Legal Implications of Corona Virus (Covid-19) for your Organisation - Update

Is your company prepared for the legal implications of the corona virus? What needs to be considered? Is there a need for action?

The Organisation for Economic Cooperation and Development (OECD) sees the coronavirus pandemic as the greatest threat to the global economy since the financial crisis more than ten years ago. Numerous industries are already affected by the consequences. The now rampant pandemic poses numerous risks to the economic prospects of companies in a wide range of industries and the functioning of the financial markets.

In the following, we would like to point out the possible effects, above all to ensure business continuity and to identify risks in good time and, if possible, eliminate them. We will be happy to assist you with any questions and considerations at any time.

We update this text regularly (as of April 28, 2020).

In detail


1. temporary legislative measures in insolvency, loan and tenancy law

With the draft of the Corona Insolvency Suspension Act - CorInsAG (BT-Drucks. 19/18110), a comprehensive package of measures for the protection of companies, tenants and borrowers passed through the Bundestag today. The Bundesrat is expected to approve the law next Friday. The measures are essentially limited in time until 30 June 2020, but due to the unpredictability of the course of the Covid 19 pandemic, the Federal Government will be given the opportunity to extend measures until 30 September 2020 and possibly beyond.

The interventions are very far-reaching. Specifically:

Insolvency law

Suspension of the obligation to file for insolvency

The officially decreed suspension of operations and the economic developments of the Corona pandemic could lead to acute liquidity problems for commercial enterprises and entrepreneurs.

In the case of corporate bodies with limited liability, this quickly leads to the obligation of the managers to file for insolvency without culpable hesitation, at the latest three weeks after the occurrence of insolvency or over-indebtedness (§ 15a InsO). This duty is subject to punishable by law and with liability. In addition, there are payment prohibitions under company law if insolvency has occurred (§ 64 S. 1 GmbHG, § 92 Paragraph 2 S. 1 AktG, § 130a Paragraph 1 S. 1, also in connection with § 177a clause 1 HGB and § 99 clause 1 GenG). The executive boards of associations are also subject to obligations to file for insolvency with liability (§ 42 Paragraph 2 BGB).

The CorInsAG takes this as a starting point and suspends the obligation to file for insolvency and the payment prohibitions until 30 September 2020, unless the insolvency is not due to the effects of the Covid 19 pandemic or there is no prospect of eliminating an insolvency that has occurred. If the debtor was not insolvent on 31 December 2019, it is assumed that the insolvency is due to the effects of the Covid 19 pandemic and that there are prospects of eliminating an existing insolvency.

The suspension of the payment prohibitions is technically effected by the fact that payments which are made in the ordinary course of business, in particular those payments which serve to maintain or resume business operations or to implement a restructuring concept, are deemed to have been made with the diligence of a prudent and conscientious manager within the meaning of § 64 sentence 2 GmbHG, § 92 para. 2 sentence 2 AktG, § 130a para. 1 sentence 2, also in connection with § 177a S. 1, HGB and § 99 S. 2 GenG are also to be considered compatible.

The suspension of the obligation to file for insolvency represents an effective protective measure from the point of view of the companies as well as from an economic point of view.

The change is also to be welcomed from the point of view of lenders. After all, lenders generally have an interest in ensuring that their borrowers do not have to file for insolvency due to events beyond the control of the lenders which are triggered by extraordinary temporary circumstances.

Suspension of the right to file for insolvency

For a three-month transitional period, the right of creditors to request the opening of insolvency proceedings will also be suspended. The suspension of the obligation to file for insolvency as well as the regulation on the reason for opening insolvency proceedings in the case of creditor insolvency applications can be extended by ordinance until 31 March 2021.

It is true that the exclusion of the creditor application right protects the borrowers. For lenders, however, this suspension represents a material restriction in certain loan structures. Especially in the case of commercial real estate financing, the insolvency of the property company (Property Company / PropCo) and the conclusion of a realization agreement or an agreement on cold forced administration (Realization Agreement) are the preferred realization strategy.

Suspension of the insolvency challenge

For lenders, the granting of loans to borrowers who are close to insolvency is associated with the risk that the collateral must be returned in the event of the subsequent insolvency of the borrower.

This risk is to be reduced by the CorInsAG by stipulating that legal acts which have granted or enabled the other party to grant security or satisfaction which the other party could claim in the type and at the time are not contestable in subsequent insolvency proceedings.

This does not apply, however, if the other party was aware that the debtor's restructuring and financing efforts were not suitable for eliminating an insolvency that had occurred. The exclusion of rescission shall apply accordingly to performance in lieu of or on account of performance, payments by a third party on the instruction of the debtor, the provision of security other than that originally agreed if this is not more valuable, the shortening of payment terms and the granting of payment facilities.

This also applies to loans granted by KfW and its financing partners or by other institutions under government aid programmes in the wake of the Covid 19 pandemic, even if the loan is granted or secured after the end of the suspension period and for an unlimited period of time for their repayment.

This is intended to create incentives to continue to provide loans to companies that get into difficulties as a result of the Covid 19 pandemic.

Suspension of subordination under insolvency law

If shareholders grant a company a loan, the claims of the shareholders in the insolvency of the company are generally subordinate (section 39 (1) no. 5 InsO). Payments to the shareholder are correspondingly contestable (section 135 (1) InsO), and there are restrictions in the case of guarantees or securities of the shareholders (section 135 (2) InsO, section 44a InsO).

CorInsAG takes this as a starting point and determines that the repayment of a new loan granted during the suspension period by 30 September 2023 and the provision of collateral to secure such loans during the suspension period is not considered to be detrimental to creditors. This also applies to the restitution of shareholder loans and payments on claims arising from legal acts which correspond economically to such loans, but not to their collateralization; § 39 (1) no. 5 and § 44a InsO do not apply in this respect in insolvency proceedings concerning the debtor's assets which have been applied for by 30 September 2023.

Only limited addressing: Lender Liability

The granting or extension of loans to companies in situations close to insolvency is in principle associated with increased risks for lenders. In the extreme case, liability for aiding and abetting the protraction of insolvency and liability for immoral deliberate damage (§§ 138, 826 BGB) may be imminent due to the granting or extension of a loan (so-called lender liability).

CorInsAG intends to mitigate this risk by stipulating that the granting of a loan and the provision of collateral up to 30 September 2023 is not to be regarded as an immoral contribution to the delay in filing for insolvency. This also applies to loans granted by KfW and its financing partners or by other institutions in the context of government aid programmes in connection with the Covid 19 pandemic, even if the loan is granted or secured after the end of the suspension period, and for an unlimited period for their repayment.

However, it can be assumed that the provision only partially reduces the risks of lender liability, but by no means eliminates them completely. The new granting or extension of loans to companies in sectors particularly affected by the Corona crisis is still possible in principle and also economically necessary. In such cases, however, the banks should continue to incur increased auditing and documentation costs. Please feel free to contact us at any time.

Suspension of the failure to grant residual debt discharge

In the case of natural persons who are not subject to an obligation to file for insolvency, the omission of an insolvency petition can lead to the refusal of residual debt discharge in accordance with section 290 (1) no. 4 InsO.
The CorInsAG therefore stipulates that section 290 (1) no. 4 InsO is to be applied to natural persons as debtors with the proviso that no refusal of residual debt discharge can be based on the delay in the opening of the insolvency proceedings in the period between 1 March 2020 and 30 September 2020.

Deferral of credit claims

Background, regulatory purpose and scope

The Covid 19 pandemic is already leading to this and will in future lead even more to a situation where private individuals and companies are no longer able to make interest and repayment payments under loan agreements on time or at all. As a result, the most important reason for termination of loan agreements is usually non-payment.
In this situation, CorInsAG wants to protect the borrowers and prevent that loans are cancelled due to default and that the collateral provided is realised. Contrary to the government draft of 20 March 2020, the following regulation only applies to consumer loan agreements, but not to loan agreements with entrepreneurs. However, the Federal Government is given the option of extending the provisions to other groups of borrowers (in particular micro-enterprises as defined in Art. 2 (3) of the Annex to EU Commission Recommendation 2003/361/EC) by way of a regulation.

The following provisions shall apply accordingly to settlement and recourse between joint and several debtors pursuant to § 426 BGB.

Legal deferment

For the above purpose, it is provided that for loan agreements concluded before 15 March 2020, claims of the lender for repayment, interest or principal payments due between 1 April 2020 and 30 June 2020 shall be deferred for a period of three months from the due date if the borrower suffers a loss of income as a result of exceptional circumstances caused by the spread of the Covid 19 pandemic which make it unreasonable to expect the borrower to perform the service owed.

In particular, he shall be deemed to be unreasonable if his "reasonable subsistence" or the "reasonable subsistence of his dependants" is at risk. While the government bill of 20 March 2020 still provided for the presumption of a link between the Covid 19 pandemic and the loss of revenue, this presumption is no longer contained in the current bill.
During the aforementioned period, the consumer is entitled to continue to make his contractual payments on the originally agreed service dates. Insofar as he continues to make payments in accordance with the contract, the aforementioned deferral shall be deemed not to have been granted.

The conditions of application of the regulations are essentially defined by general clauses. The question of when "reasonable subsistence" is "at risk" will have to be determined in each individual case and currently raises legal uncertainties.

Cancellation exclusion

In addition to the deferral of the receivables, it is provided that the lender cannot terminate the loan on the grounds of default or a significant deterioration of the borrower's financial situation under the above-mentioned conditions before the end of 30 June 2020.

This means that the most important reason for termination under loan agreements temporarily no longer entitles the borrower to terminate the agreement.

The deterioration of the financial circumstances constitutes a statutory reason for termination (§ 490 para. 1 BGB). This reason for termination is therefore also suspended by the aforementioned regulation.

It can be assumed that the aforementioned exclusion of termination also applies to contractual termination provisions which concretize or reflect the statutory termination rule of Section 490 of the German Civil Code. This applies in particular to the MAC Clause (see below), but possibly also to termination rights due to the violation of financial ratios (see below). The latter clauses are only provided for in the case of loans to entrepreneurs; the aspect could therefore gain importance if the Federal Government, in exercising its powers by decree, extends the aforementioned provision to commercial loan relationships as well.

In the event of a deterioration of the borrower's assets, a claim by the lender to demand a strengthening of the collateral is often also agreed. If the borrower does not comply with the obligation to provide additional collateral, this usually constitutes grounds for termination (see below). The lender's right to demand additional collateral should not be affected by the provisions of the CorInsAG. However, the lender's rights of termination in the event that the request for additional collateral is not complied with are again subject to suspension by the CorInsAG.

Deviating agreements

The parties to the contract may make different agreements, in particular regarding possible partial payments, adjustments of interest and repayment of principal or debt rescheduling. However, the borrower may not deviate from the exclusion of termination.

Restructuring and term extension

The lender "should offer the consumer a discussion on the possibility of an amicable arrangement and on possible support measures". For this purpose, means of distance communication may also be used.

Talking about an amicable restructuring should be the rule anyway and is recommended in any case.

However, the CorInsAG also provides that the contract term will be extended by three months if a mutually agreed arrangement for the period after 30 June 2020 is not reached. The respective due date of the contractual services will be postponed by this period. The lender must then provide the borrower with a copy of the contract, which takes into account the agreed or legally determined contract amendments.


None of the exceptions apply if the Lender can credibly demonstrate that deferral or exclusion of termination is unacceptable to the Lender taking into account all circumstances of the individual case, including changes in general living conditions caused by the Covid 19 pandemic.

By way of a general clause, the lender is thus given the opportunity to assert a case of hardship. The wording of the law thus allows lenders to avoid the sword of CorInsAG. However, in view of the clear decision of the legislator to give preference to the interests of the borrowers when weighing up the interests, the exception is likely to be extremely difficult to enforce.


The effects of the aforementioned regulations are significant for the lender side, as they lead to the fact that lenders have to accept the loss of expected cash flows without having remittances available that were previously contractually and legally provided for.

Suspension of terminations under lease agreements

The Covid 19 pandemic is already leading to this and will in future lead even more so to private individuals and companies being unable to make rental payments or to make them in full on time.

According to the legal regulation of § 543 para. 1, para. 2 p. 1 no. 3 BGB, tenancies can be terminated without notice for good cause if the tenant is in default with the payment of the rent or a not inconsiderable part of the rent for two consecutive dates, or in a period extending over more than two dates is in default with the payment of the rent in the amount of an amount that reaches the rent for two months.

In this situation, CorInsAG wants to protect the tenants and prevent that tenancies are terminated due to default.
Accordingly, it is provided that a landlord may not terminate a lease of land or premises if the tenant fails to pay the rent in the period from 1 April 2020 to 30 June 2020 despite the fact that it is due and the failure to pay is due to the effects of the Covid 19 pandemic. The connection between Covid 19 pandemic and non-payment is presumed. Other termination rights remain unaffected. Furthermore, the basic obligation of the tenants to pay the rent remains unaffected.

The scheme is only applicable until 30 September 2022.

The effects on tenancies differ depending on whether they are residential or commercial:

Housing leases are usually concluded for an unlimited period. In case of the tenant's default of payment, a landlord usually has an interest in terminating the tenancy and concluding a new tenancy agreement with a solvent follow-up tenant (possibly combined with a rent increase). Against this background, the provisions of the CorInsAG constitute an important protective mechanism for tenants.

In commercial tenancy law, on the other hand, a fixed term is usually agreed. The primary interest of landlords is usually to secure the cash flow of rental income over the entire fixed term. Landlords are therefore generally not interested in terminating the lease with a tenant in the event of late payment, but rather in enforcing their payment claims. For commercial tenancies, the suspension of the right of termination by CorInsAG is therefore less drastic. More significant in this context is the suspension of payment obligations (see below).

For commercial real estate financing, the regulation means that the borrower/lessor must expect losses in the forecast rental income. This, in turn, can have a corresponding impact on his ability to service the debt.

Right of refusal of services for consumers and micro-entrepreneurs

Debtors who are consumers or micro-enterprises should have a temporary right to refuse performance of their existing continuing obligations if they are unable to fulfil their contractual obligations due to the circumstances caused by the COVID 19 pandemic. This is intended to help, for example, consumers whose household income has been temporarily or permanently reduced or lost due to the pandemic. The aim is to help micro-enterprises that are unable to meet their service obligations because they cannot contact the beneficiary, because their workers cannot or are not allowed to come to work or because their service provision has been temporarily suspended.

In the case of consumers, this applies in relation to consumer contracts where they would not be able to perform (regularly pay) without jeopardising their livelihood or that of their dependants. The right to refuse performance exists in relation to all material continuing obligations of the consumer. Essential are those continuous obligations which are necessary to be covered by services of general interest. These include, for example, compulsory insurance, contracts for the supply of electricity and gas or for telecommunications services, and, to the extent regulated by civil law, contracts for water supply and disposal. In the case of micro-enterprises, a precondition is that the enterprise cannot provide the service or that the service cannot be provided without jeopardizing the economic basis of its commercial operations.

2. Contractual implications, especially for Corporate/M&A

Despite the intervention of the legislator, which has now taken place and is above all only temporary, companies should also review their contracts to see whether the providers or organisations within the supply chain may not be able to provide their usual services or whether delivery difficulties may arise. In addition, precautions should be taken in ongoing M&A transactions or risks arising from a share purchase and transfer agreement (SPA) that is about to be closed should be assessed and, if necessary, concrete measures should be taken. Individual factors should also be taken into account with regard to the beginning of the main and shareholders' meeting season.

General information

It is precisely here that the measures adopted by the legislator to cushion the effects of the pandemic should now be taken into account:

  • For business operations, it is particularly important to identify key person problems and to provide for suitable emergency and substitution arrangements in the event that such persons fall ill with the corona virus or are temporarily quarantined due to suspected infection:
  • If all the managing directors of a GmbH should "fail" due to the corona virus, a lack of management can result in accordance with § 35, Subsection 1, Sentence 2, GmbHG. This situation can be overcome by the appointment of a new managing director or the appointment of an emergency managing director. Restricted to court proceedings, the appointment of a guardian of process is also possible (cf. § 57 ZPO). The appointment of an emergency managing director is already possible in the case of prevention due to illness. The emergency managing director is a managing director according to §§ 35 ff. GmbHG. He differs from the ordinary managing director solely in the manner and circumstances of his appointment, as he is appointed by the local court on application until he is recalled by the court or the duly appointed managing directors resume their office.
  • Something else applies in turn to the stock corporation: A member of the management board is "absent" here in accordance with § 85 para. 1 AktG only if the exercise of the office is permanently impossible due to death or if he or she has left the management board by revocation of the appointment or resignation from office. No "absence" is deemed to exist if, among other things, a member of the Management Board is temporarily unable to exercise his office due to (even prolonged) absence or illness. In the event of such temporary inability of a member of the Management Board to perform his duties, however, the Supervisory Board may, pursuant to Section 105 (2) of the German Stock Corporation Act (AktG), appoint individual members of the Management Board for a maximum of one year as deputies of members of the Management Board who are unable to perform their duties.
  • Do any agreed MAC clauses intervene between signing (conclusion) and closing (execution) of an SPA? Does the SPA grant a right of rescission, in particular, if the economic circumstances of the target company have changed seriously due to the corona virus, because in the relevant period between signing and closing the workforce has been "put out of action" in such a way that the continuation of the business until closing cannot or could not be guaranteed or the supply chain has been interrupted and the "belts stop working"?
  • Is there a case of "force majeure" which temporarily suspends certain contractual obligations within the framework of existing supply relationships? According to the case law of the Federal Court of Justice, force majeure is "an external event which has no operational connection and cannot be averted even by the utmost care which can reasonably be expected". This should be carefully questioned in the relevant contracts and examined for each individual case. Does especially a global health emergency fall under the definition of force majeure? In analogy to travel law, epidemics and pandemics (e.g. SARS, plague, cholera) constitute cases of force majeure. Therefore, if the continuation of business was negatively affected by the corona virus, the respondent could in principle argue with a case of force majeure.
  • In any case, the individually agreed clauses should be carefully examined or defined in an appropriately stringent manner if a treaty is currently being negotiated, e.g. by introducing economic thresholds which should not be fallen short of, taking the pandemic into account.
  • Could further guarantees in a SPA be affected by the corona virus and result in possible claims for damages?
  • Businesses should consider whether there is a failure by suppliers or vendors to meet a contractual obligation and what rights they have.
  • Do any breaches of contract, delays in delivery possibly justify termination (ordinary or even extraordinary)? Can "force majeure" also be objected to? What about volume-dependent bonuses that cannot be achieved due to delivery difficulties?
  • In order to safeguard rights, it is advisable to review and comply with reporting and information obligations in general and with regard to force majeure provisions. Within the framework of the general duty to mitigate damage, there should always be an obligation between parties to the contract to make "best efforts" to mitigate the effects of a force majeure event.
  • Are there provisions in the contracts for dispute resolution (e.g. mediation and arbitration procedures)?
  • Observe the general duty to mitigate damage. We recommend that you communicate with your contractual partners at an early stage and secure evidence (written documentation). This can be particularly important to establish that you have done everything that was reasonably possible to mitigate the effects of the events on your benefit.
  • Be sure to check whether guarantees, indemnities or performance bonds could be called upon or your company runs the risk of being called upon if the secured obligations cannot be fulfilled.
  • In addition, meetings, (major) events and trade fairs have now been cancelled worldwide, and the responsible authorities have ordered curfews and contact bans. This could have a particular impact on the upcoming Annual General Meetings of German stock corporations. However, without an Annual General Meeting in person, no dividend payment can be resolved (cf. Section 119 (1) No. 2 AktG) or other resolutions of importance to the Company can be passed.
  • It is therefore necessary to consider under what circumstances a general meeting scheduled in the near future could be postponed until the summer or autumn of 2020 or whether the deadlines required by the German Stock Corporation Act have already passed. The prevailing opinion is that a cancellation of a General Meeting is still possible until its formal opening and that the cancellation must be made by the person who convened the General Meeting.
  • It may only be carried out by the body as a whole. The form in which the meeting is convened need not be adhered to for the cancellation; in any case, we consider the (electronic) Federal Gazette to be the most suitable medium for this purpose. It is possible to postpone the Annual General Meeting to a new date, but this must then be treated in the same way as a new meeting; in particular, the deadlines applicable to the convening of the meeting must be observed.
  • If the general meeting is to be held despite the current circumstances, shareholders should be encouraged to use proxy voting in order to avoid too many shareholders being present, while at the same time ensuring a quorum. However, it must be taken into account here that, especially in the case of critical agenda items, voting behaviour depends primarily on the speech of the Management Board on the annual report and the course of the ensuing general debate, and proxy voting will therefore be out of the question for many shareholders or only after the conclusion of the general debate (which in turn would require shareholders to be present until then). In any case, the Executive Board would have to examine each individual case on its own merits.
  • Pursuant to Section 118 (3) sentence 2 of the German Stock Corporation Act (AktG), the presence at the Annual General Meeting, which was previously considered a duty for the Management Board and Supervisory Board, now only applies to the Management Board. Representation of the members of the Management Board is no longer possible. The obligation to attend is only waived if there are serious reasons for prevention. An illness of a member of the Management Board has always been accepted as a reason for excuse. However, if all members of the Executive Board should fall ill with the corona virus and could not be present at the time of the General Meeting, it would therefore be mandatory to cancel or postpone the General Meeting (taking into account the above explanations). This is because, for example, participation of the ill/infected members of the Management Board in the General Meeting by means of video transmission is not possible, as this is only possible for members of the Supervisory Board in accordance with section 118 (3) sentence 2 AktG.

General meetings and shareholders' meetings

However, the legislator does not stand idly by and watch the Covid 19 pandemic and is counteracting any difficulties in the area of company law with the legislative package adopted on 25 March 2020. In order to mitigate the consequences of the COVID 19 pandemic in civil, insolvency and criminal procedure law, especially in the area of general meetings and shareholders' meetings - in contrast to the above-mentioned principles which are still valid - the following is now planned:

Temporarily, i.e. only for shareholders' meetings to be held in 2020, sub-stantaneous facilitations for the holding of shareholders' meetings of the stock corporation (AG), the partnership limited by shares (KGaA), the insurance association a. G. (VVaG) and the European Company (SE), as well as for shareholders' meetings of the limited liability company (GmbH), general meetings and representative meetings of the cooperative, and members' meetings of associations.

Essential for the AG, KGaA and the SE is the possibility for the Executive Board of the company to enable online participation (of the shareholders and the members of the Supervisory Board) in the Annual General Meeting even without an authorization in the Articles of Association, the possibility of an Annual General Meeting without an audience and with limited possibilities of rescission, the possibility of reducing the period for convening the meeting to 21 days (with simultaneous adjustment of the period for submitting requests for additions to the agenda) and the authorization for the Executive Board to make advance payments on the net retained profits even without a provision in the Articles of Association; The latter also applies to compensation payments in accordance with Section 304 AktG for outside shareholders of an inter-company agreement.

In concrete terms, the package of measures in this context states:

The Management Board may decide that the meeting is held as a virtual general meeting without the physical presence of the shareholders or their proxies, provided that

  • the video and audio transmission of the entire meeting takes place,
  • shareholders' voting rights can be exercised via electronic communication (postal voting or electronic participation) and proxy voting,
  • the shareholders are given the opportunity to ask questions by way of electronic communication,
  • the shareholders who have exercised their voting rights in accordance with No. 2, in deviation from Section 245 No. 1 of the German Stock Corporation Act (Aktiengesetz) and waiving the requirement to appear at the Annual General Meeting, are given the opportunity to object to a resolution of the Annual General Meeting.

The Board of Directors shall use its best judgment to decide which questions to answer and how to answer them; it may also require that questions be submitted by electronic communication no later than two days before the meeting; it may also require that questions be submitted by electronic communication no later than two days before the meeting.
The Management Board shall also have the possibility of filing an objection electronically with a notary public. As always, objections must be lodged by the end of the meeting and here by means of electronic communication. The notary public himself should be present at the location of the chairman of the meeting for the execution of the minutes. The notaries required for this purpose are, of course, still available nationwide (see below).

In addition, the possibility of holding an Annual General Meeting within the fiscal year has been introduced, i.e. the previous eight-month period will be extended as an exception.

For the GmbH, the facilitated possibility of passing resolutions in text form or by written vote is created temporarily, i.e. only for shareholders' meetings that take place in 2020. Notwithstanding § 48 (2) of the German Act on Limited Liability Companies (Gesetz betreffend Gesellschaften mit beschränkter Haftung - GmbHG), resolutions of the shareholders may be adopted in text form or by written vote even without the consent of all shareholders.

Insolvency law

Insolvency law: For the temporary measures in insolvency law, in particular the suspension of the obligation to file for insolvency, the right to file for insolvency, subordination under insolvency law and contesting insolvency, see point 1 above.

Conversion right

In principle, within the scope of transformations pursuant to § 17 of the German Transformation Act (UmwG), a merger must be filed for entry in the Commercial Register and, in accordance with § 17 sub-section 2 UmwG, a balance sheet must be attached for each of the transferring legal entities (so-called closing balance sheet). The provisions on the annual balance sheet and its audit shall apply accordingly to this balance sheet. In principle, the registration court may only register the merger if the balance sheet has been drawn up on a reference date which is not more than eight months prior to the registration. This is changed by the Covid 19 emergency package, which now extends the deadline according to § 17 sub-section 2 sentence 4 UmwG to twelve months, in order to avoid that conversion measures fail due to a lack of assembly possibilities during the pandemic.

Notary's offices

Irrespective of the package of measures, the notaries required for the general meetings, but also for all other legal transactions requiring form, remain at your disposal despite the guidelines for restricting social contacts adopted by the Federal Government and the Federal States on 22 March 2020. In addition, notarisation dates can be arranged in individual cases in such a way that personal contacts between the parties involved are avoided altogether or at least considerably reduced. Thus, in certain constellations, notarisations can only be carried out with individual participants or with representatives.

Other changes

The new law also contains changes in the law on cooperatives, associations, foundations and WEG, which correspond in meaning and purpose to the changes described above, but which we do not present in detail here - we will be happy to answer your questions personally.

3. Banking & finance

The rapidly spreading corona pandemic and the increasing prevention of physical social contacts (lockdown) are now already showing in some cases massive negative effects on companies from particularly affected sectors (travel industry including airlines and bus lines, hotel, catering and event event management industry, exhibition stand builders, automotive suppliers, etc.). It is to be expected that as the pandemic progresses, similar effects will also be felt by companies from other industries.

Against this background, we recommend that lenders, financial service providers and borrowers examine the following questions:

A. Finance contracts

Financial key figures

Financial key figures (financial covenants) agreed in credit agreements serve as an "early warning system" for the financing parties. The fact that the breach of the financial covenants triggers events of default means that the financing parties secure a "place at the negotiating table" at an early stage if the borrower encounters financial difficulties. In some cases, the breach of financial covenants also leads to automatic interest rate increases (margin ratchet) or other restrictions such as distribution blocks or the obligation to fill reserve accounts. In view of current developments, borrowers should keep a constant eye on their financial ratios and seek early consultation with the lender in the event of any breaches that become apparent. Lenders (or facility agents), in turn, should informally initiate an exchange with the borrower side regarding the development of the financial covenants beyond the "hard" information rights or obligations. It should be examined whether certain buffers (headrooms) are sufficient to absorb the current negative developments. In the case of corporate or acquisition financing, key financial figures are regularly based on EBITDA or EBIT. The financial parameters regularly allow for adjustments due to exceptional circumstances (Exceptional Items). It must be examined whether the EBITDA or EBIT financial ratios can be adjusted in this way or whether further adjustments are required. If a breach of the financial ratios is foreseeable despite the use of headrooms and adjustment mechanisms, the borrower should propose a strategy for adjusting (waiver) or suspending (covenant holiday) the financial ratios at an early stage.

It must also be examined whether termination rights due to the breach of financial covenants are affected by the suspension by the CorInsAG (in case of an extension of the scope by the Federal Government) (see above).
Repeated assurances

In some cases, the borrower is obliged under the credit documentation to explicitly repeat certain assurances, or certain assurances may be considered repeated under the credit documentation (repeated representations). For example, the Borrower may warrant that no termination events have occurred under its project contracts or other contracts with third parties (which may be the case due to the development of the Corona Pandemic), that information submitted so far is correct (but may be outdated by the Corona Developments), or certain assurances may be given with regard to the financial situation or the last submitted financial statements (which may no longer be correct due to the Corona Developments).Borrowers and lenders are advised to check the repeated assurances.

Information requirements

Credit agreements regularly provide for information obligations on the part of the borrower with regard to extraordinary business transactions (insurance claims above a certain amount, lawsuits for amounts above a certain amount, special business failures, etc.) as well as with regard to edn occurrence of reasons for termination. Borrowers should review their loan agreements with regard to the question whether, in view of current economic developments, special information obligations exist in order to avoid the occurrence of (possibly further) grounds for termination.


Loan agreements (e.g. No. 22 of the Savings Bank General Terms and Conditions) provide that the Bank may require the customer to provide or increase security for his liabilities if a change in the risk situation arises as a result of circumstances that have subsequently occurred or become known, e.g. due to a deterioration or imminent deterioration in the financial circumstances of the customer, a jointly liable party or guarantor or the value of existing security. If the Borrower fails to comply with the obligation to provide additional collateral, this usually constitutes grounds for termination. Banks should check whether there is a right of subsequent collateralization under the credit documentation and whether this right should be exercised if necessary. In this respect, it should be examined whether credit risks should be assessed differently if the borrowers are particularly affected by the corona virus.

Against the background of the CorInsAG, it must also be examined whether termination rights are suspended by the CorInsAG in case a request for additional collateral is not complied with (see above).

Operational commitments

Credit agreements regularly provide for certain operating obligations (covenants) of the borrower. This applies in particular to construction schedules or completion dates. Borrowers should review their credit documentation to determine whether the corona developments jeopardize compliance with the operating obligations. If this is the case, borrowers should seek discussions with the lender at an early stage in order to agree on an adjustment of the covenants. Financing parties, in turn, are also recommended to seek informal discussions with the borrower side with regard to endangered operating covenants, if the borrower side remains inactive in this regard.

MAC Clause

Many loan agreements provide for termination rights of the financing parties in the event of a material adverse change in the economic or financial situation of the borrower (Material Adverse Change Clause / MAC Clause). The MAC Clause is not standardized, but is individually tailored to the borrower's business model. Borrowers should check whether the MAC Clause could be applicable under their credit documentation and, if so, seek early discussions with the financing parties. The financing parties themselves should also check this and assess whether measures can and should be requested from the borrower on the basis of the MAC Clause. Against the background of the CorInsAG it should also be examined whether the MAC Clause is affected by the suspension of the right of termination by the CorInsAG (in case of an extension of the scope of application by the Federal Government) (see above).

Lender liability

The granting or extension of loans to companies in situations close to insolvency is in principle associated with increased risks for lenders. In the extreme case, liability for aiding and abetting the protraction of insolvency and liability for immoral deliberate damage (§ 826 BGB) may be imminent due to the granting or extension of a loan (so-called lender liability). The new granting or extension of loans to companies in sectors particularly affected by the Corona crisis is still possible in principle and also economically necessary. In such cases, however, the banks should be prepared to incur increased auditing and documentation costs. Please feel free to contact us at any time.

Upstream Security und Cross-Stream Security

In the case of larger financing transactions, companies regularly provide guarantees or assurances for their parent companies (upstream security) or for their sister companies (cross-stream security). Such a provision of security can potentially trigger a violation of capital maintenance regulations. While it was common practice until the BGH decision of March 21, 2017 - II ZR 93/16 to restrict the possibilities of realization accordingly (so-called Limitation Language) in order to avoid such a violation, this has not always been necessary since the aforementioned decision. A violation of the capital maintenance regulations is excluded if - from an ex ante point of view - the counter-performance or restitution claim against the shareholder is expected to be fully valid due to the provision of security. Accordingly, a Limitation Language has in some cases been waived for Upstream Security or Cross-Stream Security. In cases in which a Limitation Language has been waived, the managers of the collateral provider are, however, obliged to observe the financial circumstances of the shareholder and to react to an impending deterioration in creditworthiness by requesting collateral or enforcing the claim for consideration or return. This constellation can currently occur if the parent or sister company of the collateral provider experiences a deterioration of assets due to the corona pandemic. Companies that have provided guarantees or collateral for their parent or sister company should therefore consider whether collateral should be required from the parent company for the counter-performance or restitution claim.

Certain Funds

In the case of takeover bids for listed companies, the bidder must provide evidence of the funds required to fulfil the bid ("confirmation of financing" by an independent securities services company, section 13 para. 1 sentence 2 WpÜG). Under loan agreements for acquisition financing, termination rights are therefore limited for a certain period of time to serious threatened reasons for termination (major defaults) and assurances (major representations), e.g. insolvency, breach of material conditions, loss of material contracts, etc. In the case of private acquisitions, a certain funds period is not prescribed by the supervisory authorities, but both seller and buyer regularly want to minimize the risk that a disbursement condition is not met on the closing date and the loan is therefore not disbursed. Consequently, certain funds rules are also regularly agreed upon for private acquisitions. Whether a major default has occurred or a major representation has occurred or may occur as a result of the Corona development must be analyzed on a case-by-case basis. Please feel free to contact us at any time.

Financing commitment (commitment letter)

Once the borrower and lender/arranger have negotiated a term sheet, the lender/arranger regularly issues a commitment letter (commitment and mandate letter). The commitment is often subject to the condition that no material adverse change (Material Adverse Change / MAC) has occurred in the meantime in the syndication, financial or capital markets, in the business of the borrower or (in the case of acquisition financing) in the business of the target company (Target). With regard to existing financing commitments, it should be examined whether the current corona development represents a material adverse change. For new Commitment Letters, the parties should consider the issue of corona development when drafting the MAC Clause and either clarify that corona-related changes may or may not constitute a MAC.

Market Flex

In the case of a primary syndication of a loan, the Arranger regularly reserves the right to adjust the pricing and/or the terms and conditions of the loan by means of corresponding clauses in the Syndication Letter or the Commitment Letter if it considers this necessary for a successful syndication. In view of current developments in the corona crisis, market flex clauses must be carefully examined both in existing contracts and in future syndications.

PDF signing

In the case of contracts with several parties, banks and borrowers often prefer to sign the contracts at a meeting (e.g. at the bank's offices) for smaller financing transactions. It is recommended that this physical signing be replaced by the exchange of PDF pages based on the LMA contract conclusion clause (PDF Signing).

Cross defaults

A cross default clause is a clause in a loan agreement according to which a reason for termination occurs as soon as another loan agreement of the borrower (i) can be terminated (cross default clause in the broad sense) or (ii) is terminated (cross acceleration clause). In the broadest sense, the cross default clause refers not only to third-party claims against the borrower itself, but also to claims against companies affiliated with the borrower (possibly also with their registered office abroad). The current economic development leads to an increased risk of cross defaults, especially in the case of broadly formulated third-party default clauses. Borrowers should review their credit documentation with regard to cross defaults and, if necessary, seek early discussions with the financing parties. Financing parties should also review the third party default clauses of their credit agreements, not least to prevent rights from being forfeited due to prolonged inactivity.

Reasons for termination due to interruption or discontinuation of operations

Credit agreements often provide for material interruptions of business or cessation of business (cessation of business) as grounds for termination. Borrowers and lenders should examine whether such reasons for termination may have been caused by the corona development. Against the background of the CorInsAG it should also be examined whether the MAC Clause is affected by the suspension of the right of termination by the CorInsAG (in case of an extension of the scope of application by the Federal Government) (see above).

B. State financial support

Make sure you check whether government financial support to prevent liquidity bottlenecks for companies is eligible. We would be pleased to support you in this. In detail:

KfW aid programme

On 23 March 2020, the government programme for financial support by the KfW begins. KfW's corona aid is not a grant (one-off financial contribution which does not have to be repaid), but a low-interest loan.

As a matter of principle KfW has to examine each application individually - even in the Corona crisis. So it may take a few days before the money flows. In order to obtain a bridging loan from KfW, companies would have to turn to their respective house bank or to a development bank in the federal states. There are various aid programmes under which KfW assumes up to 90 % of the risk if the conditions are met:

KfW entrepreneur loan (037/047)

The most important facts in brief

  • KfW Corona aid for investments and operating funds
  • Up to EUR 1 billion loan amount
  • For companies that have been on the market for at least 5 years
  • Up to 90 % risk assumption

ERP start-up loan - universal (073/074/075/076)

The most important facts in brief

  • KfW Corona aid for enterprises
  • For investments and working capital
  • Up to EUR 1 billion loan amount
  • Up to 90 % risk assumption

Direct participation for syndicated financing (855)

The most important facts in brief

  • For financing from EUR 25 million
  • Up to 80 % risk assumption by KfW
  • For investments and working capital in Germany
  • Flexible financing structures

You can find out more on the KfW website.

Financial Corona emergency aid from the Swiss Confederation

The federal government now wants to provide financial support for small and medium-sized enterprises. To this end, it has launched an additional aid package, which also includes direct subsidies for small businesses and the self-employed.

It is mainly concerned with those companies and entrepreneurs who usually do not receive loans and have no collateral or further income. Up to 50 billion euros will be made available for this purpose.

The programme aims to secure the economic existence of the applicants and help them to bridge acute liquidity bottlenecks.

Eligible for funding are micro-enterprises from all economic sectors, self-employed persons and members of the liberal professions.

These target groups can receive emergency aid according to the following scale:

  • up to five employees: up to EUR 9,000 one-off payment for three months
  • up to ten employees: up to 15,000 euros single payment for three months

The employment figures refer to full-time equivalents. Part-time employees can therefore be converted to full-time equivalents.

Economic Stabilisation Fund

The Federal Cabinet has also approved a draft law on the establishment of an economic stabilisation fund (WSF) in the amount of 600 billion euros, which is intended to cushion the economic damage threatened to companies by the corona crisis.

The stabilisation fund is to be used to strengthen large companies with capital, and the state is to be able to take a stake in the companies if necessary.

Up to 400 billion euros in loan guarantees for the companies are planned, 100 billion euros are available for possible company investments.

Financial Corona emergency aid by the federal states

The federal states are also helping the self-employed, freelancers, small businesses and, in some cases, small and medium-sized enterprises.

In order to ensure the economic survival of as many companies as possible, all federal states have set up numerous aid programmes (protective shield for the economy).

Some of these are taxable grants that do not have to be repaid.

C. Adapted prudential requirements

The supervisory authorities try to relieve banks to the extent that this is possible without (additional) losses to financial stability. Changes in financial supervision requirements are published on the websites of BaFin and the ECB on an ongoing basis. Essentially, the statements relate to the current restriction of personal contacts, explain the process and possibilities of lending in the crisis and specify capital and liquidity maintenance rules:

The following adjustments resulting from the restriction of personal contacts

Communication with BaFin: A large number of BaFin's administrative staff are currently (as of 26 March) working from home, but in our experience they can be reached without restriction by e-mail and, as a rule, also using the regular extension numbers.

Examinations: On-site inspections by banking regulators are temporarily suspended. On-site audits, e.g. as part of the audit of the annual financial statements pursuant to sections 28 et seq. KWG or § 89 WpHG may also be waived.

Lending during the crisis

Credit assessment: The BaFin interprets § 18 KWG in such a way that the last available annual financial statements are sufficient, as a rule currently the annual financial statements from 2018. Particularly with regard to the granting of loans to companies which have only got into financial difficulties as a result of the Corona crisis and which are to be granted a KfW loan, the BaFin sets lower requirements for this credit assessment than in normal times.

Both interest rate cuts and deferrals of loans do not necessarily mean that such loans are to be classified as defaulted, following the EBA's call for flexibility and pragmatism, BaFin explains:

Interest rate reduction: BaFin points out that Art. 178 (3) (d) CRR only applies if an institution makes concessions to a debtor who gets into financial difficulties, but not if it passes on more favourable refinancing costs, for example after transactions with the central bank.

Deferment: Deferrals by government orders are in principle neither considered as deferment in the sense of Art. 47b CRR nor as deferment in the sense of § 178 CRR. If the original effective interest rate does not fall by more than 1%, deferred liabilities are not classified as a "material overdue liability" under Art. 178 (1) b) CRR. The debtor's financial obligation is not considered to be reduced, so that there is no "crisis-related restructuring" as defined in Art. 178 (3) d) CRR. In the event of such a singular crisis, different standards than in normal times must certainly be applied to the due diligence obligations customary in the industry within the meaning of MaRisk. This would also be taken into account in subsequent audits.

Problem loans: Even if lending terms and conditions are flexible and customary banking instruments are used flexibly, it must be determined whether an exposure can still remain in intensive support within the meaning of BTO 1.2.5 para. 2 of MaRisk despite significant defaults. According to BaFin, this is possible if the counterparty default risk of the loan can at least be limited and legal risks of the customary intensive support of the loan have been sufficiently examined without an expert restructuring opinion.

Use of capital and liquidity buffers

Undercompliance with the combined capital buffer requirement does not constitute a breach of minimum supervisory capital requirements. Institutions can easily use the capital tied up in the capital buffers for lending purposes.
Liquid assets held as part of the liquidity coverage requirement (LCR) may be used. According to Art. 414 CRR, no approval is required but notification is necessary (cf. also ECB and BIS).

Short-time work in regulated companies

In principle, there is no specific legal restriction with regard to the introduction of short-time work even in regulated companies. Regulated companies must, however, have adequate management, control and administrative procedures in place, especially in the event of a crisis, and they must fulfil risk management and due diligence obligations in proportion to the reduced business activity. According to AT 7.1 (Personnel) of the MaRisk, the quantitative and qualitative staffing of regulated companies must be based in particular on internal requirements, business activities and the risk situation. Short-time work absences of employees should therefore not lead to sustained disruption of risk management obligations.

Management of operational risks

Even in a crisis, institutions must record loss events appropriately. On the basis of risk reporting in accordance with MaRisk BT 3.2 point 6, a decision must be made as to whether and which measures are to be taken to eliminate the causes or which risk management measures are to be implemented.

D. Other virulent questions

You should also check the following questions:

  • What effects do annuity suspensions of up to two months (60 days) due to the corona crisis have on the credit portfolio and solvency of banks? Do such annuity suspensions lead to an increase in capital requirements? BaFin has published a clarification in its FAQ which clarifies the regulatory consequences of a suspension of annuities of up to two months (60 days) for banks.
  • Does your company fall under the announced unlimited credit program? Federal Finance Minister Olaf Scholz and Federal Economics Minister Peter Altmaier have presented a package of measures worth billions to combat theconsequences of the coronavirus. They announced an unlimited credit program for companies.
  • Does your company benefit from the tax relief? In agreement with the supreme tax authorities of the federal states, the BMF has issued regulations that provide tax relief for taxpayers affected by the consequences of the Corona crisis. Of particular importance is the possibility of deferring tax claims without interest.
4. Labour law implications

The spread of the corona virus also has considerable consequences under labour law for the employer and the employee.

Duty of care & home office

• Because of its duty of care towards employees, the employer must take measures - if necessary with the involvement of co-determination - to prevent infection at the workplace (e.g. disinfectants in the sanitary facilities; issuing instructions, such as washing hands regularly or not greeting employees with a handshake).
• If the employer fulfils his duty of care, the employee is generally obliged to attend work. Employer and employee can, however, of course agree to work in the home office by mutual consent.
• In the event of an infection, employees must report sick to their employer immediately and, due to the special situation, exceptionally also inform the employer of the nature of their illness. In the event of such an illness, employees are entitled to continued remuneration in accordance with the Continued Remuneration Act.
• In the event of corona virus illness in the company - or even if only a suspicion of this exists - the employer should contact the health authorities.
• Employees in officially ordered quarantine who are not ill are not entitled to continued remuneration in accordance with the Continued Remuneration Act. However, they receive a compensation payment from the state. The employer pays this, but is reimbursed by the health authorities. Under certain circumstances, they may also have a claim against the employer according to § 616 BGB.

Short-time work

The introduction of short-time working is also conceivable. In order to support employees and companies, the legal basis has been created in a fast-track procedure to simplify access to short-time work compensation. The Federal Cabinet has now also passed the corresponding ordinance. With retroactive effect from 1 March, simplified access rules apply: Under the new rules, the access threshold is already reached when only ten percent of employees are affected by loss of working hours. Previously, this had to be one third of the employees. It should be possible to completely or partially waive the accumulation of negative working time balances ("minus hours") prior to payment of the short-time working allowance. Current law requires that in companies where agreements on fluctuations in working hours are used, these are also used to avoid short-time work and run into minus hours. In addition, temporary workers can also receive short-time work compensation and the Federal Employment Agency will in future fully reimburse the social security contributions that employers normally have to pay for their employees. Further information that you should take into account when applying for short-time working benefits (KUG) can be found in our article on short-time working.

Closure of schools and kindergartens - Claims for compensation

Parents who cannot go to work and suffer financial losses due to school and kindergarten closures are to be compensated by the state with up to 2016 euros per month. The regulation is part of a comprehensive package of measures to cushion the consequences of the Corona crisis, which was launched by the Federal Cabinet on Monday. A corresponding compensation claim for loss of earnings in the event of official closures of schools and day-care centres is to be included in the Protection against Infection Act. According to the Federal Ministry of Labor, the compensation will be 67 percent of net income, with a maximum of 2016 euros per month. The prerequisite is that the affected persons are not able to find any other reasonable care. The receipt of short-time work benefits or other possibilities to stay away from work (e.g. reduction of time credits) shall exclude the claim for compensation. We will keep you informed about this.

5. Competition and Anti-Trust Law

Due to the corona virus, companies are currently facing special challenges. Increasingly, supply bottlenecks or even delivery failures are affecting daily business. In order to keep losses as low as possible during this uncertain period and the associated exceptional circumstances, cooperations between companies and, in some cases, competitors are playing an increasingly important role. For example, cooperation may be appropriate to ensure the supply and fair distribution of essential scarce products and services to all consumers.

Joint Statement of the Network of European Competition Authorities (ECN)

In response to this need, the European Commission, the EFTA Surveillance Authority and the national competition authorities, which together form the Network of European Competition Authorities, have issued a joint statement on the application of antitrust rules during the current coronavirus crisis. This statement explains that, for example, no action will be taken against necessary and temporary measures if they were introduced to avoid supply shortages. In any case, the ECN assumes that such practices do not constitute a restriction of competition within the meaning of Article 101 TFEU or offer sufficient efficiency advantages that would ultimately justify a restriction.
In addition to the monitoring of cooperations, the ECN also recognises the need not to neglect the abuse control of dominant companies. Especially with regard to products which are considered essential for the protection of consumer health in the current situation (e.g. face masks and disinfectant gel) there is an increased risk of price abuse. The ECN therefore points out that it will continue to take action against companies that exploit the current situation by forming cartels or abusing their dominant position.

If companies have doubts about the compatibility of their business activities with EU competition law, they can always contact the Commission, the EFTA Surveillance Authority or the relevant national competition authority (in Germany the Bundeskartellamt) for informal advice.

Assistance from the Commission

In this context, the European Commission has set up a separate e-mailbox (COMP-COVID-ANTITRUST@ec.europa.eu) to respond to specific requests as quickly as possible. Inquiries about cooperation should contain as detailed information as possible about the companies concerned, products/services, the scope of the cooperation, as well as the benefits to be achieved through the cooperation.

In addition, the European Commission's Guidelines for the assessment of the compatibility of business agreements with EU competition law can be used as usual (cf. in particular Guidelines on Art.101(3) TFEU, horizontal and vertical block exemption regulation).

Statement of the International Competition Network

The governing body of the most important association of competition authorities in the world, the International Competition Network (ICN), also made a similar statement on 9 April 2020 on the enforcement of competition law during the Corona crisis. The ICN continues to seek to exchange ideas, experience and best practices with national competition authorities in order to ensure effective competition for the benefit of consumers and the economy. In the ICN's view, the promotion and protection of competition is crucial in order to best manage the effects of the crisis and to provide an appropriate basis for economic recovery. In this sense, the ICN warns against anti-competitive cartel agreements and the abuse of dominant market positions.

Merger Control

Merger control proceedings are still conducted by the competent competition authorities. The relevant deadlines and formalities therefore remain unchanged. Nevertheless, both the European Commission and the German Federal Cartel Office recommend refraining from unnecessary notifications at present. It should therefore be examined in each individual case whether a transaction needs to be carried out in the current situation.

However, the German government is currently planning to amend the law to mitigate the consequences of the COVID-19 pandemic in competition law and for the self-governing organisations of the commercial sector. The present draft law of 23 April 2020 intends, among other things, to extend the review periods applicable to merger control proceedings once only to 2 months for phase 1 decisions and to 6 months for phase 2 decisions. The extension will only apply to notifications of concentrations in the period from 1 March 2020 to 31 May 2020. The reason for the extension of the review periods is that due to the current circumstances the Bundeskartellamt is not in a position, or not within the usual time frame, to carry out appropriate investigations and to review the notified concentrations for their legality under competition law.

Fair trading law and consumer protection

The competition authorities are not competent to deal with issues relating to unfair commercial practices and consumer protection. Such inquiries can be sent directly to the appropriate authority:

  • For online purchases: Online Dispute Resolution Platform
  • For cross-border situations: European Consumer Centres Network
  • Other national dispute resolution bodies (in Germany, for example, the consumer protection centre)
6. Corporate governance and operational impact

Always verify whether your company has sufficient arrangements in place to be able to comply with possible travel restrictions or to bring back staff if necessary:

  • Can agreements be signed without physical presence? For example, check whether a qualified electronic signature would be useful in your case to avoid risks.
  • Do your statutes allow you to hold board and management meetings via video or telephone conference?
  • The physical presence requirement, e.g. during tests, exams etc, should be reviewed in general.
7. Insurance

Every enterprise affected by the crisis should immediately verify whether the negative financial consequences of a business interruption as a result of COVID-19 could be claimed from an insurance company.

  • Determine whether you have insurance cover and meet all the requirements of the policies without delay. For example, you may have cover for losses caused by business interruptions as a result of border closures.
  • Do you have insurance cover, for example for the evacuation of staff?
  • Standard policies should be reviewed to avoid losses, e.g. your company's due diligence obligations should be observed at all times.
8. General risk management procedures

Organisations can consider the following measures address the issues mentioned above and mitigate effects on their business:

  • Clear assignment of communication responsibilities to manage the information flow.
  • Review of the company's business continuity plan and set up of a centralised team to deal exclusively with these issues.
  • Organisations may want to consider including a representative of each relevant business function (e.g. human resources, finance, legal, etc.) in the centralised team.
  • Organisations should consider introducing a document logging system to demonstrate due diligence in relation to the organisation's decision-making and be prepared to defend against claims from contracting parties.
  • It is also important to maintain accurate and thorough records of any losses arising from such events to ensure that all future claims against counterparties in respect of these losses are fully documented.


If you have any questions or would like to learn how Covid-19 could affect your business operation or contracts, don't hesitate to contact us at any time. Your Schalast team is always there for you.