Stabilisation and restructuring law in Germany

1. Which financial (not tax or labour) short-term compensation schemes for immediate losses due to social distancing measures have been implemented? For which industries/sizes of business?

So far, no direct compensation of losses is planned.

Direct subsidies for micro- and small-sized enterprises of between EUR 15,000 and EUR 50,000 per undertaking are possible to cover the costs.

2. Which medium-to long-term stabilisation measures are in place in your jurisdiction?

2.1 Economic Stabilisation Fund (ESF, planned)


Eligible companies are those which were not an undertaking in difficulty (UID) on 31 December 2019 and which exceed two of the following three criteria: 

  • a balance sheet total of EUR 43 m
  • a turnover of EUR 50 m
  • an annual average of more than 249 employees.   


The fund serves to support the real economy and has two instruments:

  • the assumption of guarantees for debt instruments and liabilities of companies with a maximum volume of EUR 400 bn 
  • the possibility of participating in the recapitalisation of companies, e.g. by acquiring shares with a volume of EUR 100 bn.

The measures are subject to requirements. Further details are to be regulated by a legislative decree.

By whom?

In most cases, the Federal Ministry of Finance and the Ministry of Economics and Energy or the promotion bank
Kreditanstalt für Wiederaufbau" (KfW) decide on the applications. Whether the application is approved depends, among other things, on how important the company is for the German economy. The details are regulated in a legislative decree. The individual measures must be notified to the Commission.

2.2 Loans from the KfW 


Eligible applicants are undertakings that are not in difficulty (UID) or that only became a UID after 31 December 2019 due to the coronavirus crisis.


1. First, there is a low-interest loan programme (Unternehmerkredit) that covers up to 90% of the risk of loans. The loan amount is up to EUR 1bn per company and is limited, among other things, either by twice the annual wage bill for 2019, 25% of the annual turnover in 2019 or the specific liquidity needs of a beneficiary for the next 12 months (18 months for SMEs). In addition, for loans exceeding EUR 25m, the loan amount may not exceed 50% of the total debt volume or 30% of the balance sheet total of the group of companies .

The loan may have a maximum duration of 10 years.

2. Second, there is a low-interest loan programme under which KfW provides syndicated loans with other banks (Direktbeteiligung für Konsortialfinanzierung).

The amount of the loan is limited to either twice the annual wage bill for 2019 or 25% of the annual turnover in 2019 or the specific liquidity requirements of the company for the next 12 months (18 months for SMEs) on the basis of an appropriate self-assessment of the beneficiary company.

The risk assumption by KfW is up to 80% of the loan but not more than 50% of the company’s total debt or 30% of the balance sheet total of the group of companies.

The term of the loan may not exceed six years.

3. Thirdly KfW Rapid Loan 2020 (Schnellkredit)

Who can receive the aid?

Small and medium-sized undertakings which:

  • had a profit in 2019 or on average over the last three years; 
  • were not in difficulty* (not UID) on 31 December 2019; 
  • have more than 10 employees at their disposal; 
  • have been active on the market at least since 1 January 2019; and 
  • have an orderly financial situation.

What does the aid consist of?

New loan programme. The bank receives a 100% indemnity from the KfW, secured by a guarantee from the federal government.

The loan amount is up to 25% of the annual turnover in 2019 with a maximum of EUR 800,000 for undertakings with more than 50 employees, and a maximum of EUR 500,000 for undertakings with up to 50 employees.

The loan is approved without further credit risk assessment by the bank or KfW. This allows the loan to be approved quickly.
The KfW loans can be applied for through the main bank.

2.3 Federal scheme State Guarantees 2020

Who can receive the aid?

Undertakings which are not in difficulty* (not UID) or which only got into difficulty after 31 December 2019 owing to the coronavirus crisis can apply.

What does the aid consist of?

New loan guarantee scheme:

  • The annual guarantee premiums are set at 25 basis points ("bps") for SMEs and 50 bps for large undertakings for the first year. For years two and three, they are set at 50 bps for SMEs and 100 bps for large undertakings. For years four to six, they are set at 100 bps for SMEs and 200 bps for larger undertakings. 
  • The maximum term of the guarantees is six years. 
  • For guaranteed loans with a maturity beyond 31 December 2020 the loan amount is limited to either twice the annual wage bill for 2019, 25% of the annual turnover 2019 or the specific liquidity needs of the beneficiary for the next 12 months (18 months for SMEs) based on appropriate justification and self-certification by the beneficiary of its liquidity needs. 
  • For guaranteed loans with a maturity until 31 December 2020, the amount of the loan principal may be higher with appropriate justification and proportionality of the aid. 
  • The public guarantee may not exceed: (i) 90% of the loan principal where losses are sustained proportionally by the credit institutions and the state or (ii) 35% of the loan principal where losses are first attributed to the state and only then to credit institutions and (iii) for both cases where the loan decreases over time, the guaranteed amount has to decrease proportionally

From whom can companies receive the aid?

The aid may be granted by public bodies, such as federal authorities and regional authorities or the guarantee banks.

2.4 State guarantee scheme for trade credit insurance

Who is eligible for the aid?

All undertakings active in the trade credit insurance sector in Germany that were not in difficulty* (not UID) on 31 December 2019.

What does the aid consist of?

The state assumes a guarantee of up to EUR 30bn for indemnification payments by credit insurers for the year 2020. The credit insurers bear the losses up to an amount of EUR 500m themselves and assume the default risks that exceed the guarantee of the Federal Government.

The participating trade credit insurers will pay 65% of annual gross premiums for the year 2020 to Germany.
The measure covers purchasers inside and outside Germany and claims related to the delivery of goods or services that take place between 1 January 2020 and 31 December 2020, provided that the trade credit insurer participates in the measure. Claims that have been notified before 1 March 2020 are excluded.

Germany received a binding commitment from the trade credit insurers active in Germany participating in this measure to retain their existing credit limits at least up to levels at the time of the agreement.

From whom can companies receive the aid?

The Federal Ministry of Finance is responsible for the measure and concluding the necessary individual agreements with the credit insurers.

3. Which measures (Guarantees, Loans, Equity Injections, etc.) are available?

See the answer to question 2. 

4. Have these mid- to long-term stabilisation measures already been notified with EU or other antitrust bodies?


Please specify.

  • The special loan programmes of the KfW were notified and approved by the European Commission as well as the state scheme for trade credit insurance. 
  • The measures of the Economic Stabilisation Fund are still subject to approval.

5. Which prerequisites are necessary to qualify for a programme?

See the answer to question 2.

6. Are there any major reasons that may inhibit an applicant from successfully applying for a stabilisation measure?


Please specify.

For the stabilization measures in question 2, the company must not already have been an undertaking in difficulty (UID) on 31 December 2020. In these cases, however, the company may have become a company in difficulty due to the Corona crisis.

7. In an international context, are subsidiaries and branches of foreign parent/holding companies eligible to apply? For EU-States: Also for non-EU-third countries?


Please specify.

Yes, under certain conditions. For instance investments in Germany by foreign companies can be financed by the KfW loan programmes.

8. Do your country’s stabilisation schemes foresee restrictions on use of cash/other restrictions?


Please specify.

Measures from the Economic Stabilisation Fund are subject to conditions and requirements. According to our preliminary assessment, recapitalisation measures may be accompanied by requirements for the distribution of dividends, for example.

9. How are insolvency application deadlines handled in times of Corona?

According to current German insolvency law (without taking into account the coronavirus-related legislation described below), the board members of limited liability companies and partnerships (e.g. GmbH, AG or GmbH & Co. KG) have the mandatory obligation to file for insolvency if their company is insolvent, i.e. illiquid or overindebted (see Section 15a of the German Insolvency Code, Insolvenzordnung – InsO). This application for insolvency must be filed without undue delay, at the latest within three (3) weeks of the occurrence of the reason for insolvency. A board member of a company who violates this obligation to file for insolvency is liable to prosecution and exposes himself to personal liability.

In the course of the current economic restrictions imposed by the authorities due to the coronavirus, numerous sectors (retail, travel, hotels and restaurants, etc.) are experiencing considerable losses in turnover while costs (rent, employees, etc.) are ongoing. Therefore even hitherto profitable and healthy companies may no longer be able to meet their current obligations on a long-term basis from their existing liquidity. It follows that in the sectors concerned, there is already an impending insolvency in individual cases (please note that, in principle, an impending illiquidity does not force companies to file for insolvency). In the foreseeable future, this can lead to acute illiquidity, which would then force the filing of an insolvency petition.

Therefore, in view of the current crisis, German legislator has passed the law  to mitigate the consequences of the COVID-19 pandemic (in civil, insolvency and criminal procedure law) (the “COVID-19 legislation”). The COVID-19 legislation was officially published on 27 March 2020. The amendments to insolvency law entered into force retroactively from 1 March 2020 and cease to apply on 1 April 2021 (see also below).

The COVID-19 legislation – inter alia – provides for the suspension of the obligation to file for insolvency for companies affected by the coronavirus crisis until 30 September 2020, extendable to 31 March 2021. However, this regulation shall not apply: 

  • if the insolvency of the company is not based on the effects of the COVID-19 pandemic,or
  • if (despite the application for public funds or serious financing or restructuring negotiations) there is no reasonable prospect of restructuring of the respective company.

In this respect, the COVID-19 legislation provides for a presumption rule according to which in case of an existing solvency (Zahlungsfähigkeit) on 31 December 2019, it shall be assumed that a later insolvency is based on the effects of the COVID-19 pandemic and there is a prospect of resolving the insolvency.

Connected to the ending of a strict obligation to file for insolvency, board members may generally not be held personally liable for payments made in the ordinary course of business during the period up to 30 September – or 31 March 2021 in case of an extension (see also below).

Furthermore, the COVID-19 legislation restricts insolvency applications by creditors: for creditor applications filed between 28 March 2020 and 28 June 2020 it is necessary that the reason for insolvency already existed on 1 March 2020. 

10. How far have local insolvency/restructuring laws been changed/eased which might have an impact on international businesses?

The legislation to mitigate the consequences of the COVID-19 pandemic provides for several further regulations, which might have an impact on international businesses.

10.1 Amendments concerning Insolvency Law

The amendments concerning insolvency law entered into force retroactively from 1 March 2020 and will cease to apply on 1 April 2021.

Limitation of payment prohibitions:

  • according to German law the board members of a company are personally liable for payments which the company makes after the occurrence of insolvency and/or over-indebtedness (see inter alia Section 64 Sentence 1 of the German Limited Liability Companies Act, Gesetz betreffend die Gesellschaften mit beschränkter Haftung – GmbHG, Section 92 (2) Sentence 1 of the German Stock Corporation Act, Aktiengesetz – AktG). Excluded from this liability are payments which are absolutely necessary for the continuation of the company even in critical situations. Jurisprudence has created privileged examples of such cases: in particular, current wages and salaries, payroll taxes and social contributions are privileged. The same applies to purchase of materials that are currently required for the continuation of the company as well as the current advance payment of sales tax. On the other hand, overdue obligations and/or shareholder loans may generally not be settled.
  • according to the COVID-19 legislation, the payment prohibitions as explained above shall be relieved. Payments which are made in the ordinary course of business, in particular payments which serve to maintain or resume business operations or to implement a restructuring concept, are then considered to be compatible with the diligence of a prudent and conscientious manager and do not trigger liability.

Protection against insolvency challenges (Insolvenzanfechtung):

  • according to German insolvency law, the insolvency administrator may challenge legal transactions which are detrimental for other insolvency creditors (see Sections 129 et seqq. of the German Insolvency Code – Insolvenzordnung, InsO). However, if the conditions for suspending the obligation to file for insolvency are met, the risk of a future insolvency challenge is also largely excluded:
    • the repayment by 30 September 2023 of a loan granted during the suspension period (of the obligation to file for insolvency) and the provision of collateral to secure such loans during the suspension period are not considered to be detrimental to creditors and can therefore not be challenged
    • the repayment of shareholder loans cannot be challenged. Section 39 (1) no. 5 and Section 44a InsO are not applicable in insolvency proceedings that were applied for until 30 September 2023, i.e. during the upcoming three (3) years.



There is no particular coronavirus-related legislation on cross-border insolvencies and restructurings in place in Germany.

In addition, the comprehensive package of measures to prevent German companies from suffering the consequences of COVID-19 includes the following:

12.1 Wirtschaftsstabilisierungsfonds (WSF) – Economic Stabilisation Fund

The Federal Government will establish an economic stabilisation fund. This fund, which is to be set up and managed by the finance agency (Finanzagentur), is intended to serve to stabilise companies in the real economy by overcoming liquidity shortages and by creating the framework conditions for strengthening the capital base of companies whose continued existence would have a significant impact on the economy, technological sovereignty, security of supply, critical infrastructures or the labour market. Under the current draft legislation, the fund has two stabilisation measures at its disposal:

  • the fund may provide guarantees of up to EUR 400 bn for liabilities of companies established after the entry into force of the economic stabilisation fund act
  • the fund may participate in the recapitalisation of companies. The focus here is on subordinated debt instruments (nachrangige Schuldtitel), hybrid bonds (Hybridanleihen), profit participation rights (Genussrechte), silent partnerships (stille Beteiligungen), convertible bonds (Wandelanleihen) and company shares (Unternehmensanteile). The volume of this recapitalisation amounts to EUR 100 bn.

In order to benefit from these – last resort – measures of the fund, companies must – in the last two financial years before 1 January 2020 – have had a balance sheet total of more than EUR 43 mn, a turnover of more than EUR 50 mn and an average of more than 249 employees (it is sufficient that two of these three criteria are met). Financial sector companies and credit institutions will be excluded from the measures by the economic stabilisation fund.

12.2 Kurzarbeitergeld – reduced working hours subsidy for employees

On 13 March 2020, the law on temporary crisis-related improvements to the regulations governing reduced working hours subsidy was adopted. The law allows the Federal Government – by means of a statutory order – to make it easier to apply for subsidies for reduced working hours, to relieve companies of the social security contributions (Sozialversicherungsbeiträge) for employees receiving subsidies for reduced working hours, and to allow temporary workers (Leiharbeitnehmer) to receive subsidies for reduced working hours.

12.3 Tax measures to improve liquidity

Tax liquidity measures are intended to relieve the financial situation of companies in the short term. In future, tax suspensions are to be made possible by the tax offices. It should be easier to adjust advance tax payments to decreasing turnover. If a company is directly affected by the effects of COVID-19, enforcement measures and default payments (Säumniszuschläge) are to be waived until 31 December 2020.

Portrait of Markus M. Pfaff
Dr. Markus M. Pfaff
Portrait of Alexandra Schluck-Amend
Dr. Alexandra Schluck-Amend