Financial Market Stabilisation Act eliminates capital requirement
Munich. In connection with the Financial Market Stabilisation Act (FMSTG), changes have been made to the Insolvency Code. Thus, the legislator has now restricted the obligation to file for insolvency for all companies in Germany without exception. To put it bluntly, even companies that have actually long since gone bankrupt can continue to operate with peace of mind – until they reach a state of insolvency.
The relevant statutory provision is § 19 II of the Insolvency Code (InsO), which now reads: “Over-indebtedness exists if the debtor’s assets no longer cover the existing liabilities, unless the continuation of the business is predominantly probable under the circumstances.” The amendment to the Insolvency Code means, first of all, that any manager of a corporation whose company has fallen into a state of over-indebtedness no longer has to fear being punished for missing the deadline for filing for insolvency or being liable with his private assets. However, the most important prerequisite for this is that an independent tax advisor or auditor has attested to a positive prognosis for the continuation of the company, preferably in writing. In addition, it is advisable to initiate the reorganization and to ensure legal support. Indeed, when new contracts are concluded, criminal offences may well be committed, such as fraudulent misrepresentation of solvency in the future.
Significance for small and medium-sized enterprises
For entrepreneurs or business managers, this offers an option to review their own business model even after the occurrence of over-indebtedness, to discontinue unprofitable activities, and to eliminate the over-indebtedness through further restructuring measures. The state continues to receive tax payments from over-indebted companies – those creditors whose claims are not backed by loan collateral are at a disadvantage if the company later goes bankrupt. No business partner can any longer rely on the fact that he is dealing with a solvent company with a strong credit rating. Distrust in the economy is increasing, supplier credits are tending to be restricted, and banks are also more reluctant to extend new credit. By increasing opacity, policymakers have achieved exactly the opposite of what they claim to be aiming for: Facilitated lending and market confidence.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.taspo.de (published in TASPO 22/2009)
