Germany extends insolvency moratorium for virus-hit companies until end-Jan

BERLIN, Dec 14 (Reuters) – The parties in Germany’s ruling coalition have agreed to extend a freeze on insolvency rules put in place to avoid a wave of corporate bankruptcies due to the coronavirus crisis, officials said on Monday.

In March, the government offered respite to companies that find themselves in financial trouble due to the pandemic by allowing them to delay filing for bankruptcy until the end of September.

The coalition parties later agreed to extend the insolvency waiver until the end of this year for indebted but still solvent companies. However, the freeze on the obligation to file for insolvency was not extended for insolvent firms.

In light of a second wave of COVID-19 infections and a stricter lockdown to bring the pandemic under control, lawmakers from Chancellor Angela Merkel’s conservatives and the centre-left Social Democrats agreed to extend the insolvency moratorium by one month until the end of January, coalition lawmakers said.

The Bundestag lower house of parliament is expected to pass the law on Thursday, SPD lawmaker Johannes Fechner said.

He said the insolvency waiver could be extended further until the end of February in the event of technical problems with paying out emergency state aid.

So far, Germany’s private sector has been able to avoid a coronavirus-related wave of bankruptcies due to massive state aid, unprecedented job protection schemes and financial buffers amassed by many small- and medium-sized firms before the crisis.

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