans, mezzanine)

*) Act on the mitigation of the consequences of the COVID-19 pandemic in civil, insolvency and criminal proceedings of March 27, 2020, Federal Law Gazette Part 1 No. 14, 569 ff.

To mitigate COVID-19-related economic damage, further extensive measures by companies are necessary.

PLUTA supports